Life is unpredictable. And you won’t be able to plan for every financial surprise that hits you along the way. But, part of being financially responsible is preparing for what you can.
Most people experience major life events that greatly affect their finances. Being aware of how these big life moments will impact your wallet—and having a plan beforehand—can help you remain financially secure and avoid debt.
According to one research company, 37% of Americans can’t afford to cover a $400 unexpected bill. Major life events usually cost much more than $400, which perfectly illustrates why planning for the unexpected is so vital.
9 Major Life Events That Have Financial Implications
Here are nine significant life moments that can greatly impact your financial situation:
1. Attending School
Many Americans pursue some form of education or professional training after high school, whether attending college, getting certified in a trade, or going through other programs such as real estate training or beauty school. Whatever program you choose to help you in your future career comes at a cost.
As of 2024, the average American holds over $40,000 in student loan debt.
Before paying for any schooling or training, Americans who want to be financially responsible need to understand:
- How much it will cost them, with interest and fees
- How they’ll pay for it (outright, personal loan, federal student loan, private student loan)
- How long it will take to pay it off
School can set you up for a great career, but it can also leave you with student loan debt that takes a decade to pay off and costs you thousands in interest.
2. Marriage
When you meet the love of your life, you may want to celebrate your official union with a wedding. The average cost of a wedding in 2024 was $33,000. If you plan to get married and have a wedding, you’ll likely need to save up for months or years to pay off this large expense.
Saving up beforehand is critical because you don’t want to start your new life as a married couple in debt. Financial problems are known to cause a lot of stress in a relationship and are one of the leading causes of divorce.
Speaking of marriage, if you ever find yourself facing a divorce, you can also expect some major financial implications. Divorces are expensive due to legal fees, asset splitting, and the necessity to make sudden changes on a singular income (such as renting or buying a new home).
3. Children
First comes love, then comes marriage, then comes the baby in the baby carriage.
Whether you have one, two, or more children, your wallet will take a big hit. From the moment you get pregnant, you’ll be faced with expenses. You have to buy all the baby’s equipment, pay for the hospital bills when you deliver, set up an education fund, sports and activities … the list never ends.
In 2022, the average cost of raising a child to the age of 17 in the United States was $310,605.
Of course, these costs will spread out over the years. Still, before you have children, it’s essential to sit down and look at your budget. You should have a plan for how you’ll handle the extra expenses. In many cases, new parents have to downsize or move to a lower-cost-of-living area to afford to expand their family.
4. Job Loss or Career Change
Most people don’t expect to get fired or laid off. And yet, it happens. In recent years, layoffs have been especially common. And, if the job market and economy are suffering when you’re laid off, getting rehired may take months, leaving you without an income for a while.
Career changes can also impact your finances. You might need to take time off for new training, it might take a while to get hired in your new field, or you may have to take a significant pay cut as you have no experience in this new profession.
You may not see a job loss or career change coming, but you can still prepare for it. These situations are prime examples of why having an emergency fund is so important. Most financial experts recommend having an emergency fund that can cover at least three to six months of expenses.
5. Major Moves
Sometimes, life happens, and you must pack up and make a big move. So big that the move is across the country or even across the globe. Moves of this magnitude come at a high cost. You’ll easily spend over $5,000 getting all your belongings to your new destination. And then you’ll incur even more costs as you get yourself set up in your new location.
Planning ahead for the costs of moving can make the experience much less stressful. It also allows you to start your new life without debt and financial pressures looming over you.
6. Buying a Home
Your mortgage is probably the biggest loan you’ll ever take out in your life. And it’s not something that can happen without quite a bit of financial planning. You have to save money for a down payment, have good credit to get approved for the loan, and have money set aside for post-purchase expenses such as legal fees.
Not having your finances set up can prevent you from getting a mortgage approval. Or, you’ll get approved at an extremely high rate, costing you thousands more in interest.
7. Inheritance
If you have a family, you’ll likely deal with inheritance at some point. If you are receiving an inheritance, you’ll need to know how to handle this sudden influx of cash. Do you save it, pay off debts, or take a well-deserved vacation? Do you have to pay taxes on it?
And if you have assets yourself, you’ll need to set up a will that dictates who your inheritance passes onto when you pass. Drawing up a will come with some legal costs.
8. Health Diagnosis
Hopefully, you will have good health well into your old age. Sadly, this isn’t the reality for everyone. Some Americans will get a health diagnosis at some point in their lives, that can incur massive healthcare expenses and even prevent them from working. If this happens to you, you may be left navigating financial problems such as insurance claims, unemployment insurance benefits, medical bill appeals, and stricter budgets.
9. Retirement
Ideally, you should spend all or most of your working life preparing for retirement. As you work, you must evaluate whether you’re saving enough to live comfortably in retirement.
And then retirement finally comes. This is probably one of the largest life events for your finances. You no longer have a job, so you must balance your savings and any retirement income (such as pensions) against your expenses. You have to constantly balance maintaining the lifestyle you want in retirement versus having enough money left over to last the rest of your life.
Financial Planning for a Better Life
Life is full of never-ending financial challenges, whether spurred by good or bad life changes. Those who know these are bound to happen and try to prepare for them will be left with less financial stress and can enjoy life to the fullest. Some planning and saving now can mean fewer headaches in the future.
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