Planning Your Finances for life's transitions is crucial and can be overwhelming.
Some life transitions, such as a career change, are planned. Others, such as job loss or divorce, can be sudden and unexpected. These situations often create concerns about money and your changing lifestyle. One way of dealing with this insecurity is to determine your financial staying power, which projects how long your financial resources can last during times of transition.
Planning Your Finances for Life's Transitions is crucial and can be overwhelming.
The process begins by examining how much it costs you to live your current lifestyle and matching your average expenditures against the financial resources you have committed to the transition, such as income and savings. Next, project a modified spending plan, noting areas where you can cut your budget without seriously changing your lifestyle. Finally, further hone your spending into a “bare bones” budget, reducing your cash outflows to only those necessary for survival, such as housing, food, transportation, etc.
At this point in the process, you have the information you need to decide how you will allocate your resources. You may choose to customize your plan to continue funding your current lifestyle for several months, switch to a modified spending plan if you find that you need more time, and go to your survival budget if an unexpected obstacle prevents you from achieving your transition within a certain time frame.
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Life changes can be challenging for a number of reasons, but you can ease the financial pressures by planning at the outset how you will allocate your resources during the time of transition. By determining how much it will cost you to get from point A to point B, you can determine whether your transition plan is financially feasible.
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