There’s everyday finances, and then there’s the big hurdles—changing careers, starting your own practice, having a baby, or buying your first house. For major life milestones like these, you’ll need a plan, so big events not only go over smoothly, but impact your wallet in ways you can anticipate.
As a financial wellness expert, I often counsel people experiencing major life transitions. Although most who come to me know they have to adjust their financial lives accordingly, they either don’t know how, or are using strategies that don’t work for these situations.
The good news is, I’ve got a seven-step plan to help anyone steer a course to success through any major life milestone. Walk through this, and you’ll be in a much better spot to enjoy accomplishments and avoid financial stress along the way.
1. Look inward—and be critical!
When you think about the future, are you anxious or optimistic? What’s your decision-making style? Are you someone who goes with her gut, or are you a planner? Money management is very subjective and personal, so if you don’t have a good understanding of how you approach life’s big changes, you could miss the boat financially.
Think back on changes you made in the past and dig deep into how you handled them. Often, a partner or supportive friend can help you gain insight into how you engage in change and where you might get stuck as you move through the process.
2. Shine a bright light on your values
Now’s the time to really think about what’s meaningful to you. Let’s say you’d like to buy your first home. What’s important about home ownership to you? Do you need to live in a neighborhood close to work or public transit, or in a good school district for your children? Will your purchase be an investment opportunity that will provide you with greater financial stability? Maybe you’re looking to set roots and put time and money into a home that’s yours instead of a rental. Make a list, focusing on your values and how you want to live your life —your goal is to determine the “why?” behind your milestone.
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3. Research like a boss
Information is critical to success. So what do you need to reach your milestone? Career advice? Help paying down student loans? Home buying advice? Legal support? Maybe you just don’t know yet, which is totally normal. Research online and consider different perspectives, but stay clear and grounded in your values. If you identify as an anxious planner, you may find yourself getting stuck in this step, or trapped in a circle of research. So pick the brains of optimists who have been in your position, and who can help you pull the trigger and move on to the next step.
How you manage your transition could mean the difference between success and failure, so you need a strategy that considers different angles and paths. For example, how will starting a business play out financially in the short term and as you move through life? Will you have to keep your day job for a while? How long? If you’d like to start a family, look now into the details of your employer’s maternity leave benefits, and consider taking better advantage of your employer-matching 401(k) plan. Visualize the future you want, and then create a chart that includes various approaches to designing it.
5. Consider the changes you’ll have to make
To reach your milestone, financial adjustments will have to be made. For instance, if you’re starting a new job with a better salary, you’ll be able to put a little bit more toward retirement, and add to your emergency fund. Other changes will have to be made, too. You won’t see the same people every day, so you’ll need to make adjustments to maintain important relationships.
If you want to buy a home, you might have to cut spending to afford a new mortgage, so take the time to modify your budget. If you’re planning for your first (or second!) child, you’ll need to consider new expenses, including childcare and additional healthcare costs, and start saving for your child’s education. Big life shifts translate to financial modifications—it’s your responsibility to prepare accordingly.
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6. Take the leap
Sure, change can be scary, regardless of how gutsy you are. But rest assured, the groundwork is in place. You’ve gathered the information you need and have surrounded yourself with a supportive board of directors, but as chairperson of the board, it’s time for you to make a decision and take the leap. If you tend to make decisions based on gut instinct, you may stumble here and worry in retrospect about whether you made the right one. But don’t panic even if you do, because you can always make changes down the road.
7. Fine-tune when needed
It’s a fact of life: Not everything will go according to plan. So, there will be times when tweaks are necessary. Maybe you’ll have to adjust your budget or your timeline for achieving certain financial or personal goals. Stay positive and remember that navigating life’s milestones is all about growth. You’re in control of shaping your financial future, and there will always be opportunities to correct missteps.
Big changes represent exciting and sometimes challenging times. But by being true to yourself and your values, and by understanding exactly what you need to reach your biggest goals, you’ll empower yourself to succeed on your terms.
It’s important to understand grasping the bigger financial picture. Talk to a SoFi Wealth Management team member today for help with determining your life goals and a strategy to reach them.