In a song written for his newborn son, John Lennon said, "Life is what happens to you while you're busy making other plans ... so make sure you review your car insurance coverage at least once a year."

OK, he didn't actually say that last bit about car insurance. But if he had, maybe I would have upped my auto coverage before it was too late. (More on that in a moment.)

When life happens, it's often accompanied by financial happenings, too. There's marriage, having kids, changing jobs, dealing with a family illness, buying a house, herniating your L4/L5 disc while taking your recycling to the curb and shelling out $800 in physical therapy co-pays only to tweak out your back one week later while flossing your teeth. (TMI?)

Maybe all you need is love (or so said The Beatles), but an emergency cash cushion and enough smarts to lift with your knees and not your back are close runners-up.

Speed bumps ahead
Preparation is the key element that separates opportunity from financial setback. Unfortunately, panic is what tends to inspire action. Losing a job, merging your finances with a significant other, throwing out your back, having kids, or even positive cash flow events such as getting a windfall send many people into money triage mode.

Want to know what made me review my car insurance coverage? Having my vehicle stolen. As I reported the theft to GEICO, I was reminded that I had passed up the comprehensive coverage that would have paid for the loss. (For what it's worth, when I bought my replacement car -- an even older model than the stolen one -- I elected to stick with liability coverage and self-insure against theft with The Club and an adequately stocked emergency fund for any future loss.)

You don't have to let a major life (or car) event force a scramble for a money plan. A few simple steps now can prepare you financially for whatever comes your way.

The long and winding road
As we age, our financial priorities change. In our 20s and 30s, the focus is on building a decent future. It's important to get into the habit of saving (contribute to that 401(k)!) and keep debt in check. The latter can be difficult when juggling student loans and the rising price of gas and cocktails. (Our advice: BYOB parties and carpooling.)

Our 40s and 50s are usually our peak earning years. It's also when some of the biggest financial responsibilities loom large. Balancing money concerns can be hard, particularly when big-ticket items are fighting for your dollars (like covering college costs for the kids and retirement savings for you). Consider the aid at your disposal when allocating your money. Remember, there's no such thing as a scholarship for retirement. (Sorry, kids, you're going to have to chip in or study hard to cover that school tab.)

Nearing retirement -- ages 55 and up -- we become more concerned about protecting our wealth and our family's well being. Having adequate insurance (long-term care, for example) can be a lifesaver. A serious medical condition can wipe out a lifetime of retirement savings if you're not careful. Smart estate planning is also critical to ensure that your family and not Uncle Sam receives the bulk of your bounty when you pass on to that great golf course in the sky.

It doesn't matter what life stage you're in or what life event is looming large. Having a formal financial plan in place will eliminate a lot of stress and uncertainty.

The financial planning short cut
Books can be -- and have been -- written about preparing for every financial inevitability. All of them require a current full-color, 3-D snapshot of your finances. You could certainly spend the holidays cursing your overstuffed filing cabinet and your spouse's random ATM withdrawals that make it impossible to reconcile anything. Or, you can take a few shortcuts so that you'll actually get this done.

  • Step 1: Start by taking a simple financial inventory. The math is easy. It's simply what you own (your assets -- your savings, retirement kitty, Star Trek figurine collection) minus what you owe (liabilities like credit card debt, car loan, student loans). The number you get equals your net worth.
  • Step 2: See where your money goes on a day-to-day basis. Don't worry. I have a shortcut for this one, too -- the couch potato's guide to budgeting.
  • Step 3: Freak out.
  • Step 4: Take deep breaths and remind yourself that this isn't a permanent state -- this is the "before" shot of your soon-to-be stunning finances. Remember, vague ideas about how you spend and save don't serve you well. You can't reevaluate your finances until you evaluate them in the first place.

Road map
Next, start thinking about your future. If you're currently coupled, be sure to include your significant other in this brainstorming exercise. Serve popcorn if it'll help.

Write down five things that are important to you in the present that require some cash to keep going. Then write down five things that you envision for your near-term future (e.g., a down payment on a house, finally funding that emergency cash stash so you can sleep soundly at night). And finally take a leap into the long-term future. Where will you live? How do you want to spend your days? What financial achievements signify success to your older, grayer, but still charming future self?

Take a break and revisit your list with fresh eyes and start prioritizing your dreams and adding some tangible milestone markers to each.

Guess what? You have in your hands financial goals, and this is no touchy-feely feat. Why is goal setting such an important part of financial planning? Consider these psychological and practical bonuses:

  • They give you a reason to save, which is essential in managing your money.
  • They help you funnel your money to the things that are important to you.
  • Being specific helps you pinpoint how to spend your money. Just having some vague notion that you're "saving for the future" isn't good enough. Pie charts rock.
  • Goals crystallize fuzzy thinking and even inspire people to take action. Because the sooner you start, the more likely you'll realize your goals.

Road trip!
While you're feeling inspired, start putting even more details to your "to do" list. A solid financial plan includes three elements: psychological prep (setting priorities), coming up with clear money markers (assigning accurate dollars and deadlines to those goals), and providing a legal safety net (documents that will cover you and your loved ones if something horrible happens).

Research the cost of that cruise you want to take next year and break it down into a monthly savings goal. Open a high-yield savings account (the rates are great right now) to get the most return you can on that "replace the leaky roof" fund. Set aside a lunch hour to review your employee benefits and do away with redundancies in insurance coverage. Make an appointment with a lawyer to write up your will and durable power of attorney.

(At GreenLight, we provide detailed "My Money Goals" plans with step-by-step instructions on tackling everything from estate planning to buying the right kind of insurance to making the most of your employee benefits. Click here for a free month-long trial.)

Over time, your goals will change because, well, that's life. What's important is doing this exercise for the first time (if you never have) and scheduling a regular progress report -- annually, or quarterly is even better.

You are here
Financial planning for life events starts with taking a snapshot of where you are now, making some assumptions about where you're going, and checking your progress against your roadmap along the way.

If you want someone to ride shotgun as you're tackling your money "to do's," check out The Motley Fool GreenLight service where Shannon Zimmerman and I try to take the stress out of finances and help you find money that you didn't even know you had. (Yes, there may be a hidden fortune inside your paycheck.)

GreenLight co-advisor Dayana Yochim is the author of The Motley Fool's Guide to Couples & Cash. You can read her regular dish on the GreenLight blog. The Fool has a disclosure policy.