We can trace our life events right back to birth. Financial brokers call these life events ‘transitions’. In financial planning, we can start with transitioning from being a student to working. Transitions are those significant life events that cause a relatively significant change in your life.
Each of these changes will have a fundamental impact on your financial situation and include:
- A new job: Usually this will result in an income increase (hopefully!) and probably a change in pension or other benefits.
- Marriage: A very significant financial change where you and your better half marry your fortunes together. This is a time when your financial goals and needs will change substantially.
- Buying or Moving House: A new home usually results in new debt and changed regular expenditure.
- Children: Apart from the obvious immediate costs, your thoughts will soon turn to increased living costs and future education costs etc.
- Retirement: A significant financial event as the income tap turns off and it’s time to live off savings.
- Death: This could be your death or the death of a spouse or parent or perhaps a business partner.
- Accident or Illness: Your most important asset is your income [not your home!]. Income pays for all you plan to do in life.
- Other events: There are lots of other possible events – buying a holiday home, receiving a significant gift for children, the world tour, winning the lotto or maybe even a divorce! Whatever it might be, there will be a significant financial impact.
Financial brokers use cashflow planning software, not to look back on your life but to anticipate these transitions and to help you plan for them. This exercise helps people to envision their future life, what they want and how they want their life to plan out, giving them clarity and confidence to live a life free from financial anxiety. By capturing all these goals, desires and events, you can draw up a financial battle plan to empower you to live the life you want. Then, when a major life event occurs, your financial situation is an enabler rather than a problem.