In a song written for his newborn son, John Lennon said, "Life is what happens while you're busy making other plans ... so have your checkbook handy!"

OK, he didn't actually say that last bit. But he should have.

We get a windfall and buy tickets to Europe, only to end up cancelling the flights and using our new digital camera to document water damage from a basement flood. We put a down payment on our dream house, and then the walls close in when our hours at work get cut in half. We dream in detail of an early retirement, and then the market plummets right after we give our notice.

Life happens. And when it does, it's expensive.

There's marriage, kids, changing jobs, dealing with a family illness, buying a house, and remembering to update your auto coverage before it's too late. (More on that last point in a moment.) Maybe all you need is love (or so said The Beatles), but an emergency cash cushion and a solid financial plan are close runners-up.

Detours and derailments ahead!
Preparation is the key element that separates opportunity from financial setback. Unfortunately, panic most often 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 finally get around to reviewing my car insurance coverage? Walking outside and discovering that my car had been 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.

You really shouldn't wait for a major life event (or felony theft incident) to prepare for life's expensive "what ifs" (or even completely foreseeable events like education expenses or retirement).

A few simple steps now can prepare you financially for whatever comes your way.

The financial-planning shortcut
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.

There are books and websites (including this one) devoted to helping people prepare for every possible financial issue. None of them will help you evaluate your financial needs if you haven't evaluated them in the first place.

The best place to start is, well, at the beginning. Financially speaking, that means looking at a current full-color, 3-D picture of your finances: what you own, what you owe, what you've saved and if you're going in the right direction. If you don't already have one, it's shortcut time! Our Lazy Person's Guide to Budgeting will give you a decent snapshot of where you are right now.

Next it's time to pick your destination. This is going to require some time to reflect, to dream, and perhaps some wine and popcorn. (We'll provide the financial self-reflection worksheet (link to a PDF file).

This exercise requires an excursion into your future financial needs and wants -- both the 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 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?).

Next stop: Where dreams come true
Guess what? You have in your hands the beginnings of a bona fide financial plan. These aren't just goals, they're financial waypoints:

  • 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.

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).

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 referring back to it regularly to make sure you're still on track.

Lost? No problem.
If you get lost mapping out your future, stop and ask for directions. We've got a great community right here on where you can talk with others who have navigated the same terrain.

If you need to hire a professional guide, look for a fee-only financial advisor.

Fee-only advisors are paid by the hour or by the project, which means their advice is free from the conflicts of interest inherent at firms with commission-based financial pros. Plus, it's an affordable way to get help on specific issues (or even a full-blown financial plan) so you don't have to fly solo. (At The Motley Fool we've long been fans of the Garrett Planning Network – a network of fee-only advisors in every state (click here to find one near you) and have lined up a limited-time 10% discount for new Motley Fool clients. Look for the Motley Fool icon to identify participating advisors.)

As John Lennon suggested, making plans is a big part of life. And planning is important -- it helps you achieve dreams and avoid expensive distractions. But most important of all, having a plan in place frees up time and money so that you can enjoy the scenery along the way.