Five situations when you should review your financial plan           

Financial planning is essential for ensuring your financial security throughout your life. Your financial plan is typically designed in such a way that you can meet your investment objectives within the timeframe you specify. Personal finance principles discuss the development and implementation of a financial plan for an individual’s financial well-being. What you plan today may not work next year if your needs change, your cash flow changes, or the environment around you changes.  

Nobody knows what will happen next in life because it is unpredictable. Changes can happen at any time and in a short amount of time. You might lose your job, get a big promotion, or meet new family members. All of these factors have an impact on your financial plan, and you must make changes to keep it relevant and effective. There are times when it is absolutely necessary to review your financial plan; failing to do so may have a negative impact on your investments, risking your financial goals.

1. Change in your financial goals- As you age and evolve, your outlook toward money changes. When you reach a certain age, you will have different goals and priorities. For example, in your twenties, you might want to save for your wedding and plan vacations. When you get older and have children, you start thinking about their education and marriage. Retirement is another goal that you should plan for from the start of your earning years.

2. Change in your financial conditions- The reason why you should regularly review your financial plan is to reflect any change, be it internal or external, in your financial conditions. For example, you could retire later than you had planned or settle for a house that is less valuable than you had anticipated. This allows you to change your investment options and strategy, as well as your other priorities.

3. Change in income-There are other major events like promotion, job change, job loss, long sabbatical, early retirement, etc., when your income might change quite drastically. Positive income changes, such as a pay raise, an increase in business income, a second income if your spouse works, and so on, allow you to contribute more to your financial goals, allowing you to achieve them sooner. An increase in pay does not always imply an increase in expenses. As your career progresses, you will save more money, which must be invested. This is best accomplished if you intend to review your financial strategy on a regular basis.

4. Change in your risk profile- Like how your priorities and goals change in life, your risk appetite and perception often change. Each of you can tolerate a certain level or degree of risk, which is referred to as your “risk appetite.” It varies depending on a variety of factors such as our age, income and expenses, past financial responsibilities, and time to achieve the desired goals.

5. Unforeseen events- If you have unforeseen expenses for which you are not financially prepared, your financial plan may go haywire. It is critical to review your financial plan on a regular basis in order to address any contingencies that may cause financial stress. These could include layoffs, medical emergencies, and unanticipated costs such as house repairs, car breakdowns, inheritances, and so on.

It is critical to remember that a financial plan necessitates ongoing monitoring. As your life circumstances change, you should review and revise your financial strategy on a regular basis. You should meet with your financial advisor on a regular basis to discuss your goals. These reviews are intended to keep you focused on your financial goals. You can adapt to changing conditions by doing this on a regular basis.