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Our lives are
shaped by various events that come with financial consequences. Many
people get swept up in such events without being financially prepared.
Life events range from the significant milestones of getting married,
the birth of a child, buying a home, caring for aging parents, to the
loss of a loved one, planning for retirement and your estate. What are
the major life events you anticipate this year? Are you prepared for
them financially?

Getting married?

Are you planning to
get married this year? What a thrill to plan and prepare for a wedding
but far too often an important aspect of the marriage, the merging of
financial lives, is ignored. Money is an important aspect of marriage
and one of the most difficult topics to deal with. Whilst the time
leading up to the wedding is very busy, try to make time to discuss
money matters with your fiancé before the register is signed. Open
communication will help you both to align your goals, which ultimately
makes for a more successful marriage.

As you build
financial security together you will need consensus and compromise for
some money related issues. It may not sound terribly romantic, but
issues such as establishing joint bank accounts are important matters
that ought to be discussed. Home ownership, having children, and
funding their education naturally should be on the agenda for
discussion as well. Remember to review your important documents
carefully to ensure that they reflect your new marital status.

Are you the parent
who is expected to finance your son or daughter’s wedding? Quite often,
much of the financial burden of the actual wedding day is likely to
fall on the shoulders of parents already in retirement. Where will this
money come from? If your child’s wedding is imminent, plan ahead and
try to work within a budget appropriate for you so that costs do not
spiral completely out of control and jeopardise your finances. Do not
be in competition with your in-laws who may have far greater resources
than you do.

Are you expecting a new baby?

The birth or
adoption of a child is one of life’s most fulfilling events. New
parenthood naturally comes with new financial responsibility and
raising a family presents new budgeting challenges. Start to review and
estimate current and future expenses, from nappies to university fees!
An equity mutual fund would make an ideal savings vehicle for all the
early cash gifts that your child might receive as there are strong
prospects for long-term capital growth.

Child-care is
likely to be a major expense, especially as many mothers must return to
work. Even if you are able to stay at home with the children, bear in
mind that an extended absence from work, skills and training, could
limit your future career options, and therefore your lifetime earning
potential. If you do wish to pursue a career, consider part-time work
or pursuing training and education whilst the children are still young.

Although secondary
school and higher education are decades away for your new baby, costs
continue to escalate all over the world and the sooner you begin to
save for your child’s education, the better. You will have the benefit
of luxury of a wider variety of investment and savings options to
achieve your goals.

The birth of a
child is a good time to make a will, if you don’t already have one, and
review your insurance policies to include the latest beneficiary. The
will should make provisions for guardianship if both parents die while
the children are still minors.

Owning your own home

Are you planning to
buy or build your own home? A home is one of the most significant
purchases you will make in your lifetime. If this is on the horizon
this year do make sure it is within your budget and lifestyle and will
not become a burden.

If you know what
your budget limitations are you will not be tempted to look at
properties or houses outside of your price range. Location is
everything, and a wonderful home in an undesirable area may not be
worthwhile from the home value perspective.

Be careful with
whom you deal as the real estate market can attract some unsavoury
characters. Be particularly cautious and deliberate in ensuring that
all essential documentation is in place.

Is retirement on the horizon?

Retirement should
be a fulfilling and exciting time of life. If you plan to retire this
year or fairly soon, I hope you have been preparing long before now. We
should all begin to save for our retirement years as early as possible
in our working life. Time, consistency, and discipline are important to
accumulating enough wealth to sustain you during your retirement years.
This could end up being two decades or more.

How would you like
to live in retirement and how much is it likely to cost? Assess your
sources of retirement income, which should ideally include a pension,
rental, and dividend income. Then calculate how much you must save to
supplement it to be able to afford the lifestyle you envisage. There
are numerous online retirement planning calculators that should help
you in making these estimates. Your Pension Fund Administrator (“PFA”)
will also be able to assist in this regard.

Whilst many
financial advisors recommend shifting more of your assets from
growth-oriented stocks into more stable, income producing investments,
such as money market deposits and bonds, it is advisable to retain some
portion of your assets in stocks to increase your prospects for
long-term growth.

Your investing
style will of course depend on your risk appetite as well as your age
and circumstance and may shift towards less risk. Remember that to
achieve growth of any significance, you cannot afford to be completely
risk averse. Don’t forget to build in issues of aging, such as
provision for medical health care. Estate planning should be on the
front burner, as you age.

As life goes
naturally through its various stages, so too should your financial
planning. Review your financial objectives regularly to keep them in
synch with events that shape your life. Even if you have been fairly
consistent with your planning since your twenties or thirties, by the
time you are in your 50s or 60s you will need to adjust, revise, or
completely change the way you manage your money.

Write to
personalfinance@234next.com with your questions and comments. We would
love to hear from you. All letters will be considered for publication,
and if selected, may be edited.