Planning Financially for Life's Major Moments

My uncle died yesterday. He was 88. His funeral is in Tokyo this weekend and I’m going. Funerals are important. So, too, are weddings, baby showers, birthdays, holidays, graduations, family reunions, etc. All of these events are milestones that celebrate life: past, present or future. They mark the high and low points in our lives. A milestone fund ensures I’ll be able to fly across the world for my uncle's funeral in a few days.

Having a specific account for milestone life events means that I don't have to dip into my emergency fund or accrue sudden credit card debt I can’t immediately cover in order to pay for it. This article discusses four steps to build your own milestone fund, so you’ll never miss life’s important moments. (For more, see: Financial Planning: It's About More Than Money.)

Why Do Milestone Moments Matter?

Milestone moments matter - sometimes we don’t even realize how much they matter until we miss one. A milestone fund can help ensure we never have to skip important moments or regret the things we didn’t do because we had the chance, but not the money. Some of these events happen without warning, but since it’s inevitable that highs and lows will happen, we simply need to plan for them.

I’m writing this because I want you to attend the weddings and funerals that are important to you. We often don’t go because we can’t put our hands on the funds to be able to afford the trip. Or we don’t think it’s important until we realize, often too late, that it was.

I’m heartbroken that my uncle has passed. Born in 1928, he came of age during the Great Depression and World War II and built a good life marked by personal and professional success. He was part of Japan’s “greatest generation.” As Tokyo rebuilt after WW II, there was demand for goods from all over Japan. My uncle imported tea and specialty foods for the shops he ran with my Aunt Atsuko in Tokyo for 50 years. I spent many summers there as a kid and was very close to both of them.

I know there will be many friends and family I will likely never see again after the funeral. The same thing happened at my dad’s funeral - all of my mother’s friends came. It meant a lot to me to see so many friends from far away. My mom had passed away six years earlier and I hadn’t seen most attendees since then. Sometime during my dad’s funeral, I realized I wouldn’t see most of them again. I had a chance to share with many of my mother’s friends just how much they meant to me, my family and my mom. There was closure.

Milestone moments can be expensive. The costs for travel, lodging, gifts and more add up quickly. Setting aside money in a dedicated milestone fund allows me the option of attending the faraway funeral of my beloved uncle. (For more, see: 7 Ways to Save Money for an Emergency Fund.)

Plan for Major Milestones and Prepare for the Unexpected

Sometimes you know a milestone moment is ahead and can plan accordingly to manage the associated costs. For example, perhaps your family has decided to help pay for a “gap year” before your daughter takes off for college so she can travel. Or, your best friend from high school had a long engagement to give everyone plenty of time to arrange their trip to her destination wedding in Bora Bora. But what will you do when an unexpected milestone occurs?

Even though he was in his 80s, my uncle was vibrant and active. His passing was unexpected. I hadn’t thought I’d need to attend his funeral for many years. Although I hadn’t specifically planned for my uncle’s funeral this month, I had planned for an unexpected expense like this by setting aside funds. If I didn’t have a milestone fund, I would have faced a difficult choice juggling other expenses to manage the cost of attending his funeral. or not going at all.

When a milestone occurs, will you miss it because you couldn’t put your hands on the funds you need?

How to Build a Milestone Fund

Like any other savings habit you want to develop, it requires some planning to build a milestone fund. Here is my best practice advice for creating your own milestone fund:

1. Work Backward from Your Goal

How much will you need to cover milestone expenses? Start with the ones you can reasonably expect are coming, like graduations, birthdays, important anniversaries, holidays, weddings, etc. How much will it cost you to travel to the locations where the event will occur? For example, what’s the average cost of airfare from your home to your sister’s city, where your niece will be celebrating her high school graduation in a few years?

Tally those costs that you can reasonably expect. Then divide by 12 (or the number of estimated months until the event) and put that amount aside each month. (For more, see: Why Saving Money Is Important.)

Now, think about the unexpected things that might occur, such as the death of a relative or family friend, or a baby shower for a dear friend who thought she couldn’t get pregnant. What will it cost in order for you to be there for those loved ones? Add up all those costs to get an idea of how much you’ll want to put into your milestone fund. Remember, the goal is to avoid debt so that you can enjoy what time you have with your loved ones.

2. Open a Separate Savings Account

Keep your milestone fund separate from your emergency fund and regular savings.

Your milestone fund is there to help you cover the costs of things you want to do for your emotional and spiritual well being. Your emergency fund and regular savings are there to preserve your financial well being. Keep the objectives and the accounts separate.

One trick to ensure you don’t make impulse withdrawals from your milestone fund is to put the account in a separate financial institution, one where it’s less convenient for you to access the money. Think of your local credit union as an option or a bank across town.

3. Build the Savings into Your Budget, Start Small and Automate

Always pay yourself first by funding your retirement, savings and emergency funds, but be sure to allow for some money in your budget to go into your milestone fund. You don’t have to dump thousands of dollars into your milestone fund right away. It’s fine to start out small, saving as little as $100 a month.

Make it easy on yourself by automating the savings. If your employer offers the service, have a portion of your take home pay deposited into your milestone account each month. Or, you can set up a recurring automated transfer between your regular checking account and your milestone fund.

If you rely on yourself to remember to make that transfer every month, there’s a good chance it won’t happen.

4. Speak With a Professional

It’s important to understand how your milestone fund fits into your long-term plans. You may have several targeted savings accounts, all of which must be looked at in conjunction with your financial plan. Contact a financial advisor if you have questions.

Return on Your Investment

A milestone fund can help ensure you are there for your loved ones and for yourself, celebrating the good times and comforting through the sad moments, all without resorting to sudden consumer debt. It can also help you pay off travel paid for on a credit card, so you’ll accrue miles, not interest.

I’m grateful I’ll be able to celebrate my uncle’s life and mourn his passing with my extended family. It will be positive closure for many relationships, and will be sure to create new paths forward in others. The emotional value and opportunity to build on relationships from sharing milestone moments goes far beyond the actual cost of getting there. (For more from this author, see: Start Your Financial Plan by Talking About Money.)