Kevin Ward – Advisor
Life is full of unknowns—simultaneously a source of tremendous potential joy and anxiety. But with thoughtful planning, you can help mitigate some of the unknowns—or at least better position yourself to handle surprises when they arise. In this series, we explore some planning you can undertake, depending on your phase of life. People admittedly do things in their own order—everyone’s on their own journey—so rather than group considerations into age brackets, we’ve grouped it relative to where you are with respect to your (or your significant other’s) career. If you happen to tackle life in a different order, first, good for you. And second, these pieces should nevertheless offer some ideas for you to explore more either on your own or alongside a seasoned financial advisor, so you can still position yourself well to handle whatever the future throws in your direction. Among the considerations we consistently explore are those related to benefits management, insurance, your balance sheet (managing liabilities, or debt, and assets), and saving for major life events or purchases.
As your career progresses, your responsibilities—i.e., your expenses—in various areas will likely increase. Many people in this stage of life—though by no means all—choose to start a life and perhaps a family with a partner. Or they at least start planning for a family. Naturally, increasing the number of people in your household increases your costs in various ways—grocery and other bills increase, but so may your housing payment, particularly if you choose to move into a bigger home. Or maybe there are other big purchases you’d like to make during this phase of life. As with all major purchases, the key is planning so that you can comfortably make whatever payments are involved when you pull the trigger.
Starting a family also introduces an opportunity to plan your finances thoughtfully so that as your family grows and matures, you needn’t find yourself backed into financial corners. Accordingly, this is a good time to review your benefits selections during your company’s annual enrollment. Do you need to change your health insurance? Beneficiaries on existing accounts? If you haven’t previously purchased life insurance, should you consider it now?
Other benefits-related areas to explore are childcare-related accounts, such as flexible spending accounts and education accounts. For example, starting a 529 or other education-related accounts, depending on the state in which you live and the options available, will help you plan and save for potentially hefty education-related expenses. Even if you don’t know whether your children will choose to attend college, the funds saved in such accounts may potentially be used for other opportunities as your child approaches adulthood.
Given your shifting expenses and savings focus, you may find you have less disposable income to direct toward your retirement account for a while. This isn’t necessarily a problem if you plan and know where you stand. Instead, once you’ve taken care of funding whatever education accounts you’ve chosen to open, you can return your focus to retirement and likely keep everything on track.
This phase of your career and life is also a good time to review your beneficiary, insurance, and estate-planning status. Look at any powers of attorney you’ve established to ensure they still name the right people you’d like to have handle your affairs in the event of any unexpected events. Perhaps you have a life insurance policy, but it’s no longer sufficient given the number of dependents you now have—maybe it’s worth investigating an additional policy or increasing your coverage. However, it’s worth approaching life insurance thoughtfully and discussing it with your financial advisor to ensure you’re thinking about it in the relevant context. It is possible to take out more insurance than you need—some consider it an investment, a potential future income, or debt payment replacement, depending on which type of policy they purchase. An experienced financial advisor can help you evaluate these decisions and assess whether insurance is indeed the best vehicle for achieving the goals you have in mind or whether there might be better approaches that position you better in the long run.
When it comes to estate planning, some tend to think that because they don’t necessarily have the level of assets that would qualify them as “wealthy,” there’s not much to plan. Falling prey to this fallacy could leave your family in a less-than-optimal financial position should anything untimely happen. People who pass away without a will leave their estate “intestate,” and likely, most of their assets will have to go through probate before passing to heirs. Probate can not only be timely and costly but also meaningfully eat into the assets available to pass to survivors. So, no matter how small you may think your estate is, it’s advisable to establish a will so your family will be well-positioned no matter what the future holds. If you’re unsure where to start, your financial advisor is likely a good resource—not only to ask some initial questions, but also as a potential source of referrals to a qualified estate-planning attorney.
Though it can be financially stressful, this phase of life can also entail some of life’s greatest joys—marriage, starting a family, and embarking on new adventures together. Provided you do your homework to position your family for financial success, you should also be amply able to bask in the joy these years often bring.
© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information and opinions contained herein are subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.
