Life events often trigger financial change. Sometimes we initiate the event and it brings us joy—a wedding, a new home, a well-earned retirement. Other times we’re hit by a major league curveball pitched right into the middle of a daily routine—a job loss, an accident, a death in the family.
In either case, you can navigate change with significantly less disruption when your finances are in order. Here’s why:
THE GOOD of Major Life Events
Money may not buy happiness, but science shows that financial literacy can confer all kinds of benefits to your mental health.
Most Americans cite money and work (tied at 64% each) as their top sources of stress, according to the American Psychological Association (APA). More than a quarter of respondents to APA’s annual survey say they are stressed about money most or all of the time. This anxiety often sets in motion a negative spiral of financial avoidance, money mismanagement, increased debt, lower productivity, and even depression.
So…what’s the good news? Organizing your finances puts you in control of your money, and that can help reverse the stress cycle. Here are a few examples:
- You can assess your spending habits and channel more money into priority areas. That includes emergency savings as well as small and large financial goals, from dinner out to a secure retirement.
- You’ll reduce wasted spending on interest charges, late fees, overdraft fees, and penalties.
- When the time comes to plan for happy life events—vacation? new car?—you’ll have a handle on how to adjust your finances to reach your goals.
Financial organization is one way you can prepare for, rather than fret over, the “what-ifs” of life. Natural disasters are just one example.
- When you’ve only got days or hours to react, you’ll already have important documents such as financial records and estate planning stored in a safe, accessible place, whether that’s an electronic record or safe deposit box.
- If you tackle financial planning from a comprehensive approach, you’ll also have securely stored items such as property and medical records, insurance policies, and birth certificates. You can focus on safety before and during the disaster and have critical information on hand for the recovery process.
- You’ll have emergency funds available to withdraw the cash you need during the disaster’s immediate aftermath. You’ll also be able to cover insurance deductibles and other recovery expenses.
Financial organization can help ground you when a crisis carries emotional upset along with money challenges. Overwhelming paperwork and struggling with bills only make it more difficult to navigate emotionally-charged terrain. Divorce, a layoff at work, or a serious illness are prime examples of how staying organized can keep you. Organized records that show how you spend your money can make a critical difference in whether you emerge financially intact after a crisis.
- After a layoff, you’ll be able to assess where you can tighten spending or temporarily re-channel your resources. During a health challenge, you’ll have peace of mind knowing how to direct your loved ones or financial planner to make sure bills are paid as you recover.
- Divorce requirements vary from state to state but usually call for at least three years’ worth of documentation of your financial status. This includes banking records, brokerage statements, tax returns, credit card billing, deeds, wills and trusts, and more. A property inventory for your insurance company is a common element of comprehensive financial planning, which can be used during a divorce to ease division of physical assets.
- Proper health insurance coverage with a strategy in place to cover deductibles is a key way to safeguard your well-being and finances. Having disability insurance to support cash flow in the case you can’t work is also a strong safeguard tactic.
THE BOTTOM LINE
Have you followed the advice to save six months’ worth of expenses in an emergency fund? That cushion of cash will ease the way to crisis recovery in countless ways. Financial organization provides a foundation so you can fully embrace life’s joyful events and have resources at hand to cope with the tough times.
If you’re seeking to increase your peace of mind, reach out to FJY Financial. We have tools and strategies to help keep you on a sound financial footing, come what may.