What to Do With Your Money in These 5 Major Financial Events
When things seem like they’re going well, you might reason that it’s OK to dip into your emergency savings just this one time. Then, as soon as you make that withdrawal, a major emergency comes up. It could be an illness, a birth, a death, or some other major life event. The twists and turns of life can wreak havoc on your finances. When emotions are running high, it can be hard to make sound decisions. If you’re facing a major life event that’s impacting your money, it’s important to have a plan in place that will allow you to get back on track as soon as possible. Here’s what to do with your money in these five major financial events.
1. You were just laid off
If you were just let go from your job, you’re likely in shock and probably experiencing some anger. Before you let your emotions get the best of you, make sure you get your affairs in order. First of all, apply for unemployment benefits as soon as possible. There’s usually a delay of about two weeks before you receive your first check, so don’t delay the application process. Also look into getting a side job while you’re waiting for full-time work to come through. While you may have severance pay, emergency savings, and unemployment benefits, it also will be important to add income during this time. There’s no way to tell how long it will take you to find a job, so be careful not to withdraw from your reserves too quickly.
2. There’s a new baby on the way
Prepare for life with baby by doing a quick financial checkup. First, make sure you have enough cash in an emergency savings fund. Also make an effort to build a second fund just for expenses related to your new bundle of joy. Babies are not cheap, and you’ll need all the financial resources you can muster to ensure you’re prepared for all the curveballs that life with a new baby will throw you (more often than not, that ball will smack you in the face). Also don’t be shy when it comes to adding items to your baby registry. Include everything you think you might need to the list. In addition, resist the urge to buy everything brand-new when it comes time to purchase additional items for your baby. Instead, use online consignment shops like Swap.com or ThredUp.
3. You’re buying your first house
One of the most expensive purchases you’ll make during your lifetime is a home. Before you start looking for a home, make sure you can actually afford it. Even if you have enough money to cover the down payment, you also need to take in to consideration hidden costs. For example, are you prepared to cover a broken window? What will you do if the boiler breaks down? How will you cover mortgage payments if you lose your job? Before committing to homeownership, make sure you have adequate savings to cover any financial surprises.
If you have all of your ducks in a row and you’ve determined you are ready to take the plunge, you may still be eligible for some financial assistance. There are several first-time homeowner programs available that may provide some help with your down payment. The U.S. Department of Housing and Urban Development has a state-by-state listing of downpayment assistance programs. Note, however, that certain requirements (such as income) must be met in order to qualify. Check out the state listings for additional details.
4. You’re getting married
If you’re getting married, congratulations — and good luck, you’re going to need it. Before you get hitched to that special someone, make sure you’re on the same page when it comes to managing money. If you don’t, you’ll be having a lot of fights about it, so it would be in your best interest to work out the kinks now. Set aside time now to have a regular conversation about your finances, including expectations, outstanding debts, and any bad financial habits. If you don’t talk about it now, all of your money secrets will eventually come to light, just probably not in the way you want it to.
You’ll also want to look into possibly getting a prenuptial agreement so that you can protect your assets. You never know if your dream guy or gal is going to end up being a nightmare, so you might want to give this some thought. If you’re already married and you didn’t have time to draft a prenup, you also have the option of getting a postnuptial agreement. It works the same way as a prenuptial agreement; the only difference is the document is drafted after you’re married.
5. You’re getting divorced
On the other hand, if your marriage didn’t work out, you’ll have plenty of financial decisions to make. While your emotions might be a wreck, one area that will be just as important to keep an eye on is your finances. Divorce can be expensive, so you’ll want to do your best to keep costs as low as possible. You don’t want to be both broke and an emotional mess, so try to have at least one of those areas taken care of. One of the easiest ways to keep divorce costs at a minimum is to stay organized. If your paperwork is disorganized, you’ll have to constantly call your lawyer about missing documents and ask questions about paperwork. Keep the calls to a minimum. Also take on any small tasks you can do yourself, such as photocopying documents. You’ll be billed for any time an attorney’s staff takes to make copies of your paperwork.
Another simple way to cut back on costs is to avoid divorce court and instead consider using the services of a divorce mediator. A divorce mediator, as well as your and your soon-to-be ex’s divorce lawyer, assists with reaching a resolution. Generally, divorce mediation is quicker than litigation, so this can save money. Divorce mediators can be found on sites such as Mediate.com and DivorceNet.