3 Life Changing Events to Prepare for Financially

Comerica Bank

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Achieving financial peace of mind begins with an emergency fund.

Nobody wants to think about a tragedy such as a natural disaster, car accident, illness or death, but those who plan in advance can alleviate the damage to themselves and their loved ones. However, you don't want to plan for just a disaster. Plenty of positive life changes also create financial challenges. Either way, it is important to make financial plans that give you the flexibility to respond.

Achieving financial peace of mind begins with an emergency fund.

Setting up an emergency fund

Conventional wisdom suggests that an emergency fund should contain enough savings to replace between three and six months of income or living costs. This can prove a key safety net for many minor emergencies and sets a foundation for further savings.

An emergency fund is usually best set aside in a high-interest savings account separate from your other funds. This makes it easier to avoid dipping into it casually for alternative purposes while allowing some interest to accrue over time.

Setting up an emergency fund is just the first step to being prepared for a life-changing event. Retirement accounts, funds devoted to saving for education and strategic estate planning are also important parts of strategizing prior to an emergency.

Ultimately, a life-changing event can be just about anything, but the most financially disruptive ones are those that have both an immediate and long-term impact on you or your household's fiscal well-being. With that in mind, here are three major life events and some tips on how to prepare for them:

1. Adding to the household

Whether you are getting married, expecting a child or planning for adoption, expanding your household brings unique financial challenges and opportunities that must be considered.

In the case of marriage, you must consider how you and your partner will merge finances, manage shared accounts and plan for your future together. Preparing to add a child to your family means thinking about new costs and saving for education. In either case, you may also need to think about insurance needs that may emerge to protect any dependents from a loss of income.

Strategic wealth management is critical in all of these cases, as it lays the groundwork for preparation. An effective wealth management partner can help you:

  • Identify the best account types to use relative to your financial priorities and future goals.

  • Help you evaluate cost expectations and your current ability to withstand those expenses.

  • Provide insights into trusts, specialty accounts, and estate planning opportunities to help you manage them effectively.

2. Illness and death

If your household has a primary earner, how will you maintain your lifestyle if that person becomes seriously ill or dies? What can you afford to invest in protecting against such an event, such as through insurance or savings, to safeguard the future? Do you have the resources needed to avoid financial hardship - health care costs, family support systems, etc. - if a member of your household becomes seriously ill?

All of these questions need to be considered with care, and they aren't ever easy to answer. Wealth management services can help you understand the full implications of such events. For example, if you own a business and a health issue forces you to step down from your position, a wealth management team can help you identify the best options to move forward while protecting yourself and your loved ones from financial difficulties. 

3. Employment changes

Whether you are laid off, decide to leave your job or are planning for retirement, it is important to have a financial plan to weather the period in which your income declines (or disappears altogether). An emergency account is a good first step here, but it is a limited solution.

Retirement planning is also becoming extremely complex. CNBC® reported that many consumers underestimate how long they are likely to live after retirement, leaving them in a situation in which they outlive their savings.

When planning for a change in employment, it's important to assess your entire financial portfolio, including any stock interests that may be associated with the company you worked for, and to understand regulations surrounding those funds.

Be ready for change

Wealth management services can help you evaluate the implications of change, gain a deep understanding of how life events impact your financial situation and advise you on next steps. At Comerica Bank, we take a thoughtful, personal approach to wealth management, building strong relationships with customers to help them achieve their goals. Contact us today to learn more. 

This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice.

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.

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