Managing the Finances of Life Changes

By Brittany N. Cox
Registered Investment Advisor at Nestlerode & Loy Investment Advisors

There are many changes that take place in our lives. Some we celebrate, some we mourn, some are stressful, and some bring joy. One common denominator for these life changes is most often money. The effects which these changes have on our finances usually causes additional stress.

Some of the happy and celebratory changes we experience in life are marriage, buying a home, and starting a family. In 2017, the average cost of a wedding in the US was $33,391 according to data from wedding planning website The Knot. Young couples are more focused on the “wow” factor of their weddings and the cost continues to rise as the guest list diminishes. Another 2017 study from the Knot shows that 74 percent of couples take on debt to cover the cost of their wedding. Another shocking point in their study: 52 percent of couples have delayed their wedding due to financial concerns.

The rate of millennials buying their first home is decreasing year after year. According to the National Association of Realtors, 83 percent of non-homeowners believe that student loan debt has delayed them from buying a home. They responded that their student loan debt has prevented them from being able to save and, hence, not having funds for a down payment to purchase a home. Over half of the respondents quoted another barrier is their debt to income ratio. However, over half of the participants in the study also overestimated the amount of money they need for a down payment on a home.

Planning and education are key factors when planning for big changes in life.

Another important change in life that has a large effect on our finances is starting a family. For couples early in their careers with student loan debt, having a child may create serious sticker shock. According to the US Department of Agriculture, it will cost the average American family $245,340 to raise a child. This figure does not include the cost of college. It is important that couples understand the cost involved with starting a family just as they would plan for buying a home. Having a budget and a plan in place can help ease the stress once the bundle of joy arrives.

Some changes in our lives that cause financial stress are not joyful changes and the financial stress adds to an already difficult situation. These changes can be divorce, caring for a loved one, or personal health issues. The CDC shows that over 800,000 divorces take place annually in the U.S. The national average cost of a divorce is about $15,000 per person including attorney’s fees, court costs, appraisers, tax advisors and child custody specialists.

It is becoming more common for the children to care for their aging parents as the cost of assisted living facilities increases. However, caring for an aging parent on your own will not be cost-free. Caring for a loved one often causes time off work for appointments and errands and stress-related illnesses and exhaustion. According to the Family Caregiver Alliance, the average lost wages and benefits over the time of providing care for a female caregiver is approximately $324,000. Out-of-pocket expenses also tend to add up for things such as food, gas, travel and medications. The average out-of-pocket expenses for the caregiver are about $5,500 per year.

All these changes in our lives, whether good, bad or ugly, have a common factor; money. While the monetary aspect of life changes can bring added stress, having a budget, goals and a plan will help ease the worry. It is important to have a financial advisor who you trust to work through all the stages and changes in your life to help ease the financial woes. It is important to review your goals and plan regularly, and again, if any events happen that will change your financial situation.

As the end of the year approaches, it is a good idea to get in the habit of wrapping up your finances and doing a review with your financial advisor.