Have you recently experienced or are you expecting any major life events - and if so, have you reviewed the impact on your finances?
Major life events typically involve work (starting or losing - including retiring from - a job), relationships (starting, ending), health issues, birth and death. The key is to be proactive. As much as you can, anticipate and plan for the financial changes such events can cause. For example:Work: If you get a new job with a pay increase, allocate the extra take- home pay starting with the first pay cheque. For example, you could direct 50 per cent of the increase to paying off non-deductible debt, 25 per cent into a savings-investment program (especially RRSP, TFSA, RESP) and 25 per cent into "spend-and-enjoy."
On the other hand, if job income goes down or disappears, look at different ways to cope - from spending cuts if there is another income source in the household to major lifestyle changes like selling a car or moving to less expensive housing.
Relationships: If your household goes from one to two incomes, as with a pay increase allocate the additional after-tax income to make the most of the extra money. If the increase is only temporary (until, for example, one person stops work to have a child), try to save as much as possible of this person's income in anticipation of having one income again to support a larger family.
When the end of a relationship results in less income, see the suggestions above for living on less income.
Birth: Don't let the cost of raising a child scare you, but do look at tax effective strategies (RESP, income splitting) to complement the normal "pay as you go" approach. And start investing early, even if that means starting small.
Death: See above for ways to apportion any inheritance, or to cope with a loss of income.
Realize that most major life events can involve emotions. Seek objective advice before making any large financial decisions. Take the time you need for your emotions to subside.
Mike Grenby is a columnist and independent personal financial advisor; he'll answer questions in this column as space allows but cannot reply personally. [email protected]
