How to Financially Prepare for Major Life Changes

Life doesn’t happen in a straight line. We experience love, loss, growth, and unexpected turns and often, these moments come with financial implications. Whether you’re getting married, going through a divorce, starting a family, launching a business, or planning for retirement, preparing your finances can help reduce stress and increase your sense of control.

Here’s how to approach the most common life transitions with confidence and clarity.

1. Marriage or Moving in Together

Merging lives often means merging finances, too, but it’s not always straightforward.

Things to consider:

• Have open conversations about financial goals, debts, and spending habits.
• Consider a joint budget and review whether joint or separate accounts make sense for you.
• Update or create wills, and review beneficiaries on pensions and insurance policies.
• If one partner is earning significantly more, think about how to balance contributions fairly.
• Think about protection policies in case of death, sickness or injury.

Tip: A pre-nuptial agreement might not be romantic, but it can be a practical safeguard, especially if one or both partners have substantial assets.

2. Divorce or Separation

Financial disentanglement can be as emotional as the relationship itself.

Key steps:

• Identify all shared assets, including pensions, investments, and property.
• Understand your legal rights, especially regarding spousal maintenance and pensions.
• Create a new budget based on your individual income and expenses.
• Review and update your will, insurance policies, and financial plans.

Tip: Seek professional advice early to avoid costly mistakes and to protect your financial future.

3. Having Children

Children bring joy—and new expenses.

Plan ahead by:

• Building or increasing your emergency fund to cover unexpected costs like childcare or time off work.
• Consider life insurance and income protection to provide for your family if something happens to you.
• Exploring tax-efficient ways to save for your child’s future (e.g., Junior ISAs).
• Reviewing your will and appointing legal guardians.

Tip: Even small, regular savings now can make a big difference when they’re ready for university or their first home.

4. Starting a Business

Becoming your own boss is exciting, but it requires careful financial planning.

Get prepared by:

• Keeping at least 6–12 months of living expenses in an emergency fund, self-employment can mean irregular income.
• Setting up separate business and personal accounts.
• Understanding your tax responsibilities and exploring allowable expenses.
• Thinking ahead about how you’ll continue to save for retirement, especially if you no longer have a workplace pension.

Tip: Consider business protection policies to cover key people and potential income loss.

5. Retirement

Retirement isn’t an event; it’s a transition that can span decades.

Make it smoother by:

• Understanding your income sources: pensions, ISAs, investments, and state pension.
• Deciding on a withdrawal strategy that balances flexibility and sustainability.
• Reviewing tax implications when taking income from different pots.
• Thinking about long-term care and legacy planning.

Tip: Retirement is also a great time to reassess your lifestyle and goals, not just your finances.

The Essentials: Emergency Fund, Insurance & Tax Planning

No matter the life change you’re experiencing, a strong financial foundation will help you weather uncertainty and adapt with confidence. These three essentials—emergency funds, insurance, and tax-efficient planning—should be at the heart of your strategy.

Emergency Fund: Your Financial Safety Net

Life doesn’t always go to plan. An emergency fund provides a cushion for the unexpected—job loss, illness, car repairs, or surprise expenses when moving house or caring for family.

How much should you have?

• Employed: Aim for 3–6 months’ worth of essential expenses.
• Self-employed or single-income households: 6–12 months is safer due to income volatility.
• Major transitions (e.g. starting a business, maternity leave, divorce): Build a higher buffer if possible.

Where should you keep it?

• In an easy-access savings account, not tied up in investments.
• Look for a competitive interest rate, but don’t sacrifice accessibility for returns.

Why it matters:
Having this safety net means you’re less likely to rely on credit cards, loans, or dipping into long-term savings (like pensions or ISAs) during a crisis.

Insurance: Protecting What Matters Most

Insurance can feel like an expense until the moment it becomes essential. Major life events should always trigger a review of your protection needs.

Key types to consider:

• Life Insurance:
  Provides a lump sum to your loved ones if you pass away. Especially important if others depend on your income or if you’ve recently taken on a mortgage or started a family.
• Income Protection:
  Replaces a percentage of your income if you’re unable to work due to illness or injury. Particularly valuable for self-employed individuals or single earners.
• Critical Illness Cover:
  Pays a lump sum on diagnosis of a specified serious illness (like cancer or a heart attack). Helps cover treatment costs, mortgage payments, or taking time off work.
• Business Protection (for business owners):
  Key person cover, shareholder protection, and business loan protection can help a business survive a major disruption.

Review regularly:
Make insurance part of your annual financial check-in, and always review it after big changes like marriage, having children, or starting a business.

Tax-Efficient Strategies: Keep More of What You Earn

When your life changes, your tax situation often changes too. Being tax-efficient isn’t about aggressive avoidance; it’s about using the tools available to you to legally reduce your liability and grow your wealth faster.

Pensions:

• Contributions attract tax relief, and pensions grow free from income and capital gains tax.
• Consider increasing contributions during high-earning years or when you receive bonuses.
• Understand your annual allowance and lifetime allowance implications.

ISAs (Individual Savings Accounts):

• Save or invest up to £20,000 a year (as of 2025) with no income or capital gains tax.
• Great for short- and medium-term goals, as well as flexible retirement income alongside your pension.

Marriage Allowance & Tax Planning for Couples:

• Transfer unused personal allowance between spouses or civil partners where applicable.
• Consider who holds which assets to make the most of lower tax bands.

Business Owners:

• Explore salary vs. dividends, pension contributions through your company, and allowable business expenses.
• Take advantage of Business Relief and Inheritance Tax planning opportunities.

Estate & Inheritance Planning:

• Life changes often prompt a review of wills, trusts, and how assets are passed on.
• Tax-efficient gifting and planning can help you support loved ones without unnecessary tax bills.

Bottom Line

Emergency funds give you security. Insurance gives you protection. And tax efficiency ensures you’re making the most of your money before, during, and after life’s biggest transitions.

If your circumstances are changing or you’re planning ahead, now is the time to revisit your financial foundations. Each decision you make today is a building block toward long-term peace of mind.

Final Thoughts

Major life changes can feel overwhelming, but they also offer an opportunity to realign your financial goals with your personal values. By being proactive and seeking advice when needed, you can turn uncertainty into empowerment.

If you’re facing a big transition—or simply want to make sure you’re prepared for the next one—take time to review your plan. And remember, you don’t have to do it alone.