Life is full of the unexpected. While we may have a rough idea of what the future will look like, we can never know for certain. And the changes we go through in life can have a significant financial impact—either adding to or taking away from our sense of financial stability. 

Whether it’s a new job opportunity, an inheritance, a divorce, or other big life change, these events can throw money into motion in unexpected ways. Knowing how to navigate these challenges is crucial to maintaining long-term financial goals and preserving a comfortable retirement. 

In this blog, we’ll explore what common life events can put money in motion and how to navigate the challenges of each transition. Our team at True Blue Financial has helped a lot of clients through unexpected changes in their lives by helping them create a plan and get them back on track. 

Understanding Money in Motion

Money in motion is a common way of describing how significant life events can impact our financial situation, both positively and negatively. Almost every life situation can put money in motion, but here are some circumstances our clients typically come to us with: 

• Job loss, promotion or unexpected bonus
• Death of a family member, like a parent, grandparent, or spouse
• Marriage or divorce
• Receiving an inheritance

Beyond these circumstances, many other situations can put money in motion beyond the typical day-to-day of getting paid, buying groceries, or paying bills. Other situations can include the birth of a child or grandchild, buying or selling a home, changing careers, going back to school, or having a significant illness or injury. 

Financial Planning During Major Life Transitions

When you’re going through a major life change, it’s easy for emotions to take the front seat. Whether your emotions are positive or negative, they can lead you to make spur-of-the-moment decisions that aren’t always wise for your long-term financial plan. 

That’s why it’s important to make a plan before a major life transition—because it’s not a matter of if one will happen to you, but when. It’s also important to have someone in your corner during a major life transition—someone who can help you make more measured decisions and set more realistic goals. In the next sections, we’re going to break down common types of life transitions and how you can adjust your financial plans during each one of them. 

Navigating Job Changes and Financial Instability 

The average person will change jobs 5-7 times in their lifetime. If you are nearing pre-retirement or retirement age, you’ve probably changed jobs a few times, or have even been let go from a job in the past. 

Job change and job loss often come with heightened emotions. Not only is your financial situation changing, but so is a significant portion of your life. It’s easy to just think about the short-term—how will I pay my bills? What if I don’t like my new job?—but it’s important to pause and consider long-term strategies. 

For example, consider your retirement savings. We rarely recommend that you withdraw from retirement savings if you have lost your job. (An emergency fund with about 4-6 months’ worth of expenses can prevent you from doing this, as can applying for temporary unemployment benefits.) However, a job loss might be an opportunity to reconsider your retirement plan, especially if you had an employer-sponsored account. A financial advisor can help you determine whether you want to keep the money where it is or roll it over to a different account. 

If you’ve made a job change, your retirement savings plan might also adjust as a result. Talk to your financial advisor about the savings accounts your employer provides and how to best leverage them. 

Inheritance: A Blessing and a Responsibility

Receiving an inheritance is a blessing in a difficult time. We’ve walked with many families through the strange combination of grief and hope when receiving an inheritance. On the one hand, an inheritance cannot take away the grief of losing a loved one. But on the other hand, that inheritance represents a generous legacy the person left behind—so what should be done with it? 

There’s no one “right” way to use an inheritance, but a common temptation is to spend it all right away. Many heirs will spend an entire inheritance within a year or less. While they don’t always spend it frivolously—many use it to pay for a family vacation in memory of the one they lost, or they use it to pay down debt—there are other wise ways to spend (and save) this money as well. 

If you are preparing to receive an inheritance, consider these strategies for saving or spending the money: 

• Pay off high-interest debt, like credit cards 
• Transfer a significant amount into one of your retirement accounts 
• Use the money to build a robust emergency fund 
• Donate a portion to a charity in honor of your loved one 

When in doubt, talk to your financial advisor about your options so you’re not tempted to just spend it all at once. 

Financial Planning Through and After Divorce

Divorce is complex. You are suddenly faced with a lot of big decisions—including what to do with your new financial situation. 

In a divorce, not only are you separating from your life partner, but you are also trying to divide all of the assets that you and your former spouse collected together. The most notable of these include your retirement accounts, real estate properties, and other valuables (like artwork or collectibles.)

Determining the value of these assets is a key part of divorce financial planning. If you do this before and during divorce proceedings, it can help you arrive at a fair settlement for both you and your former spouse, reducing the likelihood of financial disputes. 

After the divorce, your financial situation is going to look much different—you will probably have a different living situation, a single income, or child support payments. Working with a financial advisor can help you establish a new budget, rebuild your emergency fund, and update your insurance and retirement plan. 

Supporting Widows and Widowers in Financial Transition

The death of a spouse is always devastating, whether the loss is expected or unexpected. Widows and widowers are faced with many challenges—a reduction of income, a change in their insurance plan, and additional expenses like funeral and burial costs. And not every widow or widower has the benefit of children or grandchildren to support them. 

Bereavement is a vulnerable time financially, and it’s easy to make spur-of-the-moment decisions. Make sure to maintain and update your financial plan with a financial advisor you trust. They can help you chart a new path forward as you start the next chapter of your life. 

We recommend a few things for new widows and widowers to consider as they navigate a new chapter of life: 

• Don’t make any significant financial decisions right away. Do what needs to be done, like paying for burial expenses or updating your beneficiaries, but hold off on any significant changes to your investment portfolio or assets. 
• Expect tax changes. While a widow or widower is typically able to file as “married filing jointly” the year their spouse passes away, the next few years will look different. For the following two years, you may be eligible to file as a “qualifying widow(er).” Work with a tax professional to learn more about the benefits of this. 
• Look into Social Security benefits. If your spouse received Social Security benefits, be sure to notify the Social Security Administration that your spouse has passed away, and do not cash any checks received after their passing. Depending on your age and income, you may qualify for Social Security survivor’s benefits. Talk to a financial advisor about taking advantage of these benefits. 
• Update your assets and estate plan. Work with your attorney to update your legal documents like wills, powers of attorney, and beneficiaries on insurance. A financial advisor can help you retitle your bank and retirement accounts as well. 

Creating Stability Amidst Financial Change

Beyond the circumstances we covered above, many other life changes can put money in motion. There are simply too many to cover in one sitting. However, no matter what changes you face, here are some recommendations for creating stability before you find yourself in a challenging transition. 

Set the Right Goals

You may have some vague financial goals, like “pay off the house in 10 years” or “save enough for our daughter to go to college.” But are these goals actionable and measurable? When setting financial goals, create a plan for reaching them, like setting aside a certain amount each month in savings or paying more in each mortgage payment than is required. 

Create a Budget 

75% of Americans claim to have a budget. In your pre-retirement years, a budget is more important than ever as you prepare to withdraw from retirement accounts and leave your career. A budget can help you determine how much you will need every month in retirement and can help you find opportunities to put more money into savings accounts and emergency funds. 

Invest 

Having an investment portfolio can help your money go further. This can include your retirement account and other investable assets that work for your budget. Work with a financial advisor to create a robust investment portfolio based on your time horizon, stage of life, and risk tolerance. 

Keep Up with Money in Motion 

Life transitions can feel chaotic, both emotionally and financially, but if you have the right plan, you can keep up with money in motion. In this blog, we offered some practical guidance for typical life transitions and how they can affect finances. At True Blue Financial, it’s been our mission for decades to help individuals and families in times of transition—such as divorce, the loss of a parent or spouse, or even selling the family home. If you find that your money is in motion and you’re struggling to keep up with it, we are here to help. Schedule a complimentary consultation with us to find out more.