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Reviewing Your Financial Plan: 20 Circumstances That May Need A Review

Today being World Financial Planning Day, now is the time to review your financial plan. A financial plan is a living, fluid document that needs to be flexible enough to change and adapt to your personal and financial circumstances. While it’s always advisable to review your financial plan at least once a year, there are other circumstances that may require a more frequent review of your plan. In this article, we explore 20 life events that may cause you to revisit your financial plan:

A change in your income: Your income is the foundation of your financial planning because your goals can only be achieved by allocating your income appropriately. If your income changes in any way, it’s always a good idea to revisit your financial plan. An increase in income may allow you to meet some of your financial goals sooner or start funneling funds to a goal you haven’t started funding yet. This may mean that you can devote a larger amount to your retirement pension or afford a more comprehensive medical assistance plan. The danger of earning more is allowing a lifestyle drift – buying more home, vehicle, or physical assets than you actually need – without first determining how your extra income can be used to fortify your future. financial.

Purchase of a fixed asset: If you’ve bought a fixed property, whether it’s funded or not, it’s always a good idea to revisit your financial plan. Keep in mind that acquiring real estate may require updating your will. Additionally, if you have taken out a mortgage, you may need to adjust your life coverage to make sure there is no shortfall in the event of death or disability. Additionally, there are additional monthly costs associated with owning a property, and it is always advisable to adjust your monthly budget to account for these costs.

Receive an inheritance: Receiving an inheritance will likely mean that you will have to make investment decisions regarding the inherited funds. This is also a good time to revisit your goals, keeping in mind that a significant inheritance can give you the financial freedom to plan a different path and pursue different lifestyle goals.

Job change: Switching from one employer to another can lead to a number of discussions about financial planning, especially when it comes to funding your group retirement and covering risks. As a first step, you may need to make investment and / or withdrawal decisions regarding your group retirement fund and the various tax implications that apply to it. Second, you’ll need to understand how well your new group life and disability coverage meets your needs and whether additional solutions need to be put in place.

Entrenchment: Getting fired will undoubtedly come with a number of key decisions that need to be made, and it’s almost always advisable to seek financial planning advice – preferably at the start of firing negotiations. You’ll need to make critical decisions about your severance pay and severance pay, while making sure you understand the tax implications of each decision. In addition, the loss of your group risk coverage may cause you to have to take out coverage on a personal basis in order to ensure adequate protection. Depending on the decisions you make regarding your termination plan, you may need to make investment decisions and update your retirement plan accordingly.

Business creation : Deciding to start a business usually means seeking start-up capital, withdrawing from investments to finance the business, replacing group risk coverage with personal insurance, tightening your budget, and preparing business cash flow projections for the future. support of its business plan. You may even need to realize an asset to help fund your business idea or take out a loan to help finance the start-up, in which case a financial planning review is a must.

Consider retirement: Retirement is an important step to take, and it is always advisable to seek financial advice several years before formal retirement. There are a number of crucial decisions to be made in the years leading up to retirement, so avoid waiting until after you retire for professional advice. In the years leading up to your retirement, you’ll want to make sure that you are adequately funded and invested appropriately for retirement, and that your post-retirement goals are realistic and achievable. If there are retirement funding anomalies or deficits, at least you give yourself time to change course and update your retirement plan.

Addition of financial dependents: Any new dependents, such as the birth or adoption of a child, or the financial support of an aging parent, may require you to reconsider your planning. The arrival of a child will require updating your will and estate plan and reviewing your life coverage to ensure your child is well provided for. You will also need to review your budget, start funding education, and incorporate the costs of raising a child into your financial plan. You may also need to change the beneficiary designations on your policies and investments.

Consider emigration: Before making the decision to migrate, it is advisable to review your plan to make sure that you fully understand the financial impact of such a decision. No matter where you intend to settle, emigration is an extremely expensive business that requires careful planning. Moving your assets abroad is a complex and time-consuming process, and it is advisable to plan your emigration with an experienced advisor.

Modification of financial objectives: The financial plan you have in place should be fully aligned with your stated goals and objectives – and any changes to your goals should require review. For example, if one of your goals were to fund a trip abroad in five years, your investments would be focused on a five-year investment horizon. If circumstances change and a trip abroad is no longer in sight, you will need to redefine your goals and adjust your investments accordingly.

Wedding: Marriage almost always requires a consideration of financial planning, as there are significant financial implications for both couples, regardless of which matrimonial regime you choose to implement. Not only do each of you want to update their wills, but chances are you will need to develop a joint household budget and update your risk coverage to protect each other in the event of a disaster. This is also a great time to embark on a common goal setting exercise and begin the process of joint financial planning.

Divorced: Likewise, a financial planning exam is almost always required in the event of a divorce, although it is best to seek advice from your financial planner before signing a settlement agreement. Depending on how your assets will be divided in the event of a divorce, a number of key decisions will need to be made, many of which have tax and CGT implications.

Diagnosis of serious illness or disability: A diagnosis of disability or critical illness is likely to impact your income and future earning potential, which, in turn, will require a fully updated financial plan. If you have severe health and / or disability coverage, your advisor should be able to walk you through the claims process and ensure that all payments received are invested appropriately. Depending on the diagnosis, you may also want to make sure that your will is updated and that you sign a living will or an advance health care directive.

Retirement: Formal retirement from your retirement funds requires critical decisions about your investments, purchasing an appropriate life annuity, choosing an appropriate withdrawal rate, possibly downscaling your primary residence and reinvesting capital, preparing a post-retirement budget and determining future cash flow throughout your retirement years, and this process is best managed with the guidance of an expert in retirement planning.

To make donations : If you plan to help your adult children financially, give financial gifts to your grandchildren, or donate to your charity, make sure these intentions are included in your financial plan so that you don’t do not have to pay tax on donations. Make sure your financial plan is updated to include your donation or money donation intentions and that it is supported by a tax-efficient schedule.

Purchase of offshore assets: If you intend to buy assets abroad, talk to your advisor about the financial implications of this transaction. Depending on the jurisdiction in which you intend to purchase your asset and the nature of the asset, you may need to have a foreign will drawn up to deal with those assets. It’s also important to understand the tax implications of buying and selling offshore assets, and how this will affect your estate planning.

Divestment: Divesting any investment will have tax implications that you should be aware of before making a transaction to avoid paying unnecessary taxes. Depending on whether you invest in stocks, bonds, real estate, or cash, it is important to understand the tax implications of doing so before you divest.

Setting up a trust: If you intend to set up a trust to house certain assets for the benefit of your children or other beneficiaries, be sure to review your financial plan, as moving assets into a trust will significantly affect your planning, especially your estate plan. It is important to be clear about your intentions to create a trust, the implications of moving assets into a trust, what it means to lose control over those assets, and how the trust should be structured to best achieve your goals.

Death of a spouse: Losing a spouse will require a complete overhaul of your financial plan. Ranked among the most traumatic events in life, the financial implications of losing a spouse cannot be understated. Every element of your financial planning, including income, expenses, budgeting, money management, risk coverage, retirement funding and estate planning, will be affected by the death of your spouse, and the sooner you revise your financial plan, the better.

Market fluctuations: Fluctuations in the market can leave long-term investors feeling jittery and nervous and can cause them to make instinctive decisions about their investments. If the investment markets are particularly volatile and you need to understand the implications for your long-term investments, allow time to meet with your advisor before making rash decisions. Short-term market fluctuations are normal, and sometimes you just need the reassurance of an experienced investment advisor to refocus on your long-term goals.


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Louis R. Hancock

The author Louis R. Hancock

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