In the previous article, we offered 7 key reasons to schedule an annual review with your certified financial planner (CFP®). Throughout the rest of the upcoming series, we are going to break down each of those topics further. In this article, we will be covering the “Assessing Life Changes” section, which includes:
- Buying a house;
- Getting married;
- Starting a family; and
- Managing any health issues you, your children, or any aging family members might experience.
Let’s dive straight in…
1. How can buying a house impact my finances?
Buying a house is a huge investment, which is why it’s important to plan rigorously for it. In particular, it could be important for you to know:
- what all of your options are;
- which of those options best fits your needs;
- how much you can afford to spend right now; and
- how much you will need for the option that best fits your situation.
What Your Options Are
The most common options for housing are renting and owning. Renting allows you to use a house or apartment owned by someone else. This arrangement can free you up to move more easily once the rental period is over. However, your landlord can also raise the rent as much as they want, under the terms of the rental contract.
By contrast, owning a house or apartment puts all of the financial burden and blessing on you. Owning your property also frees you up to change whatever you want in your home, and it can create more stability for your family. While many people think that owning a home is a good investment, like any investment, it can end up being either good or bad; there are no guarantees.
Which Option Best Fits Your Needs
Your family’s needs are likely to change throughout your lifetime. That’s why it could be important to assess whether renting or owning is better for you at each stage. Some important considerations you may want to think through are whether you want to:
- be flexible with where you live due to your occupation;
- be able to establish roots in your community; and
- be able to stay in a certain school district.
How Much You Can Spend
Additionally, it makes sense to consider your budget. Renting may allow you to budget more easily because there is typically less variation in your expenses. Sometimes, utilities and other fees are even included in your contract.
When you own a home, your budget for it can fluctuate wildly. Some of the basic expenses can stay the same, like:
- a fixed mortgage payment;
- property taxes;
- home insurance; and
- trash pickup.
On the other hand, there are many expenses you budget for that can change from month to month. These include:
- an adjustable mortgage payment;
- home upkeep;
- unexpected damage to the house; and
- broken major appliances.
2. How can getting married impact my finances?
Marriage is the wonderful union of two people. In that joining, there are many parts of your lives that you will be blending. One of the main parts of your life that you are likely to combine is your finances.
Planning for your family’s finances together can be vital, even before you get married. First of all, the wedding itself is usually a big financial expenditure. A good starting point could be to choose a reasonable budget for the wedding and do your best to stick to it.
Additionally, you need to communicate honestly about various aspects of your budget and spending, such as:
- individual spending habits;
- setting financial goals together;
- how much and what kind of debt each of you has; and
- whether to have joint, separate, or a combination of checking and savings accounts.
Having conversations about these topics can be difficult and uncomfortable, but please know that it takes time and trial and error to get joint finances moving smoothly. Doing life together is a big shift! Finally, no matter the stage of your marriage relationship, remember to revisit your budget and spending habits regularly to address any life changes.
3. How can starting a family impact my finances?
The need to engage in financial planning for families is perhaps most evident when starting a family. Sometimes you have time to do that planning, and sometimes… well, you don’t. There are multiple ways to add to your family, and each comes with its own financial challenges. Three of those are:
- having your own biological children;
- adoption; and
- fostering.
Regardless of how you choose to increase the size of your family, there are several predictable financial needs we believe it could be wise to plan for. Some of those are:
- Preparing a space for the child(ren). This can include anything from moving to a place with an extra room to converting a room in your current home.
- Purchasing daily use items such as diapers, clothing, books, and school items.
- Budgeting for increased food expenses, including baby food, packed lunch items, and extra portions for family meals.
- Providing health insurance, which can be from a work health insurance plan, a personal health insurance plan, and in some cases, in Pennsylvania, the Children’s Health Insurance Program (CHIP).
- College funding is an area of need for which you have many options. You could personally save for college costs, use a 529 account to save for PA state colleges or other career education (depending on where you live), or you or your child(ren) can take out student loans to cover costs.
4. How can managing family health issues impact my finances?
There are many ways health issues can affect financial planning for families. Simply purchasing health insurance calls for financial planning, as it becomes a necessary item to factor into your budget.
Along with a traditional health insurance plan, you may want to look into a Health Spending Account (HSA) or Flexible Spending Account (FSA). These accounts allow you to set aside money pre-tax to use for qualified health and medical expenses.
There are specific requirements to set up and use these accounts, and working with a CFP®, like those at Iron Point Financial, can help when trying to answer questions regarding HSAs or FSAs.
Furthermore, more families are stepping in to help care for aging parents. There is a lot of wisdom in “honor[ing] your father and mother…that it may be well with you” (Ephesians 6:2-3 [NKJV]). Many cultures view caring for elders in their community as a valuable act of service, as it keeps the community healthy and connected across all generations.
While this can pop up unexpectedly, there are things you can do to budget for this ahead of time, and programs that can help. If you are trying to keep ailing family members in either their home or yours, there are programs through insurance companies that may pay you, or someone else, to take care of your loved ones.
If you are not able to keep family members at home, it could be advisable to research and visit any nursing or assisted living facilities in person. This can, obviously, be a large expense to cover, which is why planning is so important. Long-term care insurance can also help you pay for necessary care.
Let's Talk About Your Family's Financial Goals
We understand that this extensive exploration of financial planning for families might be a lot to take in, let alone start to navigate. The good news is that you don’t have to do it alone: we’re here to help you.
Practically speaking, ‘help’ means sitting down with you to go through:
- A rigorous evaluation process completed either in-person or online, in which we develop a deep understanding of your needs not just as a client, but as a human being;
- An analysis of your investment objectives so that we can co-create a comprehensive strategy to help you work towards your financial targets;
- A tailored investment portfolio that will help you pursue both your short- and long-term objectives; and
- Constant monitoring and adjustment of your portfolio, measured against progress towards your unique goals, not a market index (we can communicate updates on this progress digitally or face-to-face, depending on your preference).
If you want to make financial planning for your family more defined and actionable, Iron Point Financial is here to guide you through the process. Simply schedule an appointment with us today, so we can help you set up a personalized financial plan that meets your family where it’s at.
And if you enjoyed this piece on financial planning for families, and you wanted to hear more from us in future, why not sign up to receive email updates, straight to your inbox, so you never miss a future post?
Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have security registrations for 22 other states across the continental USA.
Further Reading
Disclosures
General Disclosures
The opinions are those of the writer, and not the recommendations or responsibility of Cetera Advisor Networks LLC or its representatives.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
Life Insurance Disclosures
The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased.
Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved.
As with most financial decisions, there are expenses associated with the purchase of life insurance.
Policies commonly have mortality and expense charges.
In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.
529 College Savings Plans Disclosures
- Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing.
- This information is found in the issuer’s official statement and should be read carefully before investing.
- Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan.
- Any state-based benefit should be one of many appropriately weighted factors in making an investment decision.
- The investor should consult their financial or tax advisor before investment in any state’s 529.
