Our lives are shaped by various life events that come with financial consequences. Many people get swept up in such events without being financially prepared. Life events range from the significant milestones of getting married, the birth of a child, buying a home, caring for aging parents, to the loss of a loved one, planning for retirement and your estate. What are the major life events you anticipate this year? Are you prepared for them financially?
Are you planning to get married this year? What a thrill to plan and prepare for a wedding but far too often an important aspect of the marriage, the merging of financial lives, is ignored. Money is an important aspect of marriage and one of the most difficult topics to deal with. Whilst the time leading up to the wedding is very busy, try to make time to discuss money matters with your fiancé before the register is signed; open communication will help you both to align your goals which ultimately makes for a more successful marriage.
As you build financial security together you will need consensus and compromise for some money related issues. It may not sound terribly romantic, but issues such as establishing joint bank accounts are important matters that ought to be discussed. Home ownership, having children and funding their education naturally should be on the agenda for discussion as well. Remember to review your important documents carefully to ensure that they reflect your new marital status.
Are you the parent who is expected to finance your son or daughter’s wedding? Quite often, much of the financial burden of the actual wedding day is likely to fall on the shoulders of parents already in retirement. Where will this money come from? If your child’s wedding is imminent, plan ahead and try to work within a budget appropriate for you so that costs do not spiral completely out of control and jeopardise your finances. Do not be in competition with your in-laws who may have far greater resources than you do.
Are you expecting a new baby?
The birth or adoption of a child is one of life’s most fulfilling events. New parenthood naturally comes with new financial responsibility and raising a family presents new budgeting challenges. Start to review and estimate current and future expenses, from nappies to university fees!
An equity mutual fund would make an ideal savings vehicle for all the early cash gifts that your child might receive as there are strong prospects for long-term capital growth.
Child-care is likely to be a major expense especially as many mothers must return to work. Even if you are able to stay at home with the children, bear in mind that an extended absence from work, skills and training, could limit your future career options, and therefore your lifetime earning potential. If you do wish to pursue a career, consider part-time work or pursuing training and education whilst the children are still young.
Although secondary school and higher education are decades away for your new baby, costs continue to escalate all over the world and the sooner you begin to save for your child’s education, the better. You will have the benefit of luxury of a wider variety of investment and savings options to achieve your goals.
The birth of a child is a good time to make a will if you don’t already have one and review your insurance policies to include the latest beneficiary. The will should make provisions for guardianship if both parents die while the children are still minors.
Owning your own home
Are you planning to buy or build your own home? A home is one of the most significant purchases you will make in your lifetime. If this is on the horizon this year do make sure it is within your budget and lifestyle and will not become a burden. If you know what your budget limitations are you will not be tempted to look at properties or houses outside of your price range. Location is everything, and a wonderful home in an undesirable area may not be worthwhile from the home value perspective.
Be careful with whom you deal as the real estate market can attract some unsavoury characters; be particularly cautious and deliberate in ensuring that all essential documentation is in place.
Is retirement on the horizon?
Retirement should be a fulfilling and exciting time of life. If you plan to retire this year or fairly soon, I hope you have been preparing long before now. We should all begin to save for our retirement years as early as possible in our working life. Time, consistency and discipline are key to accumulating enough wealth to sustain you during your retirement years; this could end up being two decades or more!
How would you like to live in retirement and how much is it likely to cost? Assess your sources of retirement income, which should ideally include a pension, rental and dividend income. Then calculate how much you must save to supplement it to be able to afford the lifestyle you envisage. There are numerous on-line retirement planning calculators that should help you in making these estimates. Your Pension Fund Administrator (“PFA”) will also be able to assist in this regard.
Whilst many financial advisors recommend shifting more of your assets from growth-oriented stocks into more stable, income producing investments, such as money market deposits and bonds, it is advisable to retain some portion of your assets in stocks to increase your prospects for long-term growth.
Your investing style will of course depend on your risk appetite as well as your age and circumstance and may shift towards less risk; remember that to achieve growth of any significance, you cannot afford to be completely risk averse. Don’t forget to build in issues of aging, such as provision for medical health care and estate planning should be on the front burner, as you age.
As life goes naturally through its various stages, so too should your financial planning. Review your financial objectives regularly to keep them in synch with events that shape your life. Even if you have been fairly consistent with your planning since your twenties or thirties, by the time you are in your 50s or 60s you will need to adjust, revise or completely change the way you manage your money.Originally posted on 6/1/2012
contributed by Mrs Nimi Akinkugbe. For further questions or advise send email to [email protected]. photo source: quickenloans