As our life changes so do our financial planning needs. I have created a list of some important life events that are commonplace and highlight some of the issues associated.
Pay rise – Pay rises are obviously financially good news, they increase our capacity to save or repay debts and will allow us to achieve our goals sooner. Don’t let pay rises get sucked up into everyday spending without improving your lifestyle. A pay rise may also change your income protection requirements.
Getting married – Getting married changes everything! Weddings themselves are expensive and couples are treated differently to singles for taxation and social security. Combining expenses is likely to have some economies of scale, but you may also become financially reliant on each other and that may bring into play some insurance requirements. It goes without saying that your estate planning situation is also affected by getting married.
Getting an inheritance or windfall – What to do with a lump sum? Pay off debt? Invest? Make a contribution to super? These are all valid options. There are so many considerations in this scenario and the correct advice with a lump sum can make an enormous difference.
Having a baby – Having a baby significantly affects both income and expenses greatly altering the budget and associated plans. It is likely that one or both partners are likely to reduce work hours and this might open some opportunities to be considered as a low income earner for a short period of time and utilise associated benefits. Both partners will definitely be financially reliant on each other once kids are involved and insurance needs are definitely more important.
Redundancy – Redundancy payments are complicated. There are taxation issues, the possible requirement for this to replace income and all the possibilities around what to do with a lump sum. A redundancy is a situation where good financial advice can add significant value.
Retirement – Retirement is the bread and butter of financial planners. A large portion of our advice is about providing enough wealth to meet income needs in retirement. We aim to minimise or eliminate tax, maximise Centrelink payments and create efficient income streams for retirees.
We are all likely to be effected by one or more of these significant events in our lifetime. Getting good financial advice during these times can help to secure a brighter financial future.
Alex McKenzie, Future Financial Services
Alex McKenzie is a financial planner, and the owner of Future Final Services in Penrith. He is a graduate of Western Sydney University.