A financial plan is key to achieving your financial goals. As life situations change, your financial plan requires regular reviewing. Just as you undergo regular health checkups to review your health or frequently service your vehicle or electronic appliances, your financial plan also needs regular examination. Here are a few reasons why itís important to review your financial plan:
Change in financial conditions: The first reason why you should review your financial plan regularly is to reflect any change in your financial conditions ó internal or external.
Sometimes, on review, you will realise that you have not progressed much towards your goals despite a considerable time having lapsed. This requires you to change your investment plan and, sometimes, other goals as well ó for instance, you may have to retire later than you initially planned, or settle on buying a house that is lower in value than what you had planned earlier.
Change in income levels: Given the uncertain market scenario, it is possible that your income may come down or you may not get the variable pay you expected. In such a case, your financial goals may not be met as your investment levels may reduce. This calls for a review of your financial plan. Another case is when you switch jobs and receive a salary hike. This may lead to earlier realisation of financial goals and, as a result, give you flexibility to bring in additional goals. You may also find that you have not withdrawn your PF balance when you shifted jobs, which will require you to change your retirement goal funding plan.
Sudden expenses: Another reason why your financial plan can go haywire is if you have sudden emergencies for which you are not financially prepared. Maintaining a contingency fund helps in such cases. However, if you do not have a contingency fund, you will be forced to dip into your savings, which could upset your financial goals. This calls for a review and change in the financial plan.
Change in the number of dependents: When you get married or have children, your responsibilities and number of dependents increase. This could impact your cash flows and financial plan. You will have to increase your insurance cover and include your dependents in your Will. Similarly, when your children are married and not dependent on you, you should change your financial plan accordingly.
Change in goals: You will have different goals