How to Navigate Financial Planning for Major Life Events

Life events such as marriage, starting a family, buying a home, career changes, and retirement often trigger significant shifts in your financial situation. Planning ahead can provide financial stability and ease the challenges that come with these transitions.

Whether you are preparing for a new chapter in your life or managing unexpected changes, having a clear financial plan will ensure that you are ready for the future. This blog will guide you through the process of financial planning for various major life events and discuss how tools like Fixed Deposits (FDs) and Savings Accounts can play an important role in your overall strategy.

A Brief Introduction to Financial Planning

Financial planning involves organizing your income, expenses, savings, and investments in a way that allows you to achieve your financial goals. In India, financial planning can be complex due to varying cultural, economic, and legal factors. However, there are several basic principles that can help you manage major life events without straining your finances. By creating a structured financial plan, you can secure your future, no matter what life throws at you.

Among the most important tools in your financial toolkit are Fixed Deposits (FDs) and Savings Accounts. Both are essential for liquidity and safety, with FDs being ideal for medium to long-term savings and Savings Accounts providing easy access to your money for day-to-day expenses.

Financial Planning for Marriage

Marriage brings together two individuals with different financial habits, goals, and priorities. Therefore, financial planning is critical to avoid conflicts and ensure financial security.

Pre-Marriage Financial Planning

1. Assess Joint Financial Goals: It’s important to have a candid conversation with your partner about financial priorities. Decide on goals such as saving for a home, building an emergency fund, or starting a family.
2. Review Debt and Liabilities: Be transparent about existing debts (credit cards, personal loans, etc.), and plan how you will handle them together.
3. Create a Joint Budget: A combined budget helps align both partners’ income, savings, and expenditures, ensuring that money management is a shared responsibility.
4. Utilize Fixed Deposits (FDs): Before marriage, both partners can use Fixed Deposits (FDs) as a way to build short-term savings with guaranteed returns. FDs are great for parking lump sums of money and earning interest safely.
5. Open Joint Savings Accounts: Setting up a joint savings account can make managing household finances easier. This account can be used for joint expenses like utilities, mortgage, and daily living costs.

Post-Marriage Financial Planning

1. Update Insurance and Nominees: Update life and health insurance policies to ensure both partners are covered. Change the nominees to reflect your marital status.
2. Save Together: Now that you’re sharing financial responsibilities, continue contributing to a savings account for emergency funds and short-term goals. The benefit of a savings account is liquidity and easy access to funds in times of need.

Financial Planning for Starting a Family

Starting a family brings additional responsibilities, such as healthcare costs, education, and overall lifestyle changes. Here’s how to plan for a growing family:

1. Create a Family Budget

Track household expenses carefully, considering:

• Healthcare Costs: Medical expenses can rise dramatically with children, so plan for health insurance that covers the entire family.
• Childcare and Education: Save for upcoming education costs. Consider SIPs (Systematic Investment Plans) in equity mutual funds or PPF (Public Provident Fund) for long-term wealth accumulation.

2. Use Fixed Deposits for Stability

As your family grows, consider parking a portion of your savings in Fixed Deposits (FDs) for short-term goals. FDs offer a fixed interest rate and a safe return on investments. They are a great option for accumulating funds for specific future expenses like a child’s education or family vacations.

3. Review Insurance Plans

Update your health insurance to include the spouse and children. Also, invest in life insurance to secure your family’s financial future in case something unexpected happens.

Financial Planning for Buying a Home

Buying a home is a significant life event and requires substantial financial planning. Here’s how to approach homeownership:

1. Evaluate Financial Readiness

• Savings for Down Payment: Ensure you have enough savings for the down payment (usually 10-20% of the property’s value). This can be built through a combination of regular savings in a savings account and FDs.
• Home Loan Eligibility: Check your eligibility for a home loan. In India, the amount you can borrow depends on your income, credit score, and existing debts.
• Fixed Deposits for Emergency Fund: It’s wise to park some savings in an FD before buying a house. An FD provides a higher interest rate than a savings account and can act as an emergency fund for unforeseen situations.

2. Consider Monthly Expenses (EMIs)

Before committing to a home loan, make sure that the EMI payments will not consume more than 40% of your monthly income. A home loan is a long-term commitment, and it's important to ensure you have enough disposable income for other expenses.

3. Insurance Coverage

Get comprehensive home insurance to protect your property and contents. Also, consider life insurance that will cover the outstanding home loan in case of unexpected events.

Financial Planning for Education

Education costs are rising rapidly, and it's crucial to plan early for your child's future.

1. Start Saving Early

Start investing early to build a long-term corpus for education. Both options provide tax benefits and compounded returns over time.

2. Fixed Deposits for Medium-Term Goals

For a specific educational expense (such as a child’s university fees), Fixed Deposits (FDs) can be an ideal option. FDs offer fixed returns and help you save in a risk-averse manner for mid-term goals.

3. Education Loans

If you can’t save enough for your child’s higher education, consider taking an education loan. Many banks offer loans at favorable interest rates for education both within India and abroad.

Financial Planning for Career Changes

Career changes, whether it’s a new job or entrepreneurship, can bring financial uncertainty. Here's how to manage it:

1. Build an Emergency Fund

Ensure you have a robust emergency fund. Aim for at least 6-12 months’ worth of living expenses in your savings account to provide a financial cushion during the transition.

2. Update Insurance

Review your life and health insurance coverage, especially if you are transitioning to a new company that may offer group insurance benefits. Consider purchasing individual health insurance for greater coverage.

3. FDs for Long-Term Stability

If you are shifting to a lower-paying job or starting your own business, FDs can provide you with a guaranteed return while maintaining liquidity.

Financial Planning for Retirement

Planning for retirement is perhaps the most critical part of financial planning. Here's how to secure your post-retirement future:

1. Start Early

Invest in retirement-specific instruments such as:

• Employees’ Provident Fund (EPF): If you’re employed, this is a mandatory savings scheme that you should contribute to.
• National Pension System (NPS): A government scheme that offers long-term retirement savings with tax benefits.
• Mutual Funds: SIPs in equity-based mutual funds can provide higher returns over the long term. However, mutual funds are market-linked products and subject to market volatility. Kindly consider consulting with a SEBI-registered financial adviser before investing.

2. Use Fixed Deposits for Post-Retirement Income

When you retire, FDs can be a safe and stable source of income. Many senior citizens prefer FDs for their guaranteed returns and lower risk. Also, senior citizens are eligible for higher interest rates, usually 0.5% over and above the normal FD rates. Plus, you have the flexibility to choose from multiple interest pay-out options – monthly, quarterly or at maturity.

Non-cumulative FDs offer periodic interest pay-outs whereas cumulative FDs offer interest pay-out at the time of maturity. You can read more about it here. FD interest is calculated via the compounding method, resulting in higher returns at the time of maturity.

3. Estimate Your Post-Retirement Expenses

Make sure to calculate your future expenses, factoring in inflation and healthcare costs. Consider Senior Citizens’ Savings Scheme (SCSS) or Pradhan Mantri Vaya Vandana Yojana (PMVVY), which provide regular income for retirees.