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A yearly review of your budget is always a smart idea, but there are also times in your life when it makes sense to take a good look at your financial circumstances. When you experience a big change in your life, whether it's directly related to your finances or not, you need to reassess your personal finances and how you should manage them. Many of life's big events will change your financial situation in some way, including increasing your cost of living or requiring you to live on a tighter budget. So when should you make sure to review your finances?
Getting serious with a partner is exciting, whether you're moving in together, getting engaged, or getting married. But it's also a big life change and one where finances can become a big concern. You're no longer living as two individual people, but as partners. Thinking about how you're going to manage your finances is important. Every couple may have a slightly different approach. Some take the "what's yours is mine" approach, and simply pool their incomes together in a joint account. Others split their expenses based on earnings. Whatever you decide to do, the key to working out your finances is healthy communication.
If getting together with a partner can be a big financial change, adding to your family is definitely an event that should make you look at your money. Firstly, it often means one or both of you not working for a period of time. Making sure you can afford this and what it means for your shared finances is essential. Then you have to consider the expenses of having children, from everyday essentials to childcare and even saving for their future. If you're not in a relationship with the other parent, budgeting can become a little more complicated.
The beginning of a serious relationship isn't the only time when you may need to take a hard look at your finances. If you're facing a separation or divorce, you will also need to rethink your budget. Separating from your spouse or partner will often mean finding somewhere new to live. You now only have one income, and living as a single person can be a lot more expensive than living as a couple. If you have children, you might have to consider child support, and it's possible you'll have to pay some sort of alimony or spousal maintenance too.
Owning your own home is a dream for a lot of people. It can also save you money, depending on where you live, although you do have to consider the cost of maintaining your home. When you buy your first home, you'll need to take a good look at your finances before you do anything. You need to show mortgage lenders that you're able to afford the repayments even if your financial circumstances change. As well as mortgage payments, you'll have to consider the cost of upkeep and improvements to keep your home looking good.
Getting a raise or taking on a higher-paying job can be a real benefit for your finances. But even if you're earning more, you shouldn't immediately start spending more. You might increase your spending in some areas to make your life more comfortable, but it's also smart to think about how much you can save. If you immediately increase your expenses, you could find yourself in trouble if your income ever goes down again. When you start earning more, look at whether you can really afford to change your spending habits and how much you could potentially save instead.
When your income takes a hit, it's not usually as great as when you get a raise. Sometimes it might be a conscious choice because a lower income comes with other benefits, such as a better work-life balance. But whether it's something you've chosen or not, you need to consider how a lower income is going to affect your budget. You're most likely going to have to rethink your money in some way, from how much you're able to save or invest each month to what you can afford to spend day-to-day.
Starting your own business is an exciting adventure. You get to set out on your own and make the rules. But it can also put you in a very precarious financial position. It often means not taking a salary at first and there's a risk your business won't work out. Before you become a full-time business owner, you need to consider how you're going to manage your finances. Do you have savings or any other income to support you? How long will your savings last? You'll have to think about not just your personal finances but your business finances too.
We are all at risk of developing a health problem or becoming disabled. You might be perfectly healthy now, but you never know when things could change. Being unwell or disabled could increase your expenses, from medical costs to the various expenses required to make the world accessible to you. It could also limit your ability to earn money if it affects your capacity for work. If you have a health scare or a change in your health, you need to reassess your finances to find out where you stand.
Retirement is something you really need to prepare for over the course of your working life. But when the time to retire actually arrives, it's when your retirement plan becomes reality and you need to make sure it's going to work for you. Whether you've fulfilled the goals you set for your retirement or not, you need to work out a sensible budget that matches your current financial position. As well as everyday expenses, you'll have to think about potential future care costs.
When a big change occurs in your life, remember to take some time to look at your financial situation and make appropriate changes if you need to.
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