Home / Blog / Life Transitions and Financial Planning: Adjusting Your Strategy Through Change

Life Transitions and Financial Planning: Adjusting Your Strategy Through Change

Life transitions are significant events that can impact people’s finances. Thus, individuals may need to make critical financial decisions during these times. 

Life transition financial planning is a specialised area that focuses on helping individuals navigate significant life transitions such as career changes, relationship milestones, health challenges, and financial shifts.

Marriage and Family Planning

Marriage and having a family are major life changes that can affect financial planning. Couples should update insurance policies and understand the legal and tax implications of marriage. 

The most important is for couples to have open conversations about financial matters to make informed decisions about their future goals and strategies.

Financial Planner Checklist for Marriage and Family

Financial considerations when getting married

It is important for couples to consider whether to combine finances or maintain independence. Couples may establish a joint checking account for both partners’ paychecks, or maintain separate accounts for separate deposits and withdrawals.

It is also essential to discuss financial objectives, such as buying a home or investing for retirement. Couples must agree on how much each will contribute to their superannuation or retirement savings plans

You may choose to work closely with a financial adviser who looks after your best interests when considering these.

Budgeting for a growing family

Budgeting for a growing family is crucial for financial stability and security, covering expenses like housing, food, clothing, healthcare, education, and childcare. Budget planners and savings calculators can help families track spending and save money.

The Australian Institute of Family Studies estimates that raising two children in low-paid families costs $340 per week. The Australian Government provides financial support through Parental Leave Pay, Dad and Partner Pay, and Child Care Subsidy.

Consider life insurance, income protection insurance, trauma insurance, and total and permanent disability insurance for family protection.

Career Changes and Job Transitions

Changes in jobs in Australia may have significant financial implications, including salary adjustments, benefits packages, retirement savings, and potential tax liabilities.

Financial Planner Checklist for Career and Job Transitions

Financial implications of changing jobs

Comparing employers’ total compensation packages is crucial for a fair tradeoff when moving to a new job, as it may result in changes or no change.

Employer and employee superannuation contributions and employer-matched fund vesting schedules may change if you switch jobs. Consider rolling over superannuation balances when changing jobs to maintain retirement savings momentum.

Unused entitlements like annual leave and sick leave during job changes may trigger tax consequences as they are considered ordinary income and are taxed accordingly.

Budgeting during periods of unemployment or career transition

Crafting a financially resilient strategy becomes crucial in times of unemployment or career transitions. Develop a budget by tracking essential versus nonessential expenditures when managing income loss. Cut unnecessary costs while maintaining basic needs. 

Explore alternative income streams through part-time employment, side hustles, or utilising existing resources like outplacement programs from former employers. 

Plan ahead for future roles by investing in relevant training and networking opportunities. Get professional financial advice when creating a customised plan tailored to individual circumstances.

Buying or Selling a Home

Preparing for a home purchase involves saving for a deposit, covering closing costs, and budgeting for mortgage payments and homeownership expenses. 

While selling a property involves understanding the financial implications, including capital gains tax (CGT) and relocation or downsizing costs. 

Financial Advisors’ Checklist for Property Purchase and Investment

Financial considerations when purchasing a home

A 20% deposit is generally recommended, but smaller deposits may be accepted with lender mortgage insurance. Closing costs may include stamp duty, legal fees, and inspection charges. 

Budgeting for mortgage payments and homeownership expenses involves estimating borrowing power, choosing a low-interest home loan, accounting for ongoing expenses like council rates, land taxes, maintenance, and repair costs, and researching government incentives and schemes to assist with home purchases.

Financial implications of selling a home

CGT is applicable to properties with increased value since purchase and is calculated based on the profit. However, sellers can reduce or avoid CGT, especially if the property is a primary residence. 

Home sellers can potentially be exempt up to $250,000 or $500,000 of the profit from CGT, depending on filing status and certain conditions. 

When selling a home, it’s important to budget for relocation or downsizing costs, including moving, storage, and potential renovations in a new property.

Divorce or Separation

Divorce presents significant financial challenges, including asset division, income and expense adjustments, and legal costs. It’s crucial to reevaluate financial goals and establish financial independence.

Financial Advisers’ Checklist for Divorce or Separation

Financial challenges associated with divorce

Divorce usually creates two households, which may lower living standards and economies of scale.

The implications of divorce on retirement earnings and assets are complicated and rely on several factors, including:

  • the effects on employment and retirement decisions post-divorce, 
  • the proportion of pre-divorce assets received by each partner, 
  • the stage of life at which the divorce occurred, 
  • whether or not the divorced person remarried, 
  • the amount of child support received or paid, 
  • whether the couple had entered the housing market, and 
  • the contributions made by the respective members of the couple.

Reevaluating financial goals and priorities post-divorce

Following a divorce in Australia, reevaluating financial goals and priorities involves updating various aspects of one’s financial situation. 

Update insurance, wills, and powers of attorney to match current beneficiary designations. Ensure asset and liability allocation matches the divorce settlement. Make a realistic budget based on new income and spending.

Open separate bank accounts, terminate joint accounts, cancel shared credit cards, and remove the ex-partner from contracts. Review retirement plans and how the divorce affected long-term savings. Reduce debt and create a debt management plan.

Understand the divorce settlement’s tax effects and consult specialists to reduce taxes. Restructure investment portfolios to match changing financial objectives and risk tolerance.

Retirement Planning

The retirement planning process in Australia involves several key considerations, including transitioning from the accumulation to the distribution phase and adjusting investment strategies based on the retirement timeline.

Financial Advisor Checklist  for Retirement

Transitioning from accumulation phase to distribution phase

Planning for your financial future requires estimating your income, living expenses, and future lifestyle. You may use the retirement planner to estimate how long your super fund and Age Pension will last, and decide on withdrawal options from retirement accounts such as an account-based pension, annuity, lump sum, or a combination of these.

It’s essential to plan for changing health needs or aged care, support your family, and consider healthcare costs. Additionally, having adequate health insurance, creating an emergency fund for unexpected medical expenses, and assigning an authorised representative are recommended for financial security.

Adjusting investment strategies based on retirement timeline

Given that most Australians can expect to live well into their 80s, having a financial plan for longevity and potential healthcare costs is vital. This may involve exploring retirement income options, government benefits, and estimating your income from super and the Age Pension.

It’s crucial to understand your risk tolerance and adjust your asset allocation accordingly. Seeking professional advice from a licensed financial adviser or a Services Australia Financial Information Service (FIS) officer can help you make informed decisions.

Conclusion

Adaptive financial planning plays an essential part in maintaining financial health and resilience during life transition events such as marriage, divorce, job loss, retirement, or the birth of a child. 

Seeking expert advice from professionals who understand the complexities of personal finance is highly recommended. Financial planners have expertise in understanding various scenarios and developing strategies tailored to individual needs.

Having the right financial planner assist you is crucial to long-term financial stability. You may effectively manage your money and investment by frequently evaluating and revising financial plans based on changing circumstances. This proactive attitude helps you avoid problems and be financially comfortable during unforeseen circumstances.

Ready to Build an Investment Portfolio? 

While investing can seem complicated and time-consuming, it doesn’t have to be that way with knowledge and expert guidance. Whether you’re young or old, it’s never too late to start investing, so you can achieve your personal goals. 

Need investment advice? Coastal Advice Group can work with you to tailor your investment plan and build your portfolio. Our financial advice team can help you establish direction for your investments to achieve your financial and lifestyle goals.  

Call us or book online to secure your consultation today! 

References:

DISCLAIMER: Coastal Advice Group Pty Ltd is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.

(Trading names of Coastal Advice Group Pty Ltd include Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Compass Advice Port Macquarie, Wealth for Life Financial Planning and Coastal Advice Group Brighton/Somerton Park).

The views expressed in this publication are solely those of the author; they are not reflective or indicative of the Licensee’s position and are not to be attributed to the Licensee. They cannot be reproduced in any form without the express written consent of the author. Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Any advice or information in this publication is of a general nature only and has not taken into account your personal objectives, financial situation and needs. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your objectives, financial situation or needs.

Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product, it is important for you to consider these matters and to seek appropriate advice.

Past performance is not a reliable guide to future returns.

Any tax estimates provided by us in this publication are intended as a guide only and are not intended to be a substitute for specialised taxation advice. We are not registered tax agents and you should consult with a registered tax agent to determine your liabilities, obligations or claim entitlements that arise or could arise, under taxation law.

The information in this publication reflects our understanding of existing legislation, proposed legislation, rulings etc as of the date of issue. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.

The publications on this site is designed for Australian residents only. Nothing on this website is an offer or a solicitation of an offer to acquire any products or services, by any person or entity outside of Australia.

Related Articles