Life’s biggest moments are often expensive. Going to university, buying a home, getting married and setting up a business all have high associated costs. You need to plan ahead for major events and here’s a five-step plan to show you how.
Major events mean big expenses
Life’s biggest moments tend to come with some hefty costs. Whether you are getting married, buying your first home, going to university or setting up a business, it can be challenging to cover the associated costs at the same time as keeping all the other financial planning balls in the air.
The key is to plan ahead.
Here’s a five-step plan to stay ahead of the game and incorporate those big spendy moments seamlessly into your long-term financial plan.
Planning ahead for major life events: a five-step plan
Step 1 – calculate the cost
With the excitement of major events, it’s easy to get carried away and underestimate how much things cost.
Let’s take university as an example. With a university education, the biggest cost is the fees but that is by no means the only expenditure you need to take into consideration. Most students live away from home so there will also be rent to cover, as well as utility bills. You need to research those costs carefully because they can vary enormously. In the UK, for example, annual average rent in Bristol is over £9,000 per year compared to around £6,400 in Liverpool. Then you will have to budget for food, books, going out and travel to and from home.
The more accurate your budgeting is, the better you can plan ahead and avoid any nasty surprises that could upset your finances. It’s also a good idea to add in a contingency because most major events go over budget.
Once you have an accurate budget, you can work out whether the expense is achievable, how much you will need to save to make the event happen and how long it will take.
Step 2 – work out your time horizon
Once you’ve identified the cost of your big event, the next critical step is to determine your time horizon. The time horizon refers to how long you have to save before the expense occurs. This could range from a few years, if you’re saving for something like a wedding or business startup, to decades for events like a child’s university education or retirement.
Understanding your time horizon is essential because it directly impacts how you approach your savings plan. If the event is a short-term goal, like purchasing a car or funding a deposit on a house within the next three to five years, you’ll need to focus on more conservative savings strategies. These strategies might include putting money into savings accounts or low-risk investment vehicles that prioritise capital preservation. With a shorter timeline, you’ll want to avoid exposing your money to too much market risk.
On the other hand, if your goal is farther off – say, 10 to 20 years away – you can afford to take more risk. This longer time horizon allows you to invest in higher-yield options such as stocks, which may fluctuate in the short term but generally offer better returns over a longer period. The extended timeline gives you the benefit of riding out any market volatility.
Knowing your time horizon also helps you stay disciplined. It can be tempting to dip into your savings if the goal feels far away. However, by breaking the time down into manageable milestones, you can keep track of your progress and stay motivated as you get closer to the big event.
Step 3 – Incorporate the costs into your monthly budget
When you’ve set your time horizon, it’s time to integrate your savings goal into your monthly budget. Start by determining how much you’ll need to save each month to reach your target by the desired deadline. Divide the total cost of your big event by the number of months left in your time horizon. This will give you a clear monthly savings target.
Next, look at your current budget and identify areas where you can make adjustments to accommodate this new goal. It might mean cutting back on discretionary spending, like dining out or entertainment, or reallocating funds from less urgent savings. The key is to treat this savings amount as a non-negotiable expense, just like rent or utilities. Automating your savings can help ensure you stay on track without the temptation to skip a month.
By incorporating the cost into your budget, you’ll steadily work toward your goal without feeling overwhelmed.
Step 4 – Devise a savings and investment strategy
Consider carefully where you are going to put the money you save.
Your savings and investment strategy will depend on your time horizon and risk tolerance. For short-term goals, a simple high-interest savings account or low-risk investments like bonds can help protect your capital. For longer-term goals, consider higher-risk options like stocks or mutual funds, which have the potential for better returns over time.
Diversifying your investments will balance risk while growing your savings.
Step 5 – Revisit your overall financial plan
After working through the previous steps, it’s important to step back and consider how preparing for major life events fits into your broader, long-term financial plan. For example, will purchasing your dream home affect your ability to pay for your child’s education? If you switch jobs and get a pay raise, how much sooner can you save the deposit for a new home?
As life changes, your financial plan must evolve to reflect your new circumstances.
Set a regular schedule—every six months or annually—to review your progress and ensure your strategy is still aligned with your goals.
During these reviews, assess whether your savings rate is sufficient, if your investment choices are performing well, and if any adjustments need to be made. Staying flexible and responsive to changes will help you keep your long-term goals in focus while planning for major expenses.
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As ever, a financial adviser can help you navigate your financial future with confidence. At Infinity, our cashflow forecasting tools can simplify the job of planning ahead for major events and show you exactly how that expenditure will fit into your overall financial plan.
If you have a major life event coming up, get in touch with your financial adviser to make planning ahead a breeze!
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