Why you should review your financial plans after a significant life event

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Something we’re told in life is to expect the unexpected. Everybody knows this but most people believe (and hope) the unexpected won’t happen to them.

Recently Emily, a client from Nottingham, had her life turned upside down - she and her husband divorced!

While it hadn’t been a messy process, it didn’t make the outcome any less painful. In her own words “It came completely out of the blue. Everything has changed and I don’t know what to do. I don’t even know where to start!”.

In Emily’s case the divorce had thrown all her current financial plans into disarray. Her outgoings shot up and she was struggling to keep her head above water. She was due a little over £30,000 in the divorce settlement but she had to move out of her old property and was facing the prospect of renting on her own. Buying a new house was well and truly out of reach!

When we began discussing her finances her big question was around the settlement money, and what to do with it. There were many options open to her, but in an ideal world she would put the funds towards purchasing a new home.

After modelling several options available to her and discussing the pros and cons of each, Emily decided she would rent for 2 years with the goal being to build up the savings necessary to buy a new home at the end of that period.

Emily was wary that her savings weren't really growing with this approach and the possibility of investing on that front was much more attractive. However given she needed funds available in 2 years time, she had to accept that she wasn't going to get a spectacular return in the near future. Her decision now had to fit in with her goal.

We prioritised increasing her monthly savings by cutting back on some of her more expensive outgoings, and set her up with a new savings account that provided a much better short term interest rate than her current account.

Before we sat down and worked through each scenario Emily had resigned herself to thinking that getting back on the property ladder was out of the question. So whenever you’re faced with a significant event or unexpected change taking the time to sit back and review all your options is crucial.

In Emily’s case it was the difference between renting for the foreseeable future, and have having a clear road map to get back on the property ladder within a couple of years.


Three reasons why reviewing your financial plans is essential when you have a significant life event

Changes to your finances

Like Emily, for better or worse, a significant and unexpected life event will likely have an impact on your financial situation.

That will naturally change where you stand in relation to your goals.

This will usually call for changes in your financial plan so it’s important to know what changes are needed, and how to make them. Taking a moment to reassess and planning accordingly is crucial.

Your plans will change

Your financial goals will almost always change, some out of choice and others out of necessity. How you stand in relation to your revised goals will often differ significantly from where you stood against your previous goals.

With these changes it is important to reevaluate, deciding what goals are still important to you.

By starting this process early it will give you the time you need to make the right decisions, and allow you to avoid making any rash decisions.

Lifestyle changes

If changes to your financial situation occur, there may be lifestyle changes that need to be put in place. Identifying these early will allow you to avoid getting yourself into a bad situation.

Knowing all this will allow you to make the changes you need, and give you peace of mind that you’re going in the right direction.

Even if that direction is different to before!