There are also some fundamental reasons to review the financial plan apart from the yearly practice -
There can be changes in income or wealth due to multiple reasons -
- Job change or promotion
- Moving abroad
- Starting your own business
- Loss of job or failure in business
- Inheritance or receipt of a big bonus
2) Change in Civil Status
Major personal events like marriage or divorce bring about alterations in your financial life. For example,
If you were financially dependent on your spouse, your finances would have to be managed differently after a divorce.
If you got married recently, decide if you want to keep your financial lives separate. If there will overlap, there can be changes in savings, expenses, and income. In the future, you might consider taking a home loan. These aspects need to be incorporated into the plan.
3) Change in Personal Situation - Parenthood or Retirement
When you become a parent, you are financially responsible for one more person. You will want to fund higher education for your child. Your financial goals might change. Newer financial responsibilities and changed financial goals have to be incorporated into the plan. Retirement could mean moving to a different place, reduced income, etc. The financial plan should be tweaked to consider savings, changes in asset allocation, etc.
4) Changes in Lifestyle/Financial Perspective
Sandeep was working long hours on weekdays as well as weekends. He attended a Vipassana course and his perspective changed. He wanted to “quit the rat race”. But he has to revisit his financial plan and determine how he can manage his lifestyle with lower income or how he will repay loans before taking a decision. Many people change their life goals over time. These have to be financially planned for.
5) Economic Conditions
Economic conditions and markets change over time. You should revisit your financial plan to check if you need to make any changes to the investment portfolio. If you or your financial planner think there can be significant long-term effects, you might want to manage your emergency fund and budget as well.
A periodic review of your financial plan is a check on your financial health. Re-examine your financial plan so that it is current and is aligned with your goals. It will also help in growing your net worth.