Jeffrey Aron
Life is a series of milestones. Some are joyous, like sending your kids off to college, while others, such as unexpected health challenges, can be more difficult to manage. What they all have in common is their potential to impact your financial situation. Here are a few key strategies for preparing your wealth for major life changes. Together with your financial advisor, taking a proactive approach will help you and your finances stay stable, no matter what life brings.
PREPARING YOUR LIFE FOR MAJOR LIFE CHANGES: A CHECKLIST
Because everyone’s finances are as unique as they are, this isn’t a one-size-fits-all guide, but it’s a strong starting point. Your financial advisor will personalize their recommendations to fit your circumstances.
1. BUILD AND MAINTAIN AN EMERGENCY FUND
An emergency fund is a financial safety net that everyone knows they should have, but not everyone prioritizes. It’s an essential part of a solid financial foundation, acting as a cushion against unexpected expenses like medical emergencies or job loss.
Here are some guidelines for building and maintaining a robust emergency fund:
- Keep it Separate: Use a dedicated savings or money market account. This keeps your emergency fund accessible yet distinct from other savings.
- Define Your Target: Aim to save three to six months' worth of expenses. If you prefer a stronger buffer, you might consider saving up to nine months' worth. Your comfort level and financial situation will guide this decision, and your advisor can help determine what makes the most sense based on your circumstances.
- Plan to Replenish: Create a plan to replenish your emergency fund before you need to use it. Having a sense of how you will build it back up might make it feel less stressful when you need to use those savings.
A well-maintained emergency fund won’t just protect your investments and retirement accounts. It also provides peace of mind, allowing you to focus on what truly matters during a challenging time.
2. PLAN PROACTIVELY FOR HEALTH EMERGENCIES
While it’s impossible to predict health issues, it is entirely possible to prepare for them. Healthcare planning can be viewed as part of a larger wealth management strategy.
There are a few steps you can take specifically related to healthcare beyond having an emergency fund. That includes evaluating your health insurance coverage to ensure it meets your needs. Also, take full advantage of Health Savings Accounts (HSAs) to save tax-free dollars, earmarked for future medical expenses. You can also speak with your advisors about long-term care insurance. This can help safeguard your assets in the event you need long-term care services in the future. Planning for health related emergencies also means reviewing your estate planning documents to ensure your wishes are followed and your loved ones will be provided for should the unexpected occur. Your health is priceless, and protecting your wealth from unforeseen challenges is just as invaluable.
3. BALANCE INVESTMENT AND STABILTY RISK
Navigating external changes, like market fluctuations or an economic downturn, starts with a well-balanced investment portfolio. But true diversification is more than just checking all the boxes on an asset allocation chart. Your advisor can help determine your risk tolerance, so you feel confident and comfortable with your portfolio during both calm and challenging times. In general, a long-term perspective, grounded in diversification, will help protect your investments from sudden shifts in the market. Having a long-term view and strategy will allow you to focus on your goals through economic ups and downs.
4. PREPARE FINANCIALLY FOR RELATIONSHIP MILESTONES
Relationship changes including marriage, divorce, or the death of a spouse can carry profound financial implications. They’re emotional and often stressful moments where holistic financial planning can make a significant difference.
Here’s how a financial advisor can help navigate these events:
- Marriage: Whether it’s combining finances or establishing a prenuptial agreement, it’s important to find an arrangement that is agreeable to both partners.
- Divorce: From dividing assets to updating estate plans, your advisor can help you regain financial confidence.
- Loss of a Spouse: A trusted advisor can help even before the loss of a spouse, by helping ensure accounts are accessible, estate planning documents are accurate and up-to-date, and plans are in place in the event of a death. They will also help navigate the necessary decisions and changes in the weeks and months following the passing of a spouse.
5. PLAN FOR SELLING OR CLOSING YOUR BUSINESS
Business ownership comes with unique responsibilities. Exit planning is about more than preparing for your retirement; it’s about maximizing the value of an enterprise you’ve worked so hard to build. Every business owner should design a strategic exit plan, even if selling your business isn’t on the horizon just yet. That also means exploring ways to enhance business value for potential buyers while maintaining efficient operations. Your advisors can also help prepare for sudden transitions with strategies that keep your personal finances intact. Being proactive helps ensure that you’re ready for any scenario, planned or unplanned.
6. APPROACHING THE EMPTY NEST OR RETIREMENT WITH INTENTION
Sending your kids off into the world or transitioning into retirement is a moment to redefine your life and financial goals. These shifts come with lifestyle changes, and your finances should evolve alongside them. It’s never too soon to start thinking about your retirement goals that may include experiences like travel, picking up new hobbies or maybe learning a new language. You will get to decide if you want to stay in your home, split your time in different climates, or downsize. It will also include small day-to-day decisions like who you will get coffee with and if you will go to the gym or take a walk in the park. You may also want to make sure your children, grandchildren or favorite charity are supported after you are gone. Your advisor can help you create a financial plan that will help you achieve your retirement goals.
PREPARING YOUR WEALTH FOR MAJOR LIFE CHANGES
Financial planning is about more than numbers; it’s about making a life that supports your priorities, values and goals. Life’s changes, whether anticipated or unexpected, don’t have to disrupt your financial stability. A proactive and comprehensive plan will help you gain the freedom to focus on what matters most. If you’re wondering how prepared you are for life’s changes or simply want to take the guesswork out of wealth management, we’d love to help.
Jeffrey Aron manages all aspects of Financial Planning and client services, including the preparation of comprehensive financial plans (retirement, education, cash flow, etc.), insurance and asset allocation recommendations, advanced estate planning strategies and of course, plan implementation. He specializes in servicing the unique planning needs of high net worth individuals and families, with a depth of experience covering all aspects of financial and estate planning.