When life happens … are you anchored?

Gugu Sidaki | 05 April 2023

Gugu Sidaki is an independent financial planner and co-founder of the financial planning and wealth management practice Wealth Creed. She holds the Certified Financial Planner accreditation and is an author and financial literacy enthusiast.

Life can be riddled with so many challenges – job loss, insufficient income, breakdown in relations, death and so many more. We can never really plan for every event effectively but we can try and anticipate quite a few potential problems with the view to softening the blow when it lands.

Life transitions are periods in our lives that disrupt the status quo and require quite a bit of adjusting and adapting, and we all experience hundreds of these as we progress through life. The issue with major change is not the change itself, as that is inevitable, but rather our perception of it and ultimately how we react to it.

According to Shaun B Merriam, professor of adult education at the University of Georgia, there are four types of transitions:

Anticipated transitions

These are events that are expected to occur in your lifetime.

Examples of this type of transition occur when you get married, you change jobs or your children start or leave school.

It is always a good idea to plan for the future and to plan well ahead of time for these events to minimise the financial impact.

You should plan for an anticipated event over the short term (from less than a year up to two years), the medium term (two to five years) or over the long term using savings and investments, depending on the term.

Unfortunately, too many people use debt instead of planning ahead, and debt if not managed, can wreak havoc on your finances.

Unanticipated transitions

These are events you do not expect and they do not follow any particular timeline in your life. 

Examples include sickness, accidents and job loss.  

When life happens with these transitions, you have little to no control over the impact.

But financially you can prepare and minimise the impact using insurance and emergency savings.

The emotional and psychological impact of these events is unavoidable, but having the financial backup to cope certainly goes a long way.

So often people have inadequate emergency savings or insurance to get them through the worst times. That is why it’s imperative to be adequately insured and to save for rainy days.

Non-event transitions

These are events you expect will occur but they do not. 

An example that often plays out is people expect to retire at a certain age, but they are unable to as they do not have enough retirement savings.

This is such a painful reality for so many South Africans who often come to this realisation very late in their lives.

That is why financial advisers encourage everyone to engage in the process of financial planning as early as possible – this allows you to understand how much money you need for a comfortable retirement and the options available to you, should you realize that you are not saving enough.

If you only do this exercise at or near retirement, you reduce your chances of being able to make the necessary changes in time for your anticipated retirement.

Sleeper transition

This is an event that occurs gradually and you may not be aware of its progression.

A common example that many people experience is the end of a relationship and ultimately divorce.

This is such a touchy subject and a difficult one to plan for. However, it is crucial that you consider the potential of this life event occurring at the start of any relationship and put measures in place to reduce its financial impact on both you and your partner.

As John Lennon said, life is what happens to you when you are busy making other plans. A good solid financial plan gives you the best chance of achieving the life you wish for, even as you experience different transitions. Don’t be so busy making other plans that you neglect the financial one that anchors the life you want.