Financial planning is the first step towards building a suitable corpus for long-term financial needs. This exercise helps in aligning your investing objectives with your financial goals. However, there is also a necessity to review a financial plan periodically. An emergency should not be the only situation that demands modification in your financial plan.
A few of the other life events that could influence your financial plan and require an appropriate review include having another child, a new assignment that is paying you more than your present job, or getting an offer to visit a foreign country. These situations could also require an alteration in financial planning.
Here’s a look at a few additional situations when an individual would be required to review their financial plan:
Mulling to opt for a large loan: In case an individual applies for a loan to purchase a house or a property, it is crucial to analyse their financial plan. An individual should check their portfolio before applying for a loan and after the equated monthly installment (EMI) initiates.
Before applying for a loan, one should examine their assets to gain a clear idea of how much one wishes to put down as a down payment. So, once the EMI begins, one should revisit one’s financial plan to do a fact check on how much they can invest for other goals, as the savings may experience a dip because of the house loan.
Change in income: Any changes in income, such as a hike in salary, a rise in company income, or a second income, to list a few, allow an individual to contribute more to their financial objectives and achieve them at a faster pace.
A hike in pay does not always mean a rise in expenses. As the job progresses, one can save more money for investment purposes, which can be effectively undertaken by reviewing the financial strategy.
Meanwhile, many individuals lose their jobs, opt for mid-career changes, and face other such situations. Financial strategies must also be evaluated accordingly during such rough patches in a career.
Change in health profile: Considering the uncertainties of life, a severe illness could manifest without any warning, leading to a chronic condition. Or there is a possibility of meeting with an unfortunate situation involving an accident, which may lead to leaving one struggling with a debilitating disability.
Such conditions or impairments could drain savings quite quickly. Additionally, they may impair an individual’s work productivity and push them to reduce their working hours. This will directly have an impact on earnings, which are most likely to dip.
It is crucial to review the financial strategy and modify the investment objective accordingly to ride out of such situations in a smooth manner as possible.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.