Having the right amount of money when you need it is like a dream come true. The principles of personal finance revolve around creating and executing a financial plan tailored to an individual’s well-being. However, what works today may not align with your needs next year due to changing circumstances. This necessitates regular reviews of your financial plan, at least once a year. Here are compelling reasons why you should consider a financial plan review:
Annual salary hikes:
Salary increments are common, and as your income grows, so should your investments. While lifestyle inflation might initially lead to increased expenses, channelizing the incremental money into investments becomes crucial. Regularly reviewing your financial plan ensures that you make the most of your salary hikes.
Navigating career challenges:
The linear growth of income is history, with many individuals facing job losses, mid-career shifts, or sabbaticals. Lean periods demand a review of financial plans to adapt to changing circumstances and uncertainties in your career.
Evolving aspirations:
Financial plans are built around goals, and as aspirations grow, so does spending. Lifestyle upgrades, such as opting for a sedan over a hatchback, require adjustments in your financial plan to accommodate increased savings and channel them into investments.
Life milestones:
Events like marriage, childbirth, education expenses, and post-graduate education are significant milestones that impact your financial plan. Regular reviews are essential as your financial responsibilities extend to your spouse, children, and family.
Incremental investment for higher returns:
Aspire for more but fund it in advance by increasing your investments. If you’re using a systematic investment plan (SIP) in mutual funds, regularly increasing your SIP investment can significantly enhance your returns over time.
Home purchase and loans:
Large purchases like a home involve significant financial planning, especially if you opt for loans. Regularly reviewing your financial plan helps you account for cash flow challenges and reassess your insurance needs when taking on substantial financial commitments.
Education loans and family well-being:
Co-borrowing education loans for your children can be a financial drain if job opportunities are scarce after graduation. Periodic reviews help incorporate such situations into your financial plans, ensuring stability and preparedness.
Health insurance:
Lifestyle diseases and unexpected health conditions can have both traumatic and monetary implications. Regular financial plan reviews enable you to identify gaps and take corrective actions, such as buying adequate insurance covers for hospitalization and critical illnesses.
Coping with life-threatening diseases:
Life-threatening diseases can disrupt your financial plan. Occurrences of such conditions in the family demand a thorough review of your financial plan to ensure it remains resilient and adaptive to unforeseen challenges.
Regularly reviewing your financial plan is not just a good practice; it’s a strategic move to ensure your financial well-being aligns with your evolving needs and aspirations. Adaptability is the key to financial success, and periodic reviews empower you to make informed decisions that safeguard your financial future.
