Buying a home? Paying for college? Retiring soon? Planning ahead can help you work toward your financial goals—and prepare for any unexpected challenges.
MOST OF US START OUT THINKING we can handle money decisions on our own. Then as our careers, lives and goals expand, we begin to wonder: Am I making all the right financial moves? Do I know enough to make smart investing choices that can help me meet my goals? Even then, it often takes some major turning point—marriage, divorce, a family illness—to prompt us to look for help.
Merrill conducted a Twitter poll in 2017 that asked the question, “In which new situation would you be most likely to turn to a financial advisor for help?” Here’s how 20,433 people responded:
When we asked Karen Burns, director of Enterprise Planning & Advanced Digital Solutions at Bank of America, for the top five reasons people turn to a financial advisor, she came up with a similar list based on her experience working with clients.
“Major life changes like these often make people realize how much they don’t know about the markets and their financial lives—and what’s at stake,” Burns says. But, she adds, “It’s not always a good idea to wait until you need someone knowledgeable to seek it out.”
The Risks of Waiting—and How Planning Ahead Can Help
“While major life events often encourage people to seek financial advice, knowing what you want to do before they occur can be very valuable,” Burns says. If you’ve thought through your goals with an advisor and have an informed strategy in place for reaching them, major life events are less likely to pull you off track.
”Even if you think you’re too young to be seeking financial advice, having a trusted sounding board can help you take charge of your decision-making, rather than simply reacting,” Burns adds. “When you’re forced to react to unexpected financial challenges, rather than planning ahead, often your choices are limited.”
Below, see how an advisor can help you plan ahead for five of life’s most common financial turning points.
Ask an advisor: When should we start saving for college?
The average cost of raising a child comes to $233,610 for the first 17 years alone, according to government figures.1 And that doesn’t include college tuition or inflation. “It’s wise to review your finances to make sure they’re up to the challenge before you become a parent,” Burns says. An advisor can walk you through such issues as when you might like to start saving for your child’s college education and how you can keep your retirement plan on track while providing for a growing family.
Ask an advisor: How much debt can I potentially take on?
Major financial transactions, like buying or selling a home, often involve financial retrenchment or important decisions about how best to deploy your financial resources. Long before you begin house hunting, an advisor can offer help as you wrestle with how much debt you can take on, how much money to deploy as a down payment, and how you’ll be able to keep your other important financial goals on track. If you’re selling, an advisor can be a good source of ideas about using the equity you might have built up in your home to help you pursue other goals.
Ask an advisor: What’s a fair way to divide our investments and other assets?
Along with the often-difficult emotional ups and downs of divorce, both partners will have to deal with important financial considerations. Will you have enough income to support your lifestyle? How will your investments and other assets be divided? You may very well need to change your financial strategy to keep your goals on track, Burns says. An advisor can offer thoughtful ideas for how to navigate this tricky time in your life.
As for remarriage, “it’s a joyful occasion, but one that raises questions about how to best combine your financial lives,” Burns notes. Do you have an estate plan for the two of you that provides for the financial security of the other should one of you die? Are there children from a previous marriage you’d like to leave an inheritance to? Can life insurance play a role in your planning? How might your marriage affect your Social Security benefits? These are just some of the questions you’ll want to work through with your new spouse and a knowledgeable advisor who understands what’s important to you.
Ask a professional or advisor: Should I consider paying down debt? Investing more? Retiring early?
A sudden influx of cash or assets raises immediate questions about what to do with it. “A financial advisor can help you think through the ways you could put that money to work toward your personal and financial goals,” Burns says. You’ll want to think about much could go to paying down existing debt, and how much you might consider investing for a more secure future. An advisor can also help you rethink when you may want to retire, Burns suggests. Speaking of which …
Ask an advisor: How can I avoid outliving my money?
As the length of time you’re likely to spend in retirement continues to grow, it’s more important than ever to have knowledgeable advice to prepare financially for that next phase of your life. “The financial decisions you’ll have to make in retirement are often more complex than those leading up to it,” Burns notes. Five or 10 years before you retire, it can be helpful to ask yourself such questions as: What steps should I consider taking now so that I won’t outlive my money? When should I claim my Social Security benefits? And how will I fund any unanticipated medical costs?
“No matter what stage you are in your life, there’s a lot to be said for being able to reach out to someone who can help you look beyond your immediate needs to help you build a strong financial future,” Burns says. “When you work with an advisor, you’ll always have someone you can turn to for advice as your life changes and you need to take a fresh look at your finances.”