I’m a Financial Literacy Professional: How I Financially Plan for Major Life Events
Written by
Angela Mae
Edited by
Amber Barkley
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Life happens. Even if you think you’ve got everything all figured out, a major life event — like a cross-country move, a wedding, a new family member or a (hopefully amicable) divorce — can have a huge impact on your emotional and financial well-being.
There is good news, however. While you can’t prepare for everything life throws at you, there are ways to ease the transition into whatever comes next.
GOBankingRates spoke with two financial literacy professionals — Chris Rhine, regional membership development manager at PSECU, and Grant Gallagher, head of wellbeing at Affinity Federal Credit Union — about how they financially plan for major life events. These are their top strategies and how you can do the same.
Identify Who’s Involved and Set Expectations
Regardless of the event, but especially if it’s one that’s planned, one of the first steps entails figuring out who’s involved, said Gallagher.
“Is it just yourself, a partner, your whole family? Once you’ve identified who needs to be part of the plan, you need to sit down and talk with them about expectations and what matters about the event,” he said.
Once’s that done, the next thing is to prioritize and set expectations.
“If there is a long list of things that matter about the event, you need to prioritize them, and typically set your expectations that only the top two or three might be realistic if you have a tight budget,” Gallagher said. “This is excellent advice for something like a wedding, where you could have a dozen things that matter, but only a budget for a few.”
Set a Timeline
Gallagher also shared how important it is to set a timeline while, if possible, leaving some room for the unknowable.
“Do your research to understand if your timeline is realistic and what is involved in accelerating the process if your timeline is not flexible,” he said. “Does your timeline work for everyone involved? Understand that typically trying to make things happen quicker come with extra costs — both from a saving and spending perspective — and everyone needs to agree that it’s worth it to move faster versus changing your timeline.”
Create a Budget
Whether it’s wedding planning, expanding your family or moving across the country, having a budget is crucial. Not only that, but that budget should match your expectations.
“Most people who have never been through an experience like a wedding or a home purchase have no point of reference as to if their budget is aligned with reality,” said Gallagher. “My first time planning for a cruise, I did not know to plan for parking costs at the cruise port or remember to factor in pet care while on the trip, two costs that turned out to be nearly 20% of my vacation budget!”
If you’re having trouble setting a budget, there are always free budgeting apps you can use. But even then, you’ll need to be proactive about it. This means reviewing and cutting unnecessary or wasteful expenses. It also means knowing how much time you have.
“Consider your time frame and how much you’ll need to save. This will tell you how much you need to save each month to reach your savings goals,” said Rhine. “You have to start, even if it is small. Do not fall into the ‘All or Nothing’ trap.”
Cut Credit Card Usage (But Be Realistic About It)
It’s generally not wise to rely heavily on credit to fund life events. However, it’s not always possible to omit credit altogether.
“I’ve tried to eliminate credit card use in the past, but that is not always a great idea in a digital economy,” said Rhine.
If credit is necessary, use it cautiously. If possible, find ways to pay off your bill in full each month, before interest gets tacked on to your balance.
Automate Savings
Both Gallagher and Rhine pointed out how automating savings can be a key part of financially planning for any major life event.
“Make saving for your ‘opportunity fund’ automatic to ensure you are putting money in there regularly,” said Rhine.
But be aware that this alone might not always be enough.
“You need to think of yourself as your own worst enemy, and overcome whatever limitations you have towards reaching your goal,” said Gallagher. “I find that automating whatever savings is needed to work towards your plan is a critical step, but this can only take you so far.”
Be prepared to adjust your savings if needed. Increase the savings amount when things are going well and you have more money. Reduce it when expenses rise or you’re approaching a major event that calls for the extra funds.
Use the Resources You Have
Gallagher also shared how important it is to use the resources available to you, while acknowledging that it’s an oft-overlooked part of financial planning.
“Most people also don’t think of their financial institution, like their local credit union, when starting off on planning for these events,” he said. “They can be a great resource to help set expectations, flag any hidden costs and give you a good idea of what others have experienced as part of the planning process.”
Financial planning for major life events isn’t always fun, but there may be ways around that, too.
“While everyone typically wants to reap the benefits from achieving their life events, very rarely do people find joy in the planning process,” said Gallagher. “Using financial professionals to help guide you in the process will make the process less stressful and get you closer to your goal without damaging your financial wellbeing.”
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