Why and When You Should Review Your Financial Plan

The financial plan includes financial goals or strategy that define aspirations and a systematic strategy to achieve them.

Having enough funds at the right time for what you wish to do is like a dream coming to reality. The principles of personal finance talk about creating and executing a financial plan for a person’s financial well-being.

But what you plan today or dream today may not always work next year as your needs may change, your cash flow changes, and sometimes the circumstances around you also changes.

This requires revision of your financial plans at regular intervals of time – lets say, at least once a year. Below given are some of the reasons why you should consider revising your financial plan:

Lifestyle Illnesses and Life-threatening Diseases

In the pursuit of earning more and having more fun, lifestyle diseases and health conditions visit us. Although many preventive measures are available, the likelihood of them occurring cannot be denied.

They not only lead to great injuries, but also to monetary consequences. It is better to review your financial plan and buy adequate insurance that pays for hospitalization, critical illness.

Life-threatening illnesses can turn a financial plan on its head. The occurrence of one such condition in the family requires a revision of the financial plan.

Large Purchases and Loans

Buying a house is usually a major purchase for most Indians. Given the high real estate prices, many prefer to take out loans. Home loans create a big cash flow problem financially over a long period of time.

This should be taken into account when reviewing your financial plan. You should also review your life insurance coverage when you go for large loans.

Education loans jointly taken by parents for their children’s higher education loans also act as a drain if the child cannot find a job after education.

However, loans must be repaid. Such situations need to be foreseen in the financial plans through periodic reviews.

Significant Events in Life

Getting married, having a baby, educating children and graduating, getting married and so on are some of the key milestones in the lives of many of us.

All such events require a revision of your financial plan, because then you are planning not only yourself. You must plan for your spouse, your children, your family.

In addition, it is not only about investments. This also applies to your insurance needs and the need to secure your investment by making a will.

An analysis of the financial plan helps to identify gaps, if any, and take steps to address them. For example, if you’ve bought private health insurance on a budget, it’s time to purchase larger family float insurance if you’re getting married.

Change in Income

Pay increases is one of the major event happens every year in most employment contracts. An increase in wages does not have to lead to an increase in expenses.

Although in the early years this may be the case as lifestyle inflation catches up. As you keep on to grow, more of the extra money you earn is saved. This needs to be channeled into investment.

This is best done if you are about to revise your financial goal.

Linear growth in the income of employees is a thing of the past. Many have lost their jobs, mid-career shifts and sabbaticals. In such difficult times, it is also necessary to revise financial plans.

Are You Striving for More?

The financial planning includes financial goals that define the aspirations and proper strategy to achieve them. Call it peer pressure or just high aspirations, people usually end up spending more and more.

For instance, you can plan to buy a SUV and start saving for a down payment. But as his income grows, he may prefer to buy small segment car then SUV.

This also means that a higher income has led to a better lifestyle, and therefore it is required that more savings needs to be channeled into investments.

There is nothing wrong with aiming for more, as long as you are ready to fund it up front by growing your investment.

If you are willing investing in mutual funds using a systematic investment plan which is called SIP, then it is best to shoot up your SIP investment at regular intervals.