5 Times When Financial Planning Can Matter Most


Many of life's milestones trace a predictable arc, from landing your first job and buying a home to getting married and expanding your family—not to mention transitioning to a well-earned retirement. While each of these life-changing events comes with its own unique challenges and opportunities, all can benefit from a solid financial plan.

"A financial plan is like the blueprint for your dream home—a critical first step in building the life you want for you and your family," says Rob Williams, managing director of financial planning, retirement income, and wealth management at the Schwab Center for Financial Research. "It can also serve as the basis for any changes down the road."

With that in mind, here's how a financial plan can help you navigate some of life's biggest moments.

1. Landing your first job

You're done with school, starting your first job, and reveling in what may be your first real taste of financial independence. And while you may not have much in the bank, you do have something even more valuable: time. Developing a financial plan at an early age can help set the stage for a lifetime of healthy money habits, such as living within your means, establishing good credit, and getting a jump on retirement savings.

"At this point, your plan should focus on creating a firm financial foundation to build upon in future years," Rob says. That includes things like starting an emergency fund, paying down debt, and beginning to save for retirement—especially if your employer offers a matching contribution. "Be sure to contribute at least enough to capture the full company match if offered—it's free money!"

2. Buying a home

The prospect of purchasing your first home can be both exciting and stressful. Saving enough money for a down payment can seem particularly daunting when you have other goals to contend with—to say nothing of the prospect of borrowing potentially hundreds of thousands of dollars to purchase your home.

Fortunately, a good financial plan can help you navigate these challenges, especially when it comes to figuring out how much you can afford to save without sacrificing your other goals. And if you intend to take out a mortgage to purchase your home, a plan can also help you determine how much you can afford to borrow.

"Generally speaking, lenders want to make sure your total debt from credit cards, student loans, and mortgages doesn't exceed 36% of your gross monthly income," Rob says. "That said, just because a lender will loan you a certain amount of money doesn't mean you should borrow that full amount." Planning for a mortgage in the context of your other goals and liabilities will give you a better sense of how much debt you can really handle.

3. Getting hitched

Planning becomes more complex when you're ready to commit to sharing your life—and potentially your finances—with a partner. As you work to create a future together, revisiting your individual financial goals can help you hammer out any differences before they become points of contention.

In fact, financial planning can actually help bring you and your spouse closer. "When you talk openly and honestly about money, it's less likely to cause conflict down the road," Rob says. "Not only that, but it's much easier to stay committed to a future vision you've developed together."

Reassessing your financial priorities as a couple is particularly beneficial when it comes to retirement. Even if you both were diligent savers, looking at your current nest eggs in the context of a shared retirement can help you understand where you stand as a couple and what, if any, adjustments need to be made as you move forward together.

4. Expanding your family

A baby is nothing short of life-changing—and your finances are no exception. "From budgeting and health care to saving and estate planning, kids affect nearly every aspect of your finances," Rob says. "But with a solid plan in place, you can approach the financial aspects of parenting in a thoughtful, calculated way."

For example, a financial plan can help you figure out where your budget will need to flex to accommodate new expenses, such as childcare, diapers, and health care. Likewise, if you hope to save for your child's college, assessing your plan can help you reprioritize your goals and figure out where to trim back, if needed.

A good financial plan will also help you think through how to provide for your children should you die, become disabled or mentally incapacitated, or experience a premature decline in income. "As unpleasant as it is, you need to consider how you want your finances to be managed or passed on so that your child can be cared for in the event something happens to you," Rob says.

5. Transitioning to retirement

Funding a comfortable retirement is many people's biggest financial goal. But just because you're close to the finish line doesn't mean your financial planning days are over. On the contrary, maintaining a robust financial plan leading up to—and throughout—retirement can help you successfully navigate life after work.

"Making the shift from saving for retirement to living off your savings can be challenging and is often one of the most stressful periods in an individual's or family's financial life—even more so without a plan," Rob says. "But if you take the time to work through the details, the transition becomes a lot easier." In particular, financial planning can help you nail down a withdrawal strategy that can help maximize income while minimizing taxes. Deciding when to collect Social Security is another of several important considerations that can have lasting consequences—for good or ill.

"In the end, financial planning is all about thinking ahead and considering all possible outcomes," Rob says. "You might not cover every detail, but making projections, weighing your options, and a little bit of forethought can go a long way toward helping you achieve the life you plan for."