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How to Reset Your Money After a Life Event

Sometimes you just need to pause and turn inwards.

After months of silence on this platform I’m happy to return and explain that my husband and I are now anxiously awaiting the arrival of our first child later this year – and we’ve taken a few months to sit back, digest what’s happening with our lives, and to take a long hard look at how this will affect our finances.

Prior to pregnancy, my husband and I were well on our way to paying off our $282,874.50 in debt (in 6 months we’d eliminated two credit cards, a family loan and started in on our high-interest student loan – about $13,000 in debt) – but by mid-March we both had to stop and reflect if putting every penny of our disposable income towards debt repayment was the most logical use for our money with a child on the way.

After many months of talking and planning, we’re back with a modified debt repayment plan that will allow us (first time parents) to adequately prepare for the arrival of our child in a way that’s fiscally responsible and aligns with our values. 

You, too, may experience a life event that totally upends the way your money needs to be utilized. It’s overwhelming and it’s deserving of a pause and of space to reflect on how to move forward. That life event could be the expectation of a new child, a divorce, a sudden windfall, the death of a loved one, an unexpected job change, your child leaving the nest, or more.

If something like the above happens to you, it’s ok to change course without guilt. Here are 4 simple steps to a money reset after a major life event occurs:

Give yourself some grace

We’re only human, after all. The shock of a major life change deserves time to be processed. Take the time needed to acknowledge your feelings and work through them accordingly. Give yourself permission to pause on any aggressive money goals, and let the dollars sit with you as you sit with your emotions – after all, your money goals aren’t going anywhere and, if desired, you can pick up right where you left off if that’s the right choice for you. You may discover, like my husband and I did, that suddenly your money goals don’t fit with the reality of your new life stage – and that takes time to come to and develop a plan for. Take care of yourself and your loved ones first.

Reflect on and reassess how your money is working for you

After you’ve taken time to sit with your emotions and work through them, it’s time to turn your focus back towards your money goals. Envision what your ideal state under your new circumstances looks like and shape your money goals to support that.

For my husband and I, having a child means…

  • Creating a line item in our household budget for infant necessities
  • Spending on quality pieces of furniture where necessary (crib, car seat, etc) and looking around of gently used items where it’s not (clothing, burp rags, receiving blankets, toys that can be cleaned and disinfected, etc)
  • Reducing aggressive debt payments and saving for our insurance deductible and out-of-pocket minimums
  • Saving funds for the reduced payment and non-payment portions of my maternity leave
  • Evaluating daycare options and working payments into our monthly budget
  • Maintaining minimum payments for student loans, mortgage and our car loan – and after the child arrives and we have a better idea of our monthly finances, putting back into place our debt reduction plan at new levels
  • Considering early savings for college
  • Reprioritizing a larger emergency fund to ensure job loss doesn’t mean a reduction in quality of care for the child
  • And a more serious consideration of increasing our savings rate post-debt to achieve some form of lean FI/RE to allow us time to focus on family and living

For you and your new life needs, it may look totally different. If you’re comfortable, I’d love to hear in the comments from others who’ve gone through a life event and how spending and/or savings came into play.

Make a plan

This should be the easiest step after 1 & 2 – once you know what you want, you now need to go back through your budget and reconfigure your income and expenses to identify where you have money left over to work for you on goal achievement. 

goal-guide-cta

Do the work

After your plan is in place – it’s time to reform habits and hustle.

Doing the work is arguably the longest and most boring part of achieving your money goals. Paying off debt, saving up money, seeing returns on investments…they all take a long time and provide delayed gratification (something you need to learn if you, like me, were drunk on the instant gratification that social media, online shopping and more provided!).

Find ways to self-motivate and stay focused – good things come to those who wait. A few to consider…

  • Look back to see how far you’ve come
    • Keep a log of payments or your shrinking amounts so you can look back and get a reminder of the work you’ve already put in
    • Create a visual representation of your shrinking debts (or increasing savings) – at a glance you’ll get the satisfaction that progress brings
  • Stay motivated in the moment
    • An easy tool to utilize is a habit tracker to help build daily, weekly or monthly habits and build your mental muscle memory
  • Look forward towards what you’re working for
    • Create a vision board and put it up on your fridge, your mirror, your cube wall, or some other place you regularly are to look on what you’re hustling for
This entry was posted in: Wealth

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