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How to Win at Life: Prepare Financially for Each Milestone

Graduating college, getting your first job, getting married, having a baby… These are just a few hallmarks that might come to mind if you were asked to name some of life's biggest milestones.

And although these things don't always come by surprise, the price tags associated with them often do. For reference, a recent survey shows the average cost of a wedding now hovers around $32,641.

As for college? Published tuition and fees at public four-year institutions averaged $9,410 for the 2015-16 academic year, according to the College Board, and more than triple that at private ones. Yikes.

Read on for how to prepare your finances if you're approaching a milestone.

Getting Married

So he or she asked you — or you asked him or her — and you plan on staying together in sickness and in health. Next on your list of priorities should be sitting down to have the talk about the money system you'll use. Plan it for a time when neither of you is stressed. Will you merge the entirety of both of your incomes in a single account, maintain separate ones, or use a yours-mine-and-ours system? (I'm often a proponent of the latter.) If you go the latter route, one way to execute it is to each contribute an equal percentage of earnings to the "ours" account so that the total satisfies the household expenses.

Another thing to put on your to-do list? Writing a will. Without one, the state you live in decides the percentages of who gets what. It's not the most romantic thing in the world, but writing a will is important if you want to be in control. You can use an attorney or a website like LegalZoom.com to create one.

Swiss groom puts a wedding ring on his bride during their wedding ceremony in the traditional City Hall in Lucerne
REUTERS/Michael Buholzer REUTERS

Buying a Home

If you're looking into buying a home, make one of your first steps getting pre-approved for a mortgage. It's essentially obtaining a letter from a lender saying you're qualified to borrow a certain amount at a certain interest rate, and it can increase your chances of landing the home you want. Documents you'll need for pre-approval include proof of income, proof of assets, and employment verification. (Note: You should check your credit three to six months before buying a home — and regularly besides that — to avoid surprises.)

Also near the top of the priority list? Find a trustworthy home inspector (you can vet them on sites like HomeInspector.org) before you close on your new home, and get a report so you're informed via an unbiased third party. It'll cost an average of $400 (and could vary depending on the size of the home), but it's worth it for the peace of mind and the fact that it could save you money later on. Then use the inspector's report as a punch list to remind you what is likely to need fixing/replacing and when.

A real estate sign advertising a new home for sale is pictured in Vienna, Virginia
A real estate sign advertising a new home for sale is pictured in Vienna, Virginia, outside of Washington, October 20, 2014. REUTERS/Larry Downing

Having a Baby

One of your first priorities (after getting some rest) should be modifying your health insurance. That's because policy rules typically state that in qualifying events (like having a baby), you have to update to include new babies within 30 days of their birth, according to Leslie Trowbridge, president of Family First Financial Planning. Do this as soon as possible to avoid trouble with potential extended hospitalizations or other complications.

Next, it's important to get life insurance — or update your policy — since having dependents means it's now your responsibility to provide a safety net for them.

And your third — but still vital — priority? That will (if you haven't done it already). It's the only place you can name guardians for minor children. Finally, consider opening a 529 and starting to save for your kid's future college tuition, but don't do it at the expense of your own retirement savings. There are loans for college but not for retirement.

College-Bound Kids

As a parent, you probably have a lot on your plate right now, but something that should be at the top of your list is making sure your child is squared away with student accounts (e.g., financial aid and the bursar's office), says Kal Chany of Campus Consultants. You don't want him or her to be surprised — and/or prevented from registering for classes — because a check didn't clear. (A guest on my podcast said this happened to her. It wasn't fun.)

What's the Best Way to Save for College? 0:42

Then, set up a budget with your children by having a conversation about money. Answer questions like how much will they need to live on each month, when will it come in, what will it cover and will they need to work to earn additional funds? Try breaking it down week by week for budgeting purposes. And as for a credit card? They don't necessarily need one, but if you want to put them on one of your cards as an authorized user, it can help them build credit in their own name.

Read More: Kids Off to College? Here's How to Get Them Started With Credit

Retirement

First things first — you'll need to get your medical coverage all squared away before you retire, whether you're going on MediCare, staying with a prior employer's plan through COBRA, or doing something else. Having a gap in coverage isn't wise. As you figure out where your income will come from, if you're not yet 70 years old, you'll typically want to take distributions from your retirement accounts instead of tapping Social Security. And for good reason — Social Security benefits increase about 8 percent annually for each year you wait before taking them between age 62 and 70.

Here's how to make 401(k) withdrawals without penalty 0:35

If you're married, consider using a calculator like MaximizeMySocialSecurity.com with your spouse to figure out what works best for you both combined. (It's not free, but it's worth it.) As for downsizing, you could move to a cheaper location or smaller home at any time, but my advice? Don't rush — and visit first to make sure you actually like it, not just the idea of it.

With Hayden Field