Mastering Life’s Big Financial Shifts Without the Added Stress

Life rarely moves in a straight line. Five years of planning down to the last detail can be derailed in a second.

While I know many of you can relate to this, I also know that no two people’s experiences are the same.

That’s why I want to share a few examples of how life has changed for me recently, in hopes that you might find something that resonates with you.

Perhaps you have just moved to another part of the country for a new job, or you have just had a new baby and need to reorganize your household and finances, or you are finally going to follow your dreams and become 100% self-employed.

New jobs, new locations, new babies and full-time independence – yes, these are big change events that can bring huge amounts of excitement but also much chaos as you try to deal with all the new admin tasks, decisions and spending that go along with these new events.

And as you sit in your kitchen late at night, pouring over all your open browser tabs and trying to work out all the ins and outs of your new budget, you realize that although you have made some big changes in your life, the real event of change is not the new external circumstances, but all the new details around managing your money.

And that’s the point.

I think we should focus on the changes that are most visible to us when we undergo large transitions.

In addition to the obvious work of preparing to move to a new location, the physical act of relocation can introduce a variety of new details to manage.

And the same is true for any number of large changes that occur for us from time to time.

The important thing is to recognize that it is the less visible or “hidden” details that can have the largest impact on our finances during the period of time in which we are adjusting to a large change.

How much is your big change going to cost you? In addition to the obvious (moving to a new city for a new job), there are lots of smaller costs that add up.

Taking Stock of the Moving Parts

The details within details of a big change of life. Let’s say, for example, that you have just moved to a different part of the country to start a new chapter of your life and new career.

On the surface, you have to deal with all of the usual aspects of the relocation process, like getting your new place set up, setting up your new home and office, organizing your new household, getting your new contracts in place, setting up your new routines, and organizing your life to fit in your new job and new daily work.

But then you have to start thinking about all the details that relate to your cash flow.

While you may be excited to change up your daily routine, every transition requires a few new decisions, some obvious, some less so.

To manage the cost of your new life, you’ll need to go through the list of moving parts, or the various aspects of your life that will need to be readjusted.

For example, if you are moving to a new part of the country for work, the cost of your daily commute will likely change.

If you are taking on a new role, you will likely have to pay for work-related expenses differently. And so on.

When you know all of the different costs of your life, you can get a handle on them.

You can take stock of the different costs in your life and make a plan for how to pay for them all.

Treat your personal balance sheet as a living, breathing document.

The real work of organizing and prioritizing will have to be done by you.

And that makes all the difference.

Think of your budget as a framework instead of a solid set of rules that you are required to follow at all times.

Just as your surroundings change during a life transition, your spending plan must adapt to your new environment.

Yes, certain things remain the same, but your budget can be adjusted as needed to suit your new lifestyle best.

Protecting Your Cash Flow During Transitions

The most obvious thing to control is the recurring costs. Here are some examples of typical recurring costs, also known as fixed overhead costs: Subscriptions (e.g., software, streaming services, gym memberships), recurring bills for utilities (e.g., electricity, garbage collection), and insurance policies (e.g., health, disability, life insurance).

These types of costs are often overlooked, especially because they are typically set up to be paid automatically on a regular schedule (e.g., every month).

This means that people tend to forget they even exist, until it is time to pay them again.

As a result, these costs can also easily become out of sync with the person’s current lifestyle.

For example, people’s vehicle usage patterns can change frequently, meaning that their vehicle coverage needs to change as well.

For this reason, it is a good idea to review your recurring costs regularly and make sure they remain relevant to your current circumstances.

Many expenses are routine, or that we have set up on auto pay, such as our car insurance.

Our car insurance may be set up for a specific amount of driving per year (say, for example, $1,800).

Still, that amount was based on our previous lifestyle, and we may not even realize that our new situation requires less coverage.

By gathering updated car insurance quotes and securing the best price for our new situation, we can save on an expense we were already paying for, which we can use to cover transition costs we hadn’t anticipated.

Cutting ties with underperforming overhead costs, whether they be recurring, subscription-based, or even membership-driven, can unlock significant amounts of margin that can then be redirected into new areas and even during the midst of transition.

As with most things in life, there are the obvious costs, and then there are the less obvious yet quietly draining line items.

These ‘leaks’ need to be hunted down and addressed.

The only thing worse than cutting ties with a costly service in good times is cutting ties with an inexpensive service in bad times.

So, by proactively stripping out the amount of ‘waste’ that your current spending plan contains, you will find that you are far better equipped to handle the unexpected expenses that inevitably arise as a result of any major transition.

Building Resilience Against the Unexpected

A little unexpected cost can cause big problems for people who are already going through a lot of change.

So as well as working out how much things are going to cost for the obvious things (like furniture for a new home) you also need to work out the cost of the things that will happen but that you can’t anticipate (like a delay in getting your security deposit back from your old home, or realizing that the cost of things for your new home or for your new job are higher than you expected).

So what happens when the plan falls apart?

Be prepared for unexpected expenses by building a transitional ‘friction’ budget into your overall plan.

This is the bit that will inevitably go wrong, but having it ring-fenced and separately allocated in your spending plan means you won’t be tempted to raid your savings or opt for expensive interest-bearing debt.

When things stop going as planned, it can cause a great deal of stress.

The stress is not merely financial but also a strain on your time and physical energy.

Every time you have to stop and deal with some unexpected expense, it causes a lot of additional stress.

To avoid a lot of stress during a financial transition, it is very important to have a financial reserve for unexpected expenses.

And I am not only talking about money.

Having some financial reserve also means having some mental reserve.

Having enough money for unexpected expenses gives you the peace of mind that you can handle any unexpected expenses without losing a lot of energy and causing yourself a lot of stress.

And that energy and that stress can be spent on getting used to a new environment, on getting used to a new job, on enjoying a new status.

In short, it is very important to have enough financial reserve to be able to handle any unexpected expenses during financial transition and to be able to focus on other important things.

Setting the Tone for Long-Term Success

Once you have set up your new household, re-evaluate your current financial goals to see whether they remain relevant to where you are today.

And will the amount you have designated for your safety net need to increase as your cost of living for your new household is higher?

If all has gone well for you, your next big transition (be it a new job, move, children, etc) will be as financially smooth as the last, and you will have consolidated your financial position into a solid footing for the next chapter in your life.

Photo by Paico Oficial on Unsplash