Financial planning is about more than securing your future wealth. It’s about improving your quality of life and protecting your mental health against unnecessary money worries. Solid money management and greater peace of mind at various life stages go hand in hand.
Have you prepared for the changes that lie ahead? Learn why you should.
What Types of Life Transitions Affect Financial Planning?
Different life stages can affect your future. You’ll feel stressed when unprepared and don’t have savings to help cushion the blow. You should prepare for several life changes, not just retirement and old age. Other transitions to plan for include:
- Marriage and divorce: Getting married means changes in your financial needs, and you’ll potentially have to support a future spouse and children. Likewise, divorce may significantly affect your future finances.
- Starting a family: If you want kids, you may have to start saving for them before they’re a glimmer in the eye. Their education and needs increase exponentially as they age.
- Blending families: Love is rarely a case of “boy meets girl.” Sometimes, other factors are involved, like your kids, their kids, the kids you share and former spouses. It can get complicated and expensive, creating significant stress without thorough preparations.
- Changing careers and unemployment: You’ll likely have an average of 12 jobs from age 18 to 56, so you’ll have to plan for career changes and how this could impact your future earnings. Periods of unemployment may also accompany career changes. Not having emergency savings to carry you through tough times can trigger massive stress.
- Selling assets or a business: You may sell a company in your lifetime, buy another, or buy and sell assets requiring detailed planning and tax responsibilities.
- Pre-retirement: Nobody wants to work until they die, and retirement planning involves scaling down on work before you finally retire. Your fiscal preparations should accommodate this.
- Death of loved ones: When family members pass away, you may need to step in to support loved ones, and the associated costs can quickly add up. Unexpectedly losing a partner’s income can dramatically influence your plans.
- Medical diagnosis: Serious illness and critical medical conditions can jeopardize your financial stability and cause stress. Proactive planning is essential to mitigate their impact.
- Inheriting wealth: Inheriting wealth can significantly affect your tax obligations and, without proper planning, may turn into a money challenge rather than a benefit.
- Deploying overseas: Even aspects of your job, like working abroad, can impact your family’s financial plans. Being unable to pay local bills or send money to family while traveling abroad can negatively affect your credit profile and may even cause you to go into debt.
- Disasters: Natural disasters can equally compromise your future plans. Hopefully, you have insurance to protect you from property damages, but you may also need to plan for rebuilding and overcoming challenges when there’s an earthquake or fire.
Financial Planning and Peace of Mind Statistics
Financial planning statistics in the U.S., U.K. and Australia show the impact of life stages on mental health. In 2023, Americans reported that 51% of polled individuals feel peace of mind because they work with a certified financial planner. Knowing they have qualified guidance ensures tranquility, confidence and a more satisfying family life. With plans resulting in 37% greater financial confidence, it’s easy to see how being prepared significantly impacts your state of mind.
Even those living on a tight budget of less than $60,000 indicated a 46% increase in mental health when they had a money plan, so planning isn’t for the wealthy alone. Similar reports from the U.K. show that 79% of polled people worry about their future and finances. Constant worry seriously impacts one’s mental state, and 29% of the survey respondents remarked that their fears have physical manifestations like headaches and sleeplessness.
Australians experience money worries, too, with 69% of a 2024 survey indicating they feel utterly unprepared for financial upheaval or transitions. Greater access to advisors would comfort 24% of the respondents, and 30% say they want to cultivate more vigorous money habits. Fiscal preparations help you feel calmer and ready for the future regardless of where you live.
6 Stages of Financial Planning for Transitions
Your earnings plan must be as dynamic and adjustable as your life circumstances. What you anticipate may never happen, and the unexpected could be approaching. The lifelong journey of planning your finances includes these steps. Preparation can help you feel more assured and confident that, no matter what, you can survive and thrive in the future.
1. Seeing Your Money Today
People often look to the future, forgetting that what they spend, earn and value today significantly affects their financial success. Start by evaluating your earnings, spending habits and ability to earn more. Your current assessment should include what you owe and earn, honestly reflecting where your money goes and how much you can save or invest.
2. Setting Goals
Next, you have to plan what you want to achieve. The ideals you set determine what you can do with your money and how you ensure your future. It’s about creating a plan for what you want at different life stages.
3. Analyzing Your Current Money Map
Next, your money map analysis determines what you set aside and what happens to that over time. It’s the steps you take from your starting point to your chosen goals. If you have savings targets, planning gets you there.
4. Creating a Finance Plan
Considering where you are, where you’d like to be and the distance between, you can create instructions for getting there. This is your finance plan version A. The plan will rarely remain the same, but it’s a start. It could include small steps like choosing not to have coffee every morning at the coffee shop and saving that money as part of your future investment portfolio. It can also include larger milestones like returning to school for a better-paying job.
5. Implementing the Plan
Now, you need to see how well your initial plan is doing. After a set interval, say six months, you can decide how well plan A is helping you achieve your goals. If there’s a bit of success, evaluate what parts of the plan work. Determine how to improve results and get where you want to go faster.
6. Evaluating and Revising the Plan
After a year, some of your initial goals have changed, and you could redraft the plan to align with these. When you have just finished school, your plan may be more short-term, such as saving enough to buy a car. Later in life, your plan could include earning enough to allow your partner to stay home and raise the kids. It’s dynamic, and your life transitions change your outcomes.
Why Plan for Peace of Mind?
Why and how does a financial plan contribute to your mental state? Simple — you stress about things you can’t quantify. Using a roadmap lets you decide what something is worth, how you will reach it and what steps you need to take to get there.
Your plan lets you know how much to save, how long it will take and when you can expect the goal to be within reach. Every step is mapped out, so you don’t have to worry. Financial preparation helps you switch off the worry gear and focus on productivity and happiness.
This is a collaborative post supporting our Peace In Peace Out initiative.