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.

Financial planning during such times can help 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, estate planning, and understand the legal and tax implications of marriage.

The most important factor 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 everyday account for both partners’ incomes, 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 a low-paid family costs $340 per week. The Australian Government provides financial support through benefits such as Family Tax Benefit A & B, Single Income Family Supplement and Parental Leave 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 contribution schedules or salary packaging options may change if you switch jobs. Consider rolling over superannuation balances when changing jobs to maintain retirement savings momentum (Important: seek advice from your Financial Adviser before making any decisions regarding your superannuation).

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 non-essential 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 your changing 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.

Whilst selling a property involves understanding the financial implications, including capital gains tax (CGT) and relocation and potentially 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 or depending on your occupation. Closing costs may include stamp duty, legal fees, and inspection charges.

Budgeting for mortgage payments and homeownership expenses involves estimating borrowing power, choosing a suitable home loan product, 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 the main residence.

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 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 allocations match 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 a retirement planner to estimate how long your income stream 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, support your family, and consider aged care costs. Additionally, having adequate health insurance, creating an emergency fund for unexpected medical expenses, and assigning a power of attorney 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, personal investments and the Age Pension.

It’s crucial to understand your risk tolerance and adjust your asset allocation accordingly. Seeking professional advice from an authorised financial adviser 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 investments by regularly 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 Your Financial Future?

While managing your financial future 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 financial advice? Coastal Advice Group can work with you to tailor your financial plan, create a retirement nest egg, build your portfolio, and protect you and your family. Our financial advice team can help you establish direction for your finances to achieve your financial and lifestyle goals.

Call us or book online to secure your consultation today!

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