Helen 200 x 200
By Helen Hartman, CRPC®

Frequently in the financial industry, representatives will use the word transition to describe a client’s current life situation. However, what is a financial transition? What are life situations which we should be extra attentive to our financial well- being? A financial transition is any time a life occurrence will change the overall finances of the household. A financial plan needs to be readdressed at any of the following changes;

  1. Major purchase- whenever there is a major purchase being considered, the overall impact on the financial well-being needs to be reviewed. Such issues as how will this affect current savings, future monthly payments, and future savings goals should be calculated. After the review of impact, the purchase should either be completed or placed into a plan for the future.
  2. Change in residence- moving out of your parent’s house and running your first residence can be very stressful. Purchasing a bigger home (or smaller) will also change the monthly outflow of cash. Many different factors such as taxes, utilities, and rent/mortgage can affect a savings plan.
  3. Change in relationship status- getting married, getting divorced. Whether you are combining or dividing finances, it can be a very stressful adjustment. Developing (or adjusting) a financial plan can help guide an individual through the extreme differences.
  4. Changing/ loss of jobs- The change of income needs to be addressed when a new job enters the financial picture. A comparison of the change in income versus the current expenses should be conducted to adjust the savings plan. The loss of a job requires analysis of what accounts will be used to substitute for lost income. A review of lost employer benefits and needs should also be done.
  5. Addition of family members- Adding a dependent, whether child or parent, will change the household needs and require a long-range plan for achieving financial goals due to greater stresses on the expenses.
  6. Retirement- The highly anticipated day when work is no longer a daily event requires a lot of planning and preparation. Today’s retirement requires more active involvement from the retiree than in the past. A plan for future comfort is necessary. Many of the previous transitions will keep future retirement in mind as the approach for the situations is devised.
  7. Death of a spouse/partner- The transition from two incomes to one is frequently scary. An approach to this life transition should be created and reviewed constantly. Life insurance, transfer on death accounts, replacement income streams are all vehicles that should be considered and implemented if necessary.

The need for financial planning and preparation is necessary to support individuals through life’s big transitions. The need for consultation or review puzzles individuals. Guidance and planning are always recommended to help prepare and/or address the financial transitions in life.

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