Mar 29, 2022 | insights

Financial Planning through Life Transitions

DalyAnderson
By Daly Andersson, CFP®, CFA
Co-Owner & Managing Partner
Tenet Wealth Partners 

Ch-ch-ch-ch-ch-changes


How has your life changed in the last few years?  Lately, it has felt like the one constant has been change.  We have seen many people embark on new career paths.  We have watched as friends have gotten married, often in creative ways during the pandemic.  We have planned all kinds of retirements – the retirements that were earlier-than-expected, later-than-expected, part-time, and those who go on to encore careers.  We have seen roles change – a grandmother providing daytime care for her young grandchildren, the empty-nesters caring for aging parents.  We have also seen unwelcome changes – job layoffs, health scares, and the passing of loved ones.  The funny thing about life change is that it can’t be boiled down to a handful of events or observations. What might not register as a major life adjustment for one person, may be a dramatic shift for another. What defines life change is truly in the eye of the beholder. And all life change, even change that you welcome, has the potential to pack a punch to the very heart of what makes you feel like you. 

What does life transition have to do with money?

As financial planners, helping families navigate life change is at the very core of what we do.  Life change often has financial implications.  Change can stress test any financial plan – not necessarily because the change wasn’t anticipated (though sometimes it isn’t, of course), but because change causes us to feel and react.  And it is often the emotional and behavioral reactions to life change that tend to make our well-laid plans go awry.  When change is upon us, it can leave us feeling vulnerable and uncertain.  Decision-making can become difficult and taxing.  Learning new things, keeping up with your daily routines, instilling new healthy habits?  Forget about it!  Change can make mountains out of molehills. 

Why does change (even welcome change) leave us so unsettled? 

It turns out that there are biological reasons why we go a little ‘wonky’ during life change.   Like a stealthy ninja, our brain is always in the background helping us make decisions, focus our attention, and resist temptation.  But while it facilitates these higher-order functions, the brain’s primary purpose is to keep us safe from harm.  When we perceive a threat and our stress levels increase, the brain prioritizes our safety above all else.  The “Fight, Flight, or Freeze” response is an excellent defense mechanism if a predator is chasing you, but not so helpful when you are trying to navigate a new set of financial variables.  Money is tied to our way of life, our memories and histories, and our values and aspirations.  Financial decisions and their implications can increase the stress of a transition.  When our brains go into survival mode, our higher-order functioning doesn’t work as well.  It can result in poorer decision-making, limited creativity, a tendency to only see a limited number of options and to rely on rigid rules that may not serve us well in the moment1.  

Life transitions also place a heavy burden on our mental energy.  Dr. Moira Somers, a financial psychologist and family wealth consultant, suggests that we think about our mental energy as a big pie1. Throughout our typical day, we divide our energy into things like managing our emotions, learning new things, and keeping up with our daily routines, for example.  But when life throws a wrench in our day-to-day experience, our mental energy pie doesn’t get bigger, it just gets sliced up differently.  And when we are undergoing a life transition, especially one that is profound and long-term, less time-critical demands like forming new habits, or keeping up with your inbox may fall to the wayside.  This can make even day-to-day financial decisions feel overwhelming.   

What can we do about it?

First of all, feeling “all-the-things” during a time of life change is completely normal. It is important to give yourself grace and compassion.  Even welcome and celebrated changes can rock your foundation for prolonged periods of time.  In financial planning, we often spend a lot of time focusing on financial resources like income and assets.  But when experiencing life change, it turns out that your non-financial resources are often just as important, and now is the time to lean in and take stock of all those attributes that will help you through this period. 

Dr. Nancy Schlossberg, a professor of counseling and a prolific researcher in life transitions, created a model for evaluating the supports that impact a person’s ability to manage life change.  You can use Schlossberg’s 4-S Transition Theory to explore and lean into your own personal strengths and areas of support through a transition2:

  • Assess your situation.  Imagine for a moment that you have a 5,000-foot view of your current life.  How would you characterize the situation around you?  Is the change you are experiencing something that you planned for and expected, or one that was sudden or perhaps even unwelcome?  Are there other stressors in your life that are making your transition more challenging or affecting your ability to cope?  Now think back to a time that you may have experienced a life transition in the past.  How did you cope at that time?  What supports were key for you to find your way through it?

  • Look at your ‘self’.  One important reason why life transition can be so difficult is that it often changes how we see ourselves.  Consider the retirement of a long-time physician who has dedicated countless hours to the care of their patients.  Like many, this person may feel that their career is a core piece of their identity and that their care for patients gives their life purpose.  It can be unsettling to leave behind a career, especially one that fills you with purpose.  Reframing a transition to focus not on what you are retiring from, but what you are retiring to can bring new meaning and identity.
     
  • Name your support.  What supports do you have in place around you?  Has your support system changed as a result of your transition?  We can find support from our social network – our friends, family, or colleagues.  We can also find support from the professionals who help us – our financial planners, accountants, attorneys, therapists, and healthcare providers, for example.  Support can come from services such as meal and grocery delivery, professional house cleaning services, and others that may ease the stress of this current transition.  You may experience support from spiritual or religious beliefs.  Take a moment to really think through and identify your key support.   

  • What Strategies do you have for coping?  It can be hard to maintain healthful habits when going through the stress of a transition, but these same habits are often great ways to cope with the stress of a life change.  Strategies for coping can include anything that helps you manage the stress of the transition.  Things like exercise, eating well, journaling, music, spending time in nature, or taking time for a coffee with a good friend, can all be excellent strategies to help cope with a transition. 


Life change is always around us.  Even when the change we experience is welcome, it can often leave us feeling unsettled as our sense of identity, purpose, and social networks shift.  Financial change often accompanies life transitions and can increase the mental strain of the situation and cause unintended consequences.  At Tenet, we believe that financial planning can be a critical area of support during these times.  A financial planner who gets to know you and your unique set of values, goals, and priorities can provide advice and support as you make important financial life decisions.  

Once you have explored your transition strengths, take a cue from David Bowie and “turn and face the strange”.  Now is the time to lean into your strengths, your support, and your strategies for coping.  It’s time to call in all the reserves and move forward into the unknown. 



Sources:

1. Somers, M. (2018). Advice that Sticks: How to give financial advice that people will follow. Practical Inspiration Publishing.

2. Schlossberg, N. (2011). The Challenge of change: the transition model and its applications. American Counseling Association Journal of Employment Counseling, Vol. 48, Iss 4.