Life’s full of changes. Some you can plan for. Others catch you by surprise.
Each significant life event brings new financial challenges and opportunities.
So, your financial plan needs to evolve as your life does.
Major life events often trigger the need to review and adjust your financial strategy. Whether you’re getting married, starting a family or changing careers, each milestone requires careful consideration of your financial situation. Understanding how these events impact your finances will help you make better decisions and maintain your financial stability through life’s transitions, for better or worse.
This blog shares some tips to help you navigate life’s complexities while keeping your financial plan on track.
Getting married or entering a civil partnership
Marriage or civil partnership means sharing your life – and, often, your finances – with your partner or spouse. You’ll need to decide how to manage money together. Will you combine all your finances or keep some accounts separate? There’s no correct answer, but you need to discuss it openly.
Consider opening joint accounts for shared expenses while maintaining individual accounts for personal spending. This can help balance independence with shared financial responsibilities.
Marriage brings tax implications and benefits. The Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your spouse, potentially reducing their tax bill. To benefit as a couple, the lower earner must have an income below the spouse’s or partner’s Personal Allowance (usually £12,570). You might also need to update your tax status with HMRC.
It’s also worth reviewing your insurance policies as a couple. You could save money by combining policies, and you’ll need to update beneficiaries on life insurance and pensions. Consider whether you need additional coverage now that someone else depends on your income.
Starting a family
Having children changes everything, including your finances.
The immediate costs of baby essentials like cots, prams, clothes and nappies can run into hundreds of pounds before your child even arrives. Increased food, clothes and activities create a significant increase in your monthly outgoings. Childcare costs are substantial, averaging more than £15,000 per year for full-time care in the UK. Your household income might also reduce if one parent decides to reduce their working hours or leave work entirely to care for the child.
Many families find they need a bigger home or car, or both, adding to the financial pressure. Your insurance needs change significantly, too – life insurance becomes essential when others depend on your income. Your tax position might also change, particularly regarding Child Benefit.
So, start planning early. The average cost of raising a child in the UK exceeds £150,000, not including education. Junior ISAs offer tax-efficient savings for children’s futures.
And again, review your protection needs. Life insurance becomes crucial when others depend on your income. Consider income protection and critical illness cover, too. They can provide financial security if you’re unable to work.
Buying your first home
Buying a home is likely your biggest financial commitment. With the average UK house price around £265,000, you’ll need a substantial deposit – typically 10-15% of the purchase price, meaning £26,500-£39,750 just to get started.
Mortgage payments often consume 25-35% of monthly income, making it your largest monthly outgoing. The additional costs are significant too – solicitor fees run £1,000-£1,500, surveys cost £400-£1,500, and Stamp Duty can add thousands more to the total cost. Moving costs average £1,200, and home insurance is essential. And once you’re in the property, ongoing maintenance costs average 1% of the property value annually, and you’ll need a larger emergency fund to cover unexpected repairs and maintenance.
So, start saving for a deposit early. Look into Help to Buy ISAs or Lifetime ISAs for bonus payments on your savings.
Getting a mortgage requires careful planning. Consider all costs: arrangement fees, surveys, solicitors and Stamp Duty. Your credit score matters – start improving it well before applying.
You’ll also need buildings and contents insurance. Consider life insurance to cover the mortgage if something happens to you.
And adjust your emergency fund. Build a buffer for unexpected expenses.
Career changes
Changing jobs affects more than your salary.
Pension contributions and schemes usually differ between employers, affecting your long-term financial planning. Changes in holiday entitlement, working hours and location can affect your work-life balance and associated costs. Commuting costs could increase or decrease, and changes in working hours might affect your childcare needs and expenses.
So, consider the complete package: pension contributions, health insurance, life insurance and other benefits. Will your new employer match them?
If you’re going self-employed, plan for irregular income. Build a larger emergency fund. Consider how you’ll replace workplace benefits like sick pay and pension contributions.
Divorce or separation
Divorce has significant financial implications that can affect every aspect of your finances. Legal fees can spiral. Property usually needs to be sold or equity released, which can be complicated and costly. Regular maintenance payments can significantly affect monthly budgets for both parties. Your investment portfolios, joint debts and insurance policies will all need dividing, resolving or updating. Your tax status will also change, and your living costs could increase as you move from running one household to two. And if children are involved, childcare arrangements might need to change, bringing additional costs.
You’ll also need to divide assets fairly. This includes your property, savings investments and pensions. Get professional advice – mistakes here can be costly.
Pension sharing is complex. You might be entitled to a share of your ex-partner’s pension or vice versa. Consider how this affects your retirement planning. And update your insurance policies (and your will, if you have one) and their beneficiaries.
Inheriting money or assets
Inheritance can significantly impact your finances. Large inheritances might attract Inheritance Tax (IHT) at 40% above the £325,000 threshold, requiring careful planning. You’ll face important investment decisions about how to manage inherited wealth effectively. Inheriting property brings ongoing maintenance costs and decisions about whether to keep, sell or rent it out. Your tax position might change, and your asset allocation will need reviewing. Your insurance needs might change, and your estate planning will need updating. You might face new responsibilities, such as managing property or investments, and your family dynamics might be affected. Professional advice becomes essential to manage these changes effectively.
Understanding the tax implications is essential. While some inheritances are tax-free, others might trigger IHT or Capital Gains Tax.
Consider your investment options carefully. Don’t rush into decisions. Think about your long-term goals. Would your benefactor have approved of your plans?
Review your estate plan. How will the inheritance affect your estate’s value? You might need to update your will or consider tax-efficient giving.
Serious illness or disability
Serious illness can devastate your finances.
Your income might stop or reduce significantly. Private medical treatment can cost thousands, and home modifications might be needed to accommodate your changed circumstances.
Transport costs often increase with more frequent hospital visits, and care costs can be substantial.
Your insurance premiums might increase, your savings can deplete quickly and your future earning capacity could be permanently affected.
So, getting long-term protection in place is essential. Income protection insurance can help replace lost earnings. Critical illness cover provides a lump sum if you’re diagnosed with specific conditions.
Again, if you’re unsure what protection you need, seek advice from an experienced financial planner like the team here at Glenrose.
Losing a spouse or partner
Bereavement brings emotional and financial challenges that can feel overwhelming. Immediate costs include funeral expenses, which average more than £4,000. Your household income might reduce significantly, particularly if the deceased was the primary earner. Joint accounts might be frozen temporarily while the estate is settled, causing short-term cash flow problems. Insurance claims need processing, pension arrangements need reviewing, and your tax status will change. Property ownership might need changing, existing debts need addressing and investment strategies often need examining. Living costs don’t necessarily halve when there’s one less person in the household, creating additional financial pressure during an already difficult time.
So, take immediate steps: notify relevant organisations, claim any life insurance policies and apply for any benefits you may be entitled to.
Review your pension arrangements. You might be entitled to some of your partner’s pension. State pension rules can be complex – again, seek professional advice.
Adjust your financial goals. Your circumstances have changed significantly, so take the time you need to reassess your needs and plans.
Retirement
It might seem a long way off, but it’s never too early to start planning for retirement. Compound growth means money invested in your 20s and 30s has more time to grow than money invested later in life. Starting early also lets you take more investment risk when you’re younger, potentially leading to better returns. It gives you time to adjust your strategy if needed, reduces the monthly savings burden and helps you build a more substantial pension pot for a comfortable retirement.
So, review your pension arrangements regularly – at every life stage. Consider when you want to retire and whether your pension will provide enough income. Think about your healthcare costs and potential future care needs and whether you’ll have enough income to support them.
A professional financial adviser can help you adjust your investment strategy as retirement approaches.
How can Glenrose help?
Life changes are inevitable. Your financial plan needs to change, too.
Regular reviews help ensure your finances remain aligned with your circumstances and goals.
So, be proactive rather than reactive. Consider potential changes before they happen and build flexibility into your financial planning.
Remember, you don’t have to navigate these changes alone.
The team at Glenrose is here to help you protect and maximise your wealth for a financially secure future. We’ll work with you to understand your current situation and long-term objectives. Then, we’ll provide personalised advice and tailored recommendations to help you achieve them.
To find out how we can help you create a long-term financial plan that works for you, schedule an appointment with one of our advisers today.