Budgeting for major life events

Couple with young baby and child sit at home and plan their budget using a laptop.
Budgeting for major life events

Big life goals look different for all of us.

You might want a down payment for your first home, to grow your family, take a dream vacation, or maybe even an entire year off (sorry, boss). Then there are unexpected expenses like a health scare or a flood – the things that make saving an emergency fund worth it.

Saving for our big dreams can be daunting though, especially when it can be tricky just getting through the month. More than half of Canadians say that they’re living paycheque-to-paycheque, according to a recent study from accounting firm BDO Canada. North Cover’s own research uncovered that only about half of Canadians (48%) say they’re optimistic about their financial future, and the same percentage worry about running out of money in retirement.

Still, budgeting for major life events is essential. “The first step is to acknowledge that it's definitely going to happen, and you definitely need to plan for it,” says budgeting coach Carrie Hayes, owner of Better Budgets.

What are major life events?

Major life events are those big moments that tend to change your circumstances pretty dramatically, financially and oftentimes, emotionally. Marriage, expanding your family, and buying a home or moving are all major life events. There are also the less positive moments we tend to not think too much about, like losing a loved one, facing an illness or injury, or getting divorced.

Having a plan to make it more manageable now is just the thing future-you, and your loved ones, will thank you for. Here are some tips on how to do it.

Know your numbers

This means all of them: from what your big goals will cost to your monthly budget. Research lovers, this is your time.

For your big goals, you’ll need to know what it will cost, but also how that might change over time. For example, if you’re looking to buy a home in a specific location, then you’ll want to keep an eye on the sales prices of comparable listings, plus interest rates for mortgages. Or, if you have a little one on the way, you’ll need a plan in place for childcare costs, even if you don’t need to cover them immediately.

Why is budgeting important?

Once you have a number in mind, you’ll need a budget that allows you to save for it. Budgeting is important because it gives you a plan to achieve your big financial goals.

Start by reviewing the money going out over the last three to six months – in other words, what you spend to cover life’s everyday expenses. Tracking your money helps you understand where you spend it. It’s also a good idea to make note of when you have higher-than-normal expenses, such as during holidays or if you have multiple family members with birthdays in the same month. Some months will probably be higher than others, so find the average.

Next, look at the money coming in. Track your income to make sure you have enough to cover your average monthly expenses, plus a little extra for your savings. If it’s not enough, you may need to lower your spending, boost your income, adjust your savings goal, or do all three.

Set a (realistic) timeline

While it’s overwhelming to think about saving thousands of dollars, Carrie says the trick is to break the task down into micro pieces – smaller sums of money that add up to the big number.

Dividing up your big savings goal into a monthly goal, or even a goal by pay period, can help make it feel more achievable. Remember that while we’d like to save as quickly as we can, sometimes our income, expenses and budget don’t allow for that. That means setting realistic timelines. Saving for a wedding or a down payment on a home can take years.

While you might be tempted to be super strict, Carrie says that deprivation can suck all the fun out of life – and make you less likely to stick to your tight budgets. “You do have to back up and look at [your budget] and go, ‘that's going to come from somewhere, and how do I shuffle the pieces and reprioritize so that I can make the space for the longer-term goals?’”

Giving yourself a longer timeline can make the journey as good as the destination.

Want to stick to your budget?

Of course, living within the budget you’ve set will be important. Keeping track of your spending helps, and it’s not hard to do.

The Government of Canada has a template, and there are several free apps out there to help track your spending easily. The major banks’ apps can also give you a window into your spending.

If you’re a little more vintage, even a pencil and notebook will do the trick. The point is to choose a method you like and will stick to for the long term.

Get insurance coverage to help

The costs of hitting life milestones can add up over time. Being properly insured can be a good way to have some peace of mind.

Insurance coverage can help make everything from unexpected property damage or a loved one passing away, easier to cope with financially. A life insurance payout, for example, can help your loved ones pay for the family home or tuition, even if you’re not around. Working insurance into your monthly budget is a smart way to plan for the unexpected.

As you plan for your goals, remember that every dollar counts. A little budgeting now can lead to big things down the road – and you may even get there sooner than you think. It can also pay to protect yourself and those you love financially, even if your circumstances change. Find out how with North Cover Life Insurance today.