The impact of life events on your financial plan

Unexpected events are a factor of life and unavoidable, from potential medical costs to insurance costs. With a rise in the cost of living in recent years, people have been faced with having to change budgets and savings to adjust to the status quo.

From time to time life events can affect your finances, but with flexibility you should hopefully be able to adapt to new situations and plan around them.

It can be beneficial to have long-term plans in place for things like savings and pensions. It can help you have goals to work towards and also give you peace of mind, knowing that you have a set plan for your finances. This can be beneficial with things like pension plans, as people may not know they can add to pensions outside of workplace schemes, for instance. By law, employers have to pay a minimum amount of three per cent into employees’ pensions, going up to a maximum of eight per cent from an overall salary.

Practical ways of planning can be to save directly toward a pension outside of employer contributions with a lifetime ISA, which can help you save towards a house or for general life savings. Similarly, you can plan around long-term investing with a stocks & shares ISA or in funds like the S&P 500 by using a free investment app like Freetrade or Wealthify. Investing can be a method of growing wealth considerably faster than with saving accounts, but it also comes with an element of risk that isn’t present with just saving.  

One way to effectively plan can be by setting long-term goals with a financial advisor for your finances if you’re unsure about how to start. For instance, this could involve setting a five or ten-year saving goal, or a set amount for pensions by the time you retire.

To reiterate a popular phrase, you should expect the unexpected, as life can throw certain surprising scenarios at us when we least expect it. This could be anything from a car breakdown or damage, an extreme event like a house fire or needing to pay for a procedure, such as getting a root canal or eye care. Maybe more commonly, a person can be hit by rising utility bills or council tax, or by paying for major housework in doing a loft extension or garden conversion. Any work that takes an extended amount of labour will usually also cost significant sums of money.

Additional changes to finances can include life events like being made redundant or having an accident. In turn, common financial goals may include buying a house, buying a car or getting married—things that will affect your finances to varying degrees. The result can be multi-tiered, as you achieve your goal and make the purchase, but then must pay off long-term loans like mortgages and wedding loans.

Even knowing a rise in expenditure is on the horizon, it can be a struggle to be laboured with an increased bill in an ongoing cost-of-living crisis. As this will impact any long-term plans and force you to adjust your plans.

It’s important to try to remain flexible in such scenarios if that means re-allocating money and or re-adjusting a financial plan. Looking at budgeting may also be a consideration if it’s needed.

It’s beneficial to plan with your finances, but you should always remember that unexpected events can still occur and affect your financial plans. Another way to alleviate negative financial impacts is to have contingencies like emergency funds to fall back on just in case, to provide assistance when needed.

You should always speak to an independent financial adviser for additional guidance. Unbiased can connect you with a local financial adviser that is regulated by the Financial Conduct Authority (FCA) today.