Preparing Financially for Marriage, Children, and Other Big Life Changes

Throughout life, everyone faces significant changes that affect them personally and financially. While some of these changes happen with little warning, there are others that you often have time to prepare for. For these life milestones, it is important to prepare yourself mentally and emotionally but also financially. Big life changes often also mean momentous changes for your finances as well.

Here are some ways that you can prepare financially for four of life’s biggest changes.

Getting married is a joyous time and it is also a significant life change. This is when you start sharing your life with another person, and that includes your finances. The first step is to talk about your individual financial situations and to be honest with one another. Having this talk and getting everything out in the open will prevent conflicts and financial trouble in the future, even if it is not a comfortable conversation to have.

The more you understand about your financial situation, the easier it becomes to plan.

It is important to set goals for yourselves, both individually and as a couple. If each person in the relationship has different goals, you will either need to figure out how to make both happen or learn to prioritize without getting into arguments. This can sometimes be difficult but staying calm and communicating openly and honestly can help. If one partner is a shopaholic (for example) and the other partner is frugal with money or a saver, this could become a point of contention in the relationship. But open dialogue will help, as will honesty.

Remember that you will not only need to financially prepare for the future, but you may also need to pay the wedding costs if parents and family are unable to pitch in. Figure out how much you must spend (and how much, if anything, your families will be helping you out financially), then make sure to have a budget that makes sense for the event you are planning. It is important to remember that any money you spend now (as well as any debts that you take on to pay for your wedding) will affect your financial situation going forward after you are married.

Buying a home is a big life milestone and a major investment. If you want to buy a home, either by yourself or with your partner, you will need to start saving. The more money you put down on your home, the less you will have to borrow on your mortgage, which will mean smaller monthly payments and less overall debt. Determine how much you can put aside each month so you can build your down payment.

You will also need to figure out how much mortgage you can afford to pay each month. This is slightly different from how much you can borrow. The bank may be willing to give you a certain size mortgage, but you are the one who will need to make the payments and afford all your other life expenses. If you borrow too much, you could have trouble paying your bills. This is an excellent time to either create a new household budget or revise the one you already to include all your housing costs, from mortgage payments and property taxes to utilities such as water, heat, and electricity. Take a close look at your budget and figure out how much you can afford to pay each month. Take your budget with you when you go to apply for your mortgage so your broker or bank can see that you did your homework and know what you can, and cannot, afford in terms of a home. Do not forget that you will also need to put money aside for emergencies, which are often a normal part of owning a home. And do not forget your closing costs for the day you take possession of your home. These could include a percentage of the previous owner’s utility bills, real estate legal fees, etc. Your real estate lawyer can advise you of these ahead of time so you can prepare for them.

There is a lot to do before a new baby arrives, and that includes making sure you are prepared financially. If you or your partner will be taking time off work after the baby arrives, this means you will need to learn to live off a reduced income. Figure out how much you may receive in terms of parental leave benefits, then make a budget so that everything balances on your new family income. You may need to cut some costs to make things balance.

When it comes to buying things for the baby (clothing, toys, etc.) you will have to learn to prioritize. You do not need to buy absolutely everything at once and you do not need to get the most expensive version of each option. Figure out what you really need, see if you can find ways to borrow certain items, and buy things over time as you need them, rather than buying everything at once. This will prevent you from spending money on things that are not necessary.

And do not forget to register each child’s birth with the provincial and federal government once they are born. They will ensure you receive Child Tax Benefit payments monthly and will also allow you to include each child on your yearly tax return as a dependent – a further tax savings for your household.

You may also want to begin saving for future costs such as childcare, post-secondary schooling, and other expenses (such as swimming lessons and other extra-curricular activities). These costs can become quite expensive, so the sooner you start saving, the more you will have available when the funds are needed. Post-secondary education expenses can be offset by setting up a RESP (Registered Education Savings Plans) for each of your children as they are born. The government will even kick in some money to help grow the plan over time.

Most people work their entire lives with the goal of having a comfortable retirement when the time comes. However, if you are not prepared, you could end up in financial trouble when it comes time to stop working.

The sooner you start saving for retirement, the more time your money can grow before you need it. If your employer offers a pension plan or RRSP (Registered Retirement Savings Plan) matching program, consider taking advantage of these offerings as they can streamline your retirement.

If you are approaching retirement age, one of the most important things you can do is take steps to reduce your debt or get rid of debt altogether. Because once you stop working, your income will most-certainly decrease. If you have a significant amount of debt going into retirement, it will be tough to make payments and afford the rest of your expenses. Cut costs where you can do so to lower the amount you owe and reduce the number of financial commitments you have. Most of us are used to living at a specific financial level. Retirement can make that tough to sustain. So, plan for reduced expenses.

If you are at any of these points in your life and find yourself struggling with debt issues, please reach out to the professionals at Farber. Our Licensed Insolvency Trustees are here to help you. Just CLICK BELOW ON THE FREE CONSULTATION BUTTON to book a meeting or give us a call today. We can help – no matter what phase of your life you are in.