5 Life Events That Require Wise Financial Planning

Most of us wish we could stretch our money further than we do. Too often things come up that steer us away from the budget we planned. A few social obligations arise during the week and suddenly monthly entertainment expenses have doubled; which increases food costs due to eating out with friends.

Not to mention the additional costs of failing to prep meals for the week because you were out late.

Impromptu spending like this is difficult to prevent because life is full of the unexpected. But that isn’t the only reason to engrain saving into your life.

Here are five life events that require wise financial planning to motivate you to better plan for your future.

College Education

It’s well-proven that those with college educations earn more over their lifetimes than those with only high school educations.

However, given that the average student loan debt neared $40,000 in 2017, college degrees take the idea of “investing in yourself” to a new extreme.

Over 44 million Americans have student loan debt, and the delinquency rate, which denotes if a loan is over 90 days delinquent or in default, is over 11 percent.

But just because everybody’s doing it doesn’t mean you or your kid(s) have to; the overall average cost of a trade school/polytechnics is $33,000 compared to $127,000 for a bachelor’s degree.

Trade schools are also quicker to complete, teach skills in ready-to-place professions, offer solid job security and above-median salaries. Of course, the final decision is up to you and your family.

If you have to take a student loan, shop for lowest loan rate via online sites like StudentLoanHero

Birth of a Child

Few can argue against the many joys of having and raising a child, but the costs that come with having kids cannot be overlooked. It costs around $14,000 annually to raise a child — or $233,610 from birth through age 17.

Combining rising housing and childcare costs with inflation means it’ll continue to be expensive to have kids.

Though, you can save considerable money depending on where you live; to raise a child in the urban northeast costs $253,770 compared to $193,020 in the rural Midwest.

Often we see that after childbirth parents tend to work more hours and into more jobs. Often parents have to work so hard that their quality family time suffers.

Getting Married

Unless you want to elope or have an impromptu bare-budget wedding, it’s going to be expensive. But how expensive?

According to one study, the average cost of an American wedding was over $35,000, which doesn’t even factor for additional wedding-related events like the engagement party, bachelor/bachelorette party, and honeymoon, making the real number closer to $45,000.

Whether you want a large, lavish wedding or something more modest, it’s wise to save a little on the side for it. Even if most of the actual wedding cost is covered by the family, extra costs always abound.

Seeing as finances already are a common thorn for married couples, do budget for the bash you want to have without overextending your credit and setting your new life together back considerably.

Still, it’s preferable to avoid debt altogether if possible. There are ways to start saving for your eventual wedding and accumulate enough resources to have a beautiful wedding.

Starting a Business

Many of us dream of starting our own business for unlimited earning, ability to be our boss and work in a field of passion.

However, hard work and interest don’t guarantee a small business’ success. In the first year alone, 20 percent of small businesses fail. That number climbs to 50 percent within five years.

These stats don’t mean you’re doomed to fail, but you should be aware of the risk you’re taking.

You’ll want to be debt-free in your personal life before starting your small business since leveraging a loan to operate is more or less inevitable.

Wisemen keep their personal finance and business finance separated so that in case of a disastrous outcome of the business, there’s no impact on personal savings and investment.

You not only need to plan carefully but hire experienced professionals or CPAs to help you in the process.

Retirement

Finally, retirement is the most important life event that you should plan for. In fact, the planning starts from the very moment you join the workforce. 

Retirement planning starts from the moment you put a portion of your first paycheck in your retirement account and ends when you withdraw the last installment before you rest in peace.

Some of us might prefer working in our retirement to stay active mentally and socially, but the story changes if it’s at a job we don’t like and for money, we depend on.

However, based on most Americans’ saving habits, working until death is inevitable. Per a GOBankingRates study, around 42 percent of Americans will retire broke, which the study categorizes as having $10,000 or less saved for retirement.

For some people, money is undoubtedly tight. For others, it’s a simple lack of planning. According to Bloomberg, of the 79 percent of Americans that work for an employer that offers a retirement plan, just 41 percent of people make contributions.

No matter what you are currently are, it’s never too late to start building a nest egg for your golden years by contributing to your employer 401k or opening your own IRA.

For some of us, building an emergency fund isn’t concrete or exciting enough to incite real action. That’s where these essential life events come into play. Decide which life areas mean the most to you and then create an incremental savings plan to make it happen.