How to Do Financial Planning When Something Big Happens

17 December 2020
 Categories: , Blog


Financial planning often feels like a boring process that largely requires following and repeating a set of procedures to compound money until you reach your goals. What do you do, though, when all that steady work is interrupted by a major event? Here are three things a certified financial planner will tell you about dealing with big moments.

Assess the Situation

A lot of how a financial planner responds to what happened is going to depend on how long you've been working on your situation. If you have years of financial planning work behind you, responding to an adverse event should simply move you into the part of the plan you had prepared for this moment. For example, most planners want to see their clients put back enough emergency funding to pay for at least 6 months worth of bills. If you've lost your job, this is the time to access those funds.

Notably, not all big events are negative, at least by the numbers. If you came into a large inheritance, for example, that's financially a good thing as long as you manage it competently. You still need to consider the negative ramifications, though, such as what you're going to owe in taxes.

Seek Stability

When the event is fundamentally bad, such as job loss or a life change like a divorce, the important thing is to find stability. A good first move is to halt all unnecessary expenditures until you've run the numbers with the help of a financial planner. If you're facing financial hardships, you may want to see what you can do to spread out or defer things like utility bills and student loan payments. The goal is to reduce the monthly financial hit as much as possible until you can get your income stream moving in the right direction again.

A similar argument applies to positive windfalls. If you've won the lottery, for example, stability is still a good thing. You'll probably need to decide between taking a lump sum payment or an annuity, anyhow. A certified financial planner can help you make sense of which option fits your circumstances. You might take the annuity to reduce your immediate tax hit, or you could take the lump sum to pay off a large debt.

Operate As Normally as Possible

One of the points of financial planning is to be ready when big things happen. Stay calm, and try to use your financial plan to keep life as normal as possible during this period.