Financial Planning for Life Events

Effective financial planning involves taking into account significant life events.

While it is true that some occurrences are unpredictable, we can reasonably anticipate and prepare for others.

Beyond saving for college or retirement, financial planning for life events can have a substantial impact on your finances.

If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).

Because they can help you build wealth, guard against inflation, and accomplish specific financial goals, investments are essential to this process.

So, how should you prepare for both the expected and unexpected life-changing events?

What are some common examples of these events that require financial preparation?

Financial Planning for Life Events

Getting Engaged

If you’ve found that special someone, consider taking inspiration from a romantic movie by opting for an heirloom ring or one featuring an alternative stone or setting.

Here are some tips for reducing expenses on your engagement ring:

— Collaborate with a reputable jeweler:

While working with a jeweler may not be the most cost-effective option for obtaining a ring, it can be the best long-term choice.

This approach allows you to have greater influence over the choice of specific stones and metals, enabling a more strategic selection than purchasing a pre-made ring.

— Explore heirlooms:

Are there any beautiful family rings you could consider for an engagement ring?

A skilled jeweler can resize a beautiful ring to fit your partner or reset a lovely stone into a new setting, giving new life to it and bringing joy to a new generation.

— Opt for a halo setting:

Halo settings featuring smaller stones surrounding a central stone can create an impressive ring without the need for a large, expensive center stone.

— Consider alternative stones:

While diamonds are often considered “a girl’s best friend,” alternative stones in halo settings are a contemporary and cost-effective choice.

A ruby, sapphire, or other stone set within a halo setting can make a significant statement at a lower cost than an equivalent-sized diamond.

Weddings

Weddings can be a substantial expense and a source of stress for young couples, as well as for their parents if they’re covering the costs.

In 2019, the average wedding expense exceeded $31,000, with nearly half of that amount allocated to the reception venue.

So, how can you save on your big day?

— Opt for off-peak wedding dates:

Fridays and Sundays are less expensive choices compared to Saturdays due to lower demand.

Morning weddings with brunch receptions are usually more cost-effective than evening events.

Choosing a less popular season for weddings, such as fall or winter, can also lead to savings.

— Trim the guest list:

A significant portion of your venue expenses is tied to the menu and beverages, which are charged per person.

To reduce costs, consider limiting the number of attendees at the reception.

— Assess DIY options carefully:

While choosing an affordable venue may seem like a cost-effective approach, you may incur extra expenses for renting chairs, tables, or other supplies to host your reception.

— Combine ceremony and reception venues:

Choosing a location that can host both the ceremony and reception can lead to savings on venue, transportation, and floral costs.

Having a Child

Following your wedding, the next significant life event for many couples is starting a family.

Raising children is estimated to cost over $245,000 until they reach the age of 18, with one of the most significant expenses being groceries.

While feeding your children is an unavoidable cost, there’s good news for parents within specific income limits.

You may be eligible for a tax credit to help offset grocery expenses.

To leverage the tax benefits related to your growing family, follow these steps:

— Obtain a Social Security Number:

While you’re not legally required to obtain a Social Security Number for your child until they begin working, you’ll need one to take advantage of the tax credit.

You can request this number at the hospital when your child is born.

— Claim a Dependent:

Each child in your family can be claimed as a dependent on your taxes, potentially leading to a $4,000 tax reduction for each dependent in many countries.

— Apply for the Child Tax Credit:

If your income falls within specific guidelines, children may qualify for a child tax credit of up to $1,000 until they reach the age of 17.

Considering Adoption?

Adoption is a profoundly compassionate act centered on meeting the needs of a child and building a loving family.

However, it can also be costly.

How can you reduce adoption expenses while prioritizing the child’s needs?

— Consider foster care:

Thousands of children in foster care need loving families and can be adopted for a minimal fee.

— Examine bias:

It’s vital to recognize that all children deserve a loving family and not let biases become a deciding factor in the type of adoption you choose.

— Apply for the adoption tax credit:

This credit is available for families with a gross combined income below specific thresholds in many nations, but only for non-stepchild adoptions.

Additionally, children within specific income guidelines may qualify for a child tax credit, helping alleviate some of the costs.

Purchasing a Home

Acquiring a home is one of life’s most costly endeavors, second only to raising children.

Advice is abundant on how to save money in this process, but much of this data is founded on generic information.

Hence, it is crucial to familiarize yourself with the home-buying process as part of financial planning for life events.

— Buying a Foreclosure Will Not Always Save You Money:

Foreclosed or bank-owned properties are typically sold “as-is,” without disclosing defects, unlike a standard purchase and sale.

Additionally, not all foreclosed homes are as inexpensive as they may appear, as many have been vacant for extended periods.

— Negotiating Your Real Estate Agent’s Commission:

Attempting to negotiate your real estate agent’s commission might sound like a straightforward method to save money.

However, trying to reduce your agent’s commission may backfire if it means sacrificing essential guidance and support.

— Effective Ways to Save Money in Real Estate:

Eliminate PMI: Private Mortgage Insurance (PMI) is paid to the lender when your mortgage exceeds 80% of your home’s value.

You can avoid PMI by making a 20% down payment or through an 80/10/10 loan (80% first mortgage, 10% second mortgage, 10% down payment).

Typically, savings from eliminating PMI may be offset by the second mortgage.

So, the best strategy is to save for a 20% down payment or consider purchasing a more affordable starter home.

— Choose the Right House:

When buying a home, selecting the right property involves more than personal preference.

Consider long-term gains by focusing on a house’s potential rather than merely size.

— Maintain Objectivity:

Treat the home-buying process as both an investment and a personal decision.

— Inspect Before Buying:

Never purchase a home without a thorough inspection.

Hiring a professional home inspector (usually under $500) can uncover potential issues and future maintenance costs.

— Negotiate for Seller-Paid Closing Costs:

In many real estate transactions, the seller leaves the closing table with cash, while the buyer covers the closing costs.

Negotiating for the seller to pay certain allowable closing costs can help if you are short on cash.

Planning a Vacation

Planning a vacation requires careful budgeting to ensure you make the most of your travel while staying within your financial means.

In addition to well-known methods like using frequent flyer miles or hotel points, there are several lesser-known strategies to save money during your trip:

— Utilize Travel Apps:

Apps like Foursquare can help you discover discounts at your destination.

Services like Lyft, Vrbo, and other home-sharing platforms can help you find economical transportation and lodging options.

Secure Deals in Advance: Apps such as Groupon and Living Social can be excellent resources for locating deals in the city you plan to visit.

— Save on Transportation:

Ridesharing services like Lyft and Uber often offer substantial savings on ground transportation.

An alternative is to explore public transportation options, especially in major cities where it is safe, cost-effective, and convenient.

— Consider Overnight Travel:

To save on lodging expenses, contemplate taking an overnight train or a red-eye flight for stays of one or two nights.

— Embrace Staycations:

A staycation doesn’t necessarily mean staying home.

You can opt for destinations within driving distance of your residence or plan day trips to explore local attractions.

— Leverage Hotel Freebies:

Some hotels offer complimentary breakfast, which can be an economical alternative to dining out.

— Research Cultural Sites:

Many cultural sites like museums and zoos may offer free or reduced entrance fees on specific days.

— Seek Discounts:

Research whether you qualify for discounts based on your status, such as senior, student, military, or veteran discounts.

— Extend Layovers:

If your travel includes layovers, particularly on international flights, consider extending your layover to explore the layover city for a day or two before proceeding to your final destination.

— Travel Off-Season:

Popular seasons often come with higher prices.

To save money, consider visiting vacation destinations when they are trying to attract visitors.

College

The price of obtaining a bachelor’s degree can range from $100,000 to a quarter of a million dollars, a substantial investment.

So, how can you save on college expenses?

— Start a college savings plan early:

A college savings plan is a savings scheme designed to promote saving for future education costs, offering significant tax benefits.

College savings plans offer more flexibility, permitting funds to be used at any private or public school, in-state or out-of-state.

— Utilize reciprocal agreements:

Numerous countries have agreements that allow residents to attend neighboring state institutions at in-state tuition rates.

— Seek scholarships and financial aid:

Obtaining scholarships and financial aid should extend beyond the freshman year.

— Minimize room and board expenses:

A significant part of the college experience revolves around housing, budgeting, and independent living.

Having roommates, whether on or off campus, is a practical way to save money.

Buying a Car

The first major purchase for many recent graduates is a new car.

How can you make substantial savings on your next vehicle? Here are some tips:

— Negotiate online:

Many car dealerships now offer online negotiation, providing a significant opportunity for savings.

— Secure your financing:

Banks and credit unions generally offer better interest rates on car loans than in-house lenders at dealerships.

— Research car values:

The asking price may not always reflect the actual value of the car.

Thus, it’s crucial to research car values using resources like the Kelley Blue Book.

— Time your purchase:

New car models typically roll out between August and October, prompting dealerships to be more motivated to sell previous year models during this period.

— Get an inspection:

Just like when buying a home, it’s essential to assess the condition of a new or used car before purchase.

— Shop around:

While you’ll explore various car options, you should also shop around to secure the best price for your trade-in.

Retirement

Retirement is a phase in life where you look forward to having ample time to pursue your hobbies.

Most experts recommend initiating retirement savings by the age of 25. Beginning early allows you to set aside less each year and still accumulate more by the time you retire.

Additionally, it leverages the power of compounding over a more extended period.

— Be realistic:

A key factor in guaranteeing you have sufficient retirement savings is to have a realistic assessment of how much money you will need.

Conduct thorough research and consult a retirement advisor to establish and adjust your retirement savings target.

— Minimize costs:

Choose investments with low fees.

— Avoid early withdrawals:

If you are saving in a retirement plan where contributions are made, remember that there are significant penalties for early withdrawals.

Funerals

Funerals come with associated costs, and with advanced planning, these expenses can be managed more affordably.

Here are tips to save money while still ensuring a dignified farewell for yourself or your loved one:

— Consider cremation:

If there are no religious or other objections, cremation can be a cost-effective way to handle funeral expenses.

— Plan in advance:

Preplanning your funeral or cremation can provide savings by locking in today’s prices for future services.

— Opt for package deals:

Many funeral and cremation providers offer bundled services, either for pre-planning or at the time of need.

Bottom Line

Life is full of significant milestones and events, each of which can come with substantial expenses.

However, with proper planning, these costs can be managed effectively, allowing you to allocate your resources to the things that matter most to you.

That being said, I hope that the information in this article was helpful to you.

Feel free to get back to me if you want to find the best investment opportunities as an expat or a high-net-worth individual.

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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.