“When life changes, money changes. When money changes, life changes.” After 18 years as a financial planner, I can say that these truths have never been more evident than in the last year as I’ve watched my clients’ lives and money change amid, and often because of, the pandemic.
I first heard that phrase in 2000 when I read Susan Bradley’s book Sudden Money: Managing a Financial Windfall. It resonated deeply. At the time, I was exploring a career in financial planning, and I knew from personal experience that her take on the impact of life’s changes on money was spot on. ‘Sudden money’ was not my challenge; I had definitely not come into a financial windfall. On the contrary, my husband had recently suffered a debilitating stroke, and not long afterward, I had been laid off from my job. As I wrote in this blog post, I didn’t know which way was up.
During that life transition, I felt a sense of disorientation and imbalance. Many people are feeling that today. The pandemic has changed all our lives in some way. While some of those changes are welcomed and others regrettable, they all magnify life’s complexities. And though the specific changes are different for everyone, I will say that this time of transition has undoubtedly made my fourth-quarter client meetings interesting!
- Priscilla decided to retire in 2022 at 54 years old. It’s a major change that translates into a long list of necessary financial actions that we are now working through together. Before she makes the leap, we’re creating a new budget, choosing the best possible pension options (lucky her that she has a pension to work with), determining her future Social Security claiming strategy, and deciding what accounts to tap for income and how to manage her investments to ensure her money lasts for the rest of her life. We’re exploring all the tiny details that answer the question, “Will I be okay?”
- Sarah thought she was well beyond her ‘courting days’, but she found love again in her 70s, and her boyfriend recently proposed. She now faces a Pandora’s Box of decisions—both personal and financial. Of course (says I), there will be a prenuptial agreement (with age comes wisdom, after all), but what should it include? If they decide to move into his home together, should she sell her house or keep it? Should they combine their finances or maintain separate accounts? How should she manage the inheritance for her adult children? When it comes to life changes, this one is about as big as it gets.
- Allison and Jake retired last month (cheers to that!), so this is the last tax year that will include their higher earned incomes. The multi-year tax planning is complex, and our focus is on minimizing their taxable income in 2021 while setting the stage for the optimal income level each year moving forward. But tax law changes are coming, and we have no idea what those changes will actually look like once the proposal morphs its way through Washington. The result: we are building a strategic plan based on best guesses of what lies ahead.
- Eve and Joel have been focused on long-term financial planning. But now Joel’s cancer has returned. It’s a reality that changes everything—again.
- Joan’s father died from Covid and bequeathed her a sizable estate. She is working with me, attorneys, accountants, and others to address administrative details. But she has not yet grasped the fact that when money changes, life presents possibilities.
People view financial planning as a simple process, including a one-size-fits-all checklist of things that need to be completed. In reality, there is no cookie-cutter solution to the dizzying number of financial challenges that go hand in hand with this ride called life. In the words of Heraclitus, “The only constant is change.” When it happens to you, it’s time to give yourself grace and turn to your advisor to help you draw a new map, establish new priorities, and find your new boundaries. Yes, there will be checklists and to-dos, but with guidance, you’ll come out of the transition in a better place.
No matter what is changing in your life today or what change comes your way down the road, very few changes won’t impact your finances. Big life changes drive big money changes. Birth. Marriage. Retirement. Divorce. Death. (Not always in that order!) Often, even minor changes require careful planning. A job change, a home purchase, a layoff, an inheritance. The future will surprise, delight, and disappoint us. Just recognize that your story, whatever it may be, will dictate how you need to plan for tomorrow.