Sound financial planning means considering major life events. Although it’s absolutely true that some things happen unexpectedly, we can reasonably anticipate other events in order to prepare.
So, how do you prepare for both the expected and unexpected life changing events? And what are the most common life events examples you should prepare for financially?
Top 9 major life events and tips for how to plan for them
Take a look at these nine events that will likely happen in our lives. Not all of them will apply in your case, but a fair amount will. Given your current circumstances and what you hope to do in life, here’s how you can plan for big, life changing events so you can get ahead financially.
As Benjamin Franklin said, “An investment in knowledge pays the best interest.” He was certainly right in that education can bring huge benefits to your life. Unfortunately, not all education is created equal, and a college or post-graduate education can be incredibly expensive.
Paying for your childs college tuition
Most people, when worrying about the cost of education, are thinking about college. According to Educationdata.org, the average annual cost of attending a four-year in-state institution is $25,487. (Even worse, out-of-state yearly tuition plus other expenses can be an average of $43,161.)
If you’re thinking in terms of saving for a child’s college education, custodial accounts and 529 plans are wonderful tools. There are a lot of ways to save for college, and you should research your state’s options.
In general, a custodial account is an investment and holding account that you keep charge of until the child comes of age (usually 18 or 21). Funds don’t always have to be used for education, though that’s a great way to spend it.
A 529 plan is one that enables parents and other loved ones to save on behalf of a child. Earnings on the account grow tax-free, so if you start saving when your child is an infant, the money has about 18 years of growth! The funds must be used for qualified education expenses (or you pay a 10% penalty as well as regular income tax).
Your own education expenses
Now, you might also be thinking of your own college education expenses. Getting a full-ride scholarship is also a great goal, but not everyone can reach that point. If you’ve already graduated, you may have taken out student loans.
If you’re currently enrolled in college or grad school, try to use money-saving measures like applying for scholarships and grants. Follow a budget to avoid going into debt too far, if at all.
If you have student debt, you’ll want to figure out a student loan repayment plan. Even if you’re expecting student loans to be forgiven, be sure that you’re following every requirement of student loan forgiveness plans.
And if that isn’t an option, refinancing student loans may be a way to save money (especially if your interest rate is high).
Further education programs
Plenty of non-university training programs exist that can lead to higher earnings and greater career satisfaction. You might be looking at starting a new career, which can cost a bit of money and time.
Whatever stage you may be in today, you don’t have to stay in the same job or career path forever. Even those who stay in their careers often need to go through new training to keep up with technology and policies.
You might try one of the many career paths that don’t require a college degree, saving you a lot of money. There are plenty of jobs that pay well without a degree, including executive assistants, insurance sales agents, police officers, electricians, and many more.
Some of these programs require training, and if there are fees involved, be sure to know what they are up-front. Figure out how much a job is likely to pay you after you’re done, and be sure the cost of training will be worthwhile.
ROI of education costs
Whether you’re looking into college or post-graduate degrees or training programs you can finish in a few months, estimate your ROI. This means weighing the cost of education against the benefits. How much money could you earn in that new career? How strong is the job market for that field?
Be sure to figure out your return on investment (ROI) before jumping into schooling or training programs. You might need to save some money before training for a new job. Be sure to think carefully and avoid making rash career decisions.
2. Getting married
Marriage is a beautiful thing and one of the biggest life changing events. However, weddings can also be expensive (estimated $28,000 on average in 2019). Here’s how to get married without breaking the bank.
First of all, engagement doesn’t have to cost much even though it's one of the most memorable and major life events. The biggest cost is likely the engagement ring, and you can let your significant other know your preferences. A diamond ring can be gorgeous, but remember that there are price ranges on diamonds just like everything else.
Let your loved one know if a ring isn’t important to you, or if you’d like to pick out the ring yourself. You can suggest a budget to work with, too. Alternatively, you can look at preowned rings as many people sell their engagement rings.
Engagement parties can also drive up the total cost of getting married. I personally didn’t have one, but if that’s your thing, just be sure it’s something you and your betrothed can afford.
Again, wedding expenses can be astronomical. Just remember that, while a wedding is a significant milestone and a special occasion to celebrate, it should not bankrupt you.
The key to wedding planning is to create a wedding budget that checks all your boxes. Talk to your fiancé, parents, and anyone else who might financially contribute, to come up with your maximum wedding budget.
Then, break down how much each part will cost. Figure out what matters most to you, and focus spending on that if needed. Try not to use your wedding as an excuse to rack up debt. (Remember, you’ve still got the rest of your lives to plan for, too!)
Finally, if preparing for marriage, don’t neglect this super-important part of that: plan how you’ll manage finances together. This in itself is a major life event. Ask each other important money questions throughout the relationship, and decide prior to marriage if you’ll combine finances.
Some couples may combine every single dollar of their money, but given that many women suffer financial abuse, you may want to keep some accounts separate. Whatever you do, be sure that you communicate about finances with your partner before the wedding.
3. Having a baby
Having a baby is wonderful but is also often one of the most expensive life changing events in many people’s lives. If you plan to become a parent at some point, it’s wise to crunch some numbers first.
First of all, going through pregnancy is not without its costs. From doctor’s appointments to prenatal vitamins to a likely hospital stay, you need to plan ahead for this major expense if possible.
One of the best things you can do if you plan to get pregnant in the near future is to be sure you have good health coverage. Insurance isn’t necessarily cheap, but paying your premiums can drastically reduce the amount you pay out-of-pocket when you give birth.
Both maternity care and newborn care are considered essential health benefits. This means you should be able to get some level of coverage under a qualified health plan. And if you qualify for Medicaid or CHIP as a low-income family, you can get free or low-cost coverage.
If you are able to open a Health Savings Account (HSA), some of the expenses of pregnancy may be offset.
Having fertility struggles is one of the most devastating major life events. It’s one of the most unfair aspects of life: not all women can get pregnant easily. Many women who would be wonderful mothers have to fight for the chance to do so, whether through fertility treatments or adoption.
Naturally, we all assume that when we decide we want to become pregnant, it’ll just happen. It’s hard to plan for infertility unless you have some reason to expect it. About 10-15% of couples struggle with infertility.
If you need to budget for natural fertility treatments, understand that your financial burden may be high.
Adoption is a wonderful way to build your family, but it can be much more financially difficult than having a biological child. If you expect or desire to grow your family through adoption, you’ll want to be extra conscious of the costs and how to pay them.
It can be hard to know exactly how much your adoption may cost because the fees charged by different agencies vary so much. There is a lot of red tape and paperwork (as well as a lot of waiting).
Many families fundraise to offset adoption costs
According to Child Welfare Information Gateway, these are some of the cost ranges for adoptions:
- Private agency adoption: $20,000-$40,000
- Independent adoption: $15,000-$40,000
- Intercountry adoption: $20,000-$50,000
Obviously, these are big ranges, and adoption from foster care can be a more economical option. But one way that individuals and couples get the money for adoption is through fundraising. You can try a GoFundMe campaign, hold bake sales and silent auctions, and other types of fundraising events.
Sadly, once we have the dream of marriage, it doesn’t always turn out to be the fairytale we imagined. Among the major life events that no one really wants to experience is divorce. If you’re facing a divorce, be sure to consider the financial impact so you can prepare.
Legal expenses of a major life event like divorce
Divorce often brings legal fees, and the more complicated your divorce situation is, the more expensive it can get. When preparing for a divorce, you may need to shop around for divorce lawyers to compare fees.
Find someone you can trust to work with you through a challenging time. If you get along fairly well with your soon-to-be ex-spouse, you may be able to avoid racking up extensive fees by resolving things quickly.
Cost of setting up separate households
The cost of divorce extends to almost every part of your life. You’ll need to take a look at all of your financial accounts and make sure you have access to your money.
Check your credit score and find out whether any financial problems of your spouse could impact you. You may need to discuss debts—unfortunately, sometimes you may be liable for some of your ex-spouse’s debts.
Even if you are happily married, it may be wise to think ahead to the worst-case scenario of divorce. Be sure that you have some money in your name only, even if you combine most of your finances.
When preparing for a divorce, think about costs like housing. Who keeps the house? Can you afford the mortgage payments on your own? Will you move into a smaller home?
If you have children, the cost of raising them will be a factor in the divorce proceedings too. Again, a good lawyer may be well worth it to ensure you’re able to care for your home and children well after a divorce. You can rebuild your life with proper planning.
5. A major life event like personal injury or illness
Another life events examples you need to plan for is an unexpected injury or illness. Even though we all hope to be healthy and strong for a long time, the fact is that injuries and illnesses do strike. You need to prepare yourself financially for the possible struggles in case that happens.
Major illness insurance
It’s hard to plan ahead for severe illness. Major life events like cancer or diabetes aren't certainties but could happen. If you have a genetic predisposition to certain illnesses, you might want to look into insurance for that disease.
Beware that insurance for things like cancer is a supplemental type of policy. It’s not usually recommended for everyone, and you should focus more on having solid health insurance to treat a broad number of conditions.
Certain types of injuries may be covered by workers’ compensation insurance. If you happen to be injured while performing your job, your medical expenses and time off work should be covered.
Injuries can happen when you’re not at work, too, however. This is not something you can typically plan for. Again, having health insurance can help a lot, but you might still have large medical bills if you suffer an injury.
6. Death or illness of a loved one
Sadly, even if we are healthy, we can expect that people we love will get sick and even pass away. Although death and illness are somewhat unpredictable, we can take steps to protect ourselves now, before something happens. Major life events include these tragedies.
Life insurance for a spouse or partner
No matter what, if you have a spouse or partner and you share the financial burdens of the household, you need life insurance. You may need a million-dollar life insurance policy if your debts are especially high, but smaller amounts might be enough too.
Term life insurance is usually best for most people because you pay the premiums for a set amount of time and are guaranteed a death benefit. Often these policies don’t cost very much, either.
You might get life insurance through an employer, but watch out, because these policies usually don’t follow you if you leave your job. Getting your own policy is wise, and the younger you are when you do it, the lower your premiums will be.
Life insurance is key to protecting your assets. It ensures that if you die, your partner will be able to pay the bills your income normally covers. Mortgage, school tuition, everyday expenses, and debts can be covered by life insurance payouts.
A will and estate plan
While we’re on the subject of life insurance, let’s not forget about estate planning. It's a key part of any list of major life events. Too many of us don’t have a will in place, which could put our loved ones in financial trouble.
Take some time to go through your finances and make a legal will and testament. This helps ensure that the right person gains access to your financial accounts if you die. It helps set aside money to care for your children.
Helping a loved one through a major life event like an illness
When a family member faces a grim diagnosis, you may need to step up. Whether you want to offer physical care, transportation to and from doctor’s appointments, or even have your loved one move into your home, this can all take a toll on you.
Most people don’t set up separate savings accounts for such events, but it’s wise to at least consider it before it happens. My husband and I have talked many times over the years about what we might do to help our parents if something were to happen. We know it's one of the major life events we'll probably face, and it may happen more than once.
Our hope is that we’re being wise enough with our finances that we might be able to take a few months off work to care for a sick parent. We can’t really prepare fully for what might occur, but we know that things can happen that derail our financial plans, so our emergency fund may be the buffer to get us through it.
7. Moving homes
Moving is another one of the top major life events examples. Maybe you’ve lived your entire life in the same town and never had to move. But it’s pretty unlikely! Most of us will move at some point in life, and that can take a chunk out of our bank accounts.
If you know a move is coming up, be sure to plan ahead for the costs involved. If you have an awesome employer who is going to foot the bill for your move, that’s great! Do your best to stay within the budget they give you.
But for those of us who don’t have a new employer to cover the cost of relocation, we need to plan a bit. Curb your expenses by planning ahead and looking for discounts.
Think about the costs you might need to pay:
- Moving truck or van.
- Paying movers to physically pack and move your things.
- Shipping your vehicle, if you can’t drive it there yourself.
- New apartment security deposit and first month’s rent.
- If buying, you’ll need a down payment and closing costs.
When calculating the cost of moving, you might also try to negotiate a higher salary with your new employer to help offset those costs!
8. Changing jobs or careers
We already talked about job changes in the education section, but let’s revisit this one. Every time you decide to make a career pivot, it can bring some financial hardship. It can also be one of the greatest life changing events!
Cost of job training
First of all, if you don’t like your job, consider the costs involved in training for a new job or career. Some companies offer free training, but others may involve coursework or other preparation with fees.
Always weigh the cost of training against the potential increase in salary or career satisfaction. Try not to go into debt to prepare for a new career, although in some cases college classes and student loans might be necessary.
Emergency savings to cover major life events
When you’re shifting career paths, you might have several months of unemployment. This isn’t a catastrophe as long as you have your emergency fund in place.
Part of the reason for building up your emergency fund is to cover your expenses in case of a job loss. But it’s also there for planned events, like if you quit your job to pursue something more fulfilling.
Choosing to start a business
Along the same lines of changing careers, you might be ready to branch out on your own. Starting a business is one of the major life events to plan for.
If you want to be an entrepreneur and start your own business, planning ahead is important. There are ways to start a business with no money, but finances could still be tight for a long time.
One of the main roadblocks in the way of becoming a business owner is money. It’s not the only one, but if you have a dream of owning your own business one day, you might set yourself up for success by saving for it today.
Working overtime or forgoing certain luxuries for a while might be worth it for the dream of being your own boss.
You can also test the waters by launching a side hustle while keeping your day job. Starting a business from scratch is tough, but trying it out part-time may be a great way to learn.
9. Economic hardship
If anyone thought their career was solid and they’d never have to worry about money, the pandemic must have shaken your beliefs quite a bit. So many people lost income or jobs due to the pandemic, and some still aren’t back on their feet. Some form of economic hardship could hit you and through no fault of your own.
Getting fired or downsized
Although you may be the hardest worker in your company, you could still lose your job. Major life events like job loss can be devastating. Sometimes this is due to corporate restructuring, loss of revenue, or even an executive who dislikes you.
Preparing for a potential job loss could mean bulking up your emergency fund. It might mean keeping your ears open for jobs in your field when you hear rumors of downsizing at your company.
The cost of inflation
Even inflation, which we have no control over, can impact our finances including our savings and investments.
Inflation has risen a lot in 2022 due to factors out of our control.
You might not think of inflation as one of the major life events to plan for, but it impacts your finances. The cost of everyday items like groceries, clothing, fuel, and household goods is higher than usual.
What we can do in case of rising inflation is try to cut our spending on non-essentials. This isn’t fun, but sometimes necessary. It’s another reason to save money while your income is good, and not go too far into debt.
Other unforeseen major life events
The COVID-19 pandemic showed the world that our best-laid plans don’t always turn out how we wanted. A global pandemic, conflict in different countries around the world, elections, and other events can spell trouble for our finances.
I wouldn’t recommend throwing your hands up in the air and saying “Well, whatever happens, happens!” You can drive yourself crazy worrying about the “what-ifs.”
But what we can do is try to keep a level head when we hear about tough things happening in the world. We can make wise decisions each day with our money and our lives and hope that shields us from some of the worst tragedies after major life events.
Be sure to create a plan for these potentially life changing events!
It can be a little scary to think about all of the things that could happen, right? Many of these life events examples are things we choose, but others can simply happen to us, which feels frustrating.
The best advice I can think of is to plan for what you can and let go of the things you can’t control.
Some steps you can take to protect yourself and your finances should help ease your mind: have an emergency fund and life insurance, don’t rush into career changes, and get out of debt as soon as possible.
Financial planning will go a long way to ensuring your happiness, no matter what the world throws at you.