When we’re born, our parents and their support crew often start tracking our first milestones. First teeth, first words, first steps, first day at school, first car… There are plenty of firsts we knock off in our early days! As we get older, though, the magnitude of some of our milestones start to change, and these achievements can rely on us having some financial plans in place.
Choosing to move out of home or launch your career can leave you fizzing with excitement. Getting married, buying your first home or starting a family are all causes for celebration, but they should also double as reminders that it’s time to re-evaluate your financial plans too.
Updating your budget to account for key life milestones doesn’t need to be overwhelming, but you may want to set aside a bit of time to sit down and work out how changes to your lifestyle will affect things like your income, your expenses and your savings. As the important people in your life change, you’ll want to make sure that their future is also protected should anything happen to you.
Keep reading to discover more about why a budget is a key tool in your financial toolbox and six major life events that we believe are great times to rethink your budget to make sure you and your loved ones are financially protected.
Why are budgets important?
Before we get started, it’s essential to consider why you need a budget.
A budget is a super useful tool to help you ensure all of your ongoing expenses and bills are paid. A budget is, simply, a plan for how and when you’ll spend and save your money. They are useful financial management tools for everyone to master - not only people who feel like they’re having trouble making ends meet.
Keeping to a regular household budget is also a great way of making a plan to protect your loved ones and the investments you’ve made to prevent financial hardship in the future. While putting aside savings for future goals is a wise move, life can throw a few curve balls and you never know what could happen. For many Kiwis, choosing to purchase Cigna life insurance can go a long way in helping to provide peace of mind that if the unimaginable were to happen, their loved ones wouldn’t be burdened or impacted financially.
Putting a portion of your income (often as little as a cup of coffee a week) towards paying your life insurance premiums not only protects your loved ones, but it means you could get on with saving and enjoying those big life milestones like welcoming a new baby, moving into a new home, or planning your retirement without worrying about what might happen with your finances if you were suddenly unable to earn an income or were no longer here.
Six key life events that should make you dust off your budget
Entering the workforce
Getting that first big break and earning your own money for the first time can feel super liberating. Finally being able to spend your own cash on the stuff you want might mean your first couple of paychecks disappear faster than you hope. Especially if you’re also paying rent for the first time, you’ve just signed up to pay utilities (not just Netflix!), or you’re starting to tackle any student debt you may have from studies.
Once you’re earning a regular paycheck, it’s a great idea to evaluate exactly what your income and outgoings look like, and ensure the one covers the other, with a bit of fat for any unexpected costs. There are plenty of online budgeting tools to help you get started.
While you’re creating your first budget and working out your financial goals, it’s also a great time to consider your insurance cover. You might already insurance for your stuff (home and contents insurance) and your car, but have you got insurance to protect your ability to keep earning money? While you probably have a long and healthy career ahead of you, it’s worth considering how you’d manage your expenses and what debts might fall on your partner or loved ones if you suddenly became unable to work for any reason. If life insurance isn’t right for you, then income protection cover might be. You can chat with a Cigna Adviser about your goals and how to protect what matters to you with an insurance policy tailored to you as you launch your career.
Get started with a budgeting tool and find a layout and style that works for you, then consider these important factors:
- Your income
- Your loans or money you owe
- Credit cards
- Your housing costs, including power, wifi, Netflix and everything else you’re expected to pay for
- Your short-term savings goals, like holidays, engagement rings, a new car or anything else you’re saving especially hard for
- Your long-term savings goals, like a home deposit, a retirement nest egg or a ‘rainy day fund’
- Insuring your stuff, your car and your ability to keep earning.
Buying a house
Getting your foot on the property ladder in New Zealand is no mean feat, but might be the very reason you started a budget in the first place! Typically, purchasing a property will be one of the most significant financial investments you ever make. With additional legal costs, ‘must-do’ renovations, and unexpected property maintenance bills that often follow a first home purchase, you’ll want to ensure that your budget allows you to manage your ongoing costs as well as the initial investment.
When you sign up to a mortgage, your bank will usually lock you into repayments for a set number of years. While you’re exploring how that will work, it’s an excellent time to consider Life Insurance and Income Protection Insurance, to ensure your new investment is protected should anything happen to you, or the person you purchased your home with. In most cases, you may find your mortgage provider makes home insurance a requirement, so it’s worth factoring into your new-homeowners budget too.
If you’ve managed to purchase a home on your own, you’ll want to make a plan for what will happen if you’re unable to pay that mortgage down the line. If you’ve bought with friends or your partner, it’s important to consider how one person will manage the debt if the other person isn’t around, or becomes unable to contribute any longer.
You know what they say: “for better for worse, for richer for poorer, in sickness and in health”. Getting engaged, planning a wedding and planning married life are all exciting milestones that families and friends will want to celebrate with you. As well as joining hands, you might be joining finances with another person for the first time, and you’ll probably be making some big financial decisions together.
Many soon-to-be-wed Kiwis will create a budget together to manage the costs of a wedding, but that shouldn’t be the last budget you both create! Building a budget that takes into account your total household income and expenses will help you understand the situation you’re in and the financial goals you want to achieve together. Once married, you may find yourself reliant on one another financially, and you’re likely to start making different decisions when you have two incomes coming into the household. It’s important to take a moment, then decide how you would manage if one of those incomes suddenly stopped and what impact that would have on your lifestyle.
If you add a Cigna Life Insurance policy into your budget, you can name your partner as your policy’s beneficiary. This payout should reduce the financial stress that can come with losing a loved one and could be put towards covering funeral costs, bills, mortgages, loans and other everyday expenses. Life Insurance can often alleviate financial pressure during an already stressful time.
Sometimes marriage doesn’t always stand the test of time. If you and your spouse end up separating or getting a divorce, your life insurance policy should be updated to reflect these changes and the impact it will have on your budgets. It’s also important to remember to update your will.
Starting, or expanding, a family
Welcoming a new baby into your family is an exciting time for many Kiwis. Growing your family is another key moment where many couples reevaluate their budgets in anticipating for the rise in household expenses as well as often, the reduction in income, even if only for a short time. While they say you can never be totally ready for all the ways in which having a child will change your life, there are a few things you can do to plan for how they will impact your finances.
Chances are high that your priorities are going to change when a little person (or people!) enters your life. It’s important to think about the steps you can take now that will have a significant impact on your dependent should anything happen to you or your partner. As well as thinking about legal guardians and updating your will to include your child, you can start to look at your budget and expenses and where you can adjust for changes in your combined income.
In your budget, consider how parental leave payments will fit in, and how much time you and your partner can have off with your new baby, plus what you think you’ll want to do about childcare, including if one parent will stay at home, or if both parents will return to work. You may also need to consider updating your vehicle to a safer model that can take a carseat or moving to a bigger home, both of which will need to be planned for.
Going down to one income is usually manageable for many families, but it’s important to understand what would happen if that primary breadwinner was suddenly unable to work. And, there is that opportunity cost of another income if a parent becomes the main caregiver for young children, rather than returning to the workforce. Knowing how these numbers stack up will give you a really clear understanding of your opportunities, and will help you decide how much insurance cover you need to ensure your family is protected.
Not many people know this, but the best time to get Life Insurance is when you’re young and healthy, as your insurance premiums will be cheaper for a period of time. While the majority of Kiwis are in pretty good health, unfortunately, health scares do sometimes happen, and when they do it can put you in a bit of a tailspin. If you or your partner were to be diagnosed with a serious illness or condition, having a Life Insurance Policy that includes Trauma Cover can mean that you have financial freedom to make your own choices, at a time when your health has been seriously affected, and you may have to rethink your future.
Rather than cross your fingers and hope for the best, we reckon the better course of action is to be prepared for the unexpected and have a ‘back-up’ budget. One that includes just the essentials if you needed them so that you know what your financial situation might look like.
With Assurance Extra, a Cigna Adviser can work with you to understand your budget and projected budget and can tailor a custom life insurance policy to suit the needs of you and your family. Based on your personal situation and the number of people who rely on you and your income, they can talk to you about trauma cover, mortgage repayment cover or income protection cover to ensure that you and your loved ones are protected.
New Zealanders are living longer than ever before - a testament to a lot of the good things we love about this place! If you’re keen on retiring at 65 though, it will take some serious saving and a robust plan to help ensure you’re left with enough money to enjoy your time and live a comfortable lifestyle. Budgeting for the cost of aged care, increased medical bills and possibly higher living expenses like heating for your later years will help you manage your spending now and into the future.
If you retire with debts like loans or mortgages or you have a spouse, child or grandchild who is financially dependent on you, then life insurance is something that you should include in your budget. That way you’ll know that they will not be burdened with financial pressures at what will be a sad time when you are no longer around.
In the meantime, if you have elderly parents or grandparents who have already retired and are now either under your care or somewhat dependent on you, then making sure that they are looked after should they be around longer than you is key. Your parents can be nominated as beneficiaries on any policy so they can continue to be supported.
Chat to the Cigna Team
If you’re coming up to a significant life milestone and want to know more about protecting your whanau, contact Cigna today. A Cigna adviser will look at your income and financial goals and help you to make a plan for your future.