Are you prepared for this year’s life events? Our lives are shaped by various events that come with financial consequences. Too many of us get swept up in such events without being prepared financially.
Life events range from the significant milestones of starting a first job, to getting married and starting a family, educating your children, losing a job, relocating, buying a home, caring for ageing parents, losing a loved one, and planning for your retirement and your estate. What are the major events you anticipate this year? Here are a few events that you should be prepared for.
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! It is never too early. Start now to project and plan, it will make you better prepared in the long run.
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, the sooner you begin to save for your child’s education, the better. You will have the benefit of a wider variety of investment and savings options to achieve your goals. An equity mutual fund would be ideal savings for all the early cash gifts that your child might receive, as there are strong prospects for long-term capital growth.
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. Don’t view the process of making a will as negative; you do need to be prepared for the unexpected. A will should make provisions for guardianship for minors should they lose both parents.
Are you planning to get married this year?
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 secure and 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. Don’t feel pressured to have a huge wedding that you cannot really afford. You can have a small and simple yet classy wedding without the entire village being in attendance. Guests are merrymaking just for the day…you have a lifetime to build together. Don’t forget to review your important documents carefully to ensure that they reflect your new marital status.
Often, the financial burden of the wedding falls 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 jeopardize your finances. Do not be in competition with your in-laws who may have far greater resources than you do.
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. Before you start looking for a property you need to ensure that you are financially ready for such a major financial commitment. Approach your bankers to determine if you qualify for a mortgage. With a pre-approval from your bankers you will be able to determine how much you can actually afford.
Do you have any savings towards a down payment? If you do not wish to or are not eligible for a mortgage, your savings will determine what you sort of property is within your purview. Location is everything. Think of your future home as an investment as the neighbourhood amenities, including schools all affect its overall long-term value.
Be careful with whom you deal as the real estate market can attract some unsavoury characters; make sure that all essential documentation is valid and 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, you should have been preparing long before now. We should all begin to save for our retirement years early in our working lives. 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 even more!
Assess your sources of retirement income, which should ideally include a pension, rental, dividend and other passive income. Then calculate how much you must save to supplement it to be able to afford the lifestyle you envisage.
Your Pension Fund Administrator (“PFA”) will be able to calculate what income your pension will give you in retirement. There are also numerous on-line retirement planning calculators that should help you in making these estimates of what is available and what the shortfall might be.
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.
By planning ahead of major life events, some of which can be anticipated, you can help preserve and protect your present lifestyle far into the future.
Nimi Akinkugbe has extensive experience in private wealth management.
She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.
Nimi Akinkugbe
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