When life changes, money changes. And when money changes, life changes.
Transitions in life aren't just inevitable. They're constant. These crucial moments of transition may shape your entire future.
1.) Retirement
Retirement is one of the biggest life transitions many people will ever make.
It’s all to easy to put off planning in favour of living in the now – but your future self will definitely feel the pinch in their pocket if you haven’t prepared adequately.
The key is to identify what you want early on (or as early as you can). Retirement planning is a holistic approach to cover you financially, and help you make better lifestyle choices to achieve your goals.
2.) Divorce
Unfortunately, not all the transitions are necessarily expected, but they happen nevertheless.
There are often legal implications and complexities in divorce, and the intersection of emotion and finances during a divorce situation may require outside help. Even simple things like changing beneficiaries, estate-planning documents, and so on can be difficult to focus on during a stressful divorce.
In emotional situations like this it may be best to bring in a professional to help everything go smoothly, and ensure both sides are treated with respect.
3.) Death (of close friends or family)
The loss of a friend or family member is a difficult time.
In addition to coping with your grief and potentially planning a memorial service or funeral, there are often many financial decisions that follow soon afterward.
This might include dealing with estate plans including trusts and wills, updating financial accounts including beneficiaries on insurance policies and determining how property and assets will be maintained and updated.
4.) Changing jobs
Now more than at any time in recent history, massive numbers of workers are considering and seeking a new career path. Some may adopt a different focus in their current profession, while others may embrace a completely new career.
Every decision you make as part of your career change should be viewed from the lens of your personal financial needs - not just for today, but also as part of your longer-term planning needs and goals.
5.) Losing your job
Whether you are asked to leave your job or you quit yourself, the result is the same - a heavy strain on finances.
Even if you haven’t lost your job, now can be a good opportunity to start creating a sound financial plan. This will put your life into numbers and allow you to plan for such events.
6.) Moving country
Financial planning comes with its fair share of challenges, but tax, retirement, and estate planning become even more complicated when crossing borders.
There are also various stages of this transition to consider; pre-move, acclimation, global integration and retirement and independence, all of which come with unique financial planning issues.
Whether temporary or permanent, expatriate status can present multiple stumbling blocks for financial planning.
7.) Receiving an inheritance
A large inheritance can be both a blessing and a burden.
A blessing, because the money could be life changing for you and your family; and a burden, because it imposes a certain responsibility on you to use it wisely.
A trusted fiduciary can help you decide how to handle the money in the short term as well as devise a long-term financial plan.
8.) Ageing parents (and associated healthcare issues)
This is only going to become a more common transition as the baby boomer generation continues to age.
How should children handle the emotional and financial consequences of taking care of their parents? Should they keep their parents in their current house or move them to a facility? What are the financial implications of each situation?
Caring for an ageing parent is one of the hardest transitions that exist, both financially and emotionally.
Money clouds judgement. In these situations it can be helpful to have an external party, to step in and ensure everyone is treated with dignity.
9.) Illness or death of a partner
Nobody wants to see a spouse fall gravely ill or pass away. Both situations are highly emotional, but they also require good financial decision making.
Handling sickness and death entails much more than just estate planning; it’s about taking in the entire financial and emotional picture.
More stress is the last thing you need when facing such a challenge – so it’s often easiest to let the professionals do the legwork for you.
10.) Wealth accumulation, deaccumulation and transfer
Accumulation is the period when you’re accumulating assets. During this time, you’re working and trying to save and invest for life goals.
Deaccumulation is when the time has come for you to spend the money you have saved and invested. This generally occurs in retirement.
In terms of transfer, this means the time has come for you to transfer money to loved ones and charities, and to pass other legacy items to the next generation.
Change of any kind tends to occur in each of these three categories.
One more, compelling reason
As you think of your goals for the coming year, ask yourself why you want to achieve that.
You'll find that no matter your goal, eventually these goals are important because you want either yourself or someone you love to be happy.
For us, successfully guiding clients through the changes and transitions of life requires more than sound technical knowledge and advice. It's about having a solid relationship and being a financial coach, delivering advice proactively, not reactively.
Nick Stewart is a Financial Adviser and CEO at Stewart Group, a Hawke’s Bay-based CEFEX certified financial planning and advisory firm.
This article was created in conjunction with AES International. The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
