Skip to main content

Why your Financial Plan is always Work in Progress?


Ever heard someone saying, this is my last month in the Gym, after that there is no need for me to workout ever again…I will stay fit for the rest of my life without any fitness regime. No one can retain the perfect physique forever without exercise. It is always a constant effort to stay at the desired level for almost anything that you think of. You cannot be a great chef without trying out new recipes, you cannot be a great marketer without adapting to new marketing strategies, you cannot be a great fashion designer without adapting your fashion sense towards the trending styles. Leave all of this, you even cannot even think of becoming a good parent if you don’t change from old tricks to new methods for upbringing this generation kids. If you have to upgrade your act with every other thing in life, then how your investments could be any different.

The Financial Planning Process has 6 broad steps with the last one focussing on the importance of monitoring and revision of the plan at the regular intervals. Let’s discuss why is it so important to regularly monitor your Financial Plan.


Your Financial Plan is based on assumptions

Whenever your financial planner creates a financial plan for you, the planner takes data such as your income and monthly expenditure, your financial goals, your financial assets, etc. All these data points are expected to grow at an assumed rate of return to calculate the money you would require for your financial goals. Even the future inflation numbers have to be assumed. Though past data points are taken as reference points which helps a lot in achieving your goals, you cannot expect assumed calculations to hold true for all your life. Therefore, it is required that you review the calculations at least every year for your financial plan to stay true to its purpose i.e. achievement of all your financial goals.


Change in your Lifestyle

Your Lifestyle changes at every step of your life – it changes from your college days to when you start earning, it changes when you get married, it changes when you have kids, it changes when your kids start earning on their own and are no longer dependant on you. With the change in Lifestyle, your either start spending more or saving more depending upon the circumstances you are in. This changing Lifestyle has to be incorporated in your Financial Plan because it can have a huge impact on your financial goals primarily retirement planning. Hence, it is required to review your Financial Plan on regular basis to monitor the change in your lifestyle.


Change in your Financial Goals
All of us have once in a lifetime wish – it could be a luxury car, or a lavish vacation, or anything under the sun. But sometimes this financial goal/desire fades with time. Some financial goals lose their relevance with time. It is important to understand the validity and necessity of your financial goals while reviewing your financial plan. So, reviewing your financial plan is like doing a reality check on your future financial goals.


Monitoring your Investments

Markets have become very volatile in recent times. Even the Global events have an impact on the Indian stock markets which ultimately affects your portfolio. To keep a check that whether the funds you have invested in are giving you desired returns or not, it is very important to monitor their performance on regular basis. Since Investment Planning is a part of financial planning, your financial planner can review your investments along with the Financial Plan review. It can help you reallocate your portfolio towards performing funds and help you achieve your financial goals within desired timelines.


Most of the times, the query which we receive on out DIY online financial planning portal www.theriteplan.com is – for how long should we stick to this financial plan? Is it good enough to continue for another 5 years? But the answer is NO. You have to monitor your Financial Plan and investments on regular basis. By regular, I don’t mean every week or every month – it should be at least once a year or depending upon your life situations – lifestyle changes, salary hike, change in family structure, job relocation, etc. Basically, your financial plan has to be reviewed if there is any change in your life which affects the monetary aspect of your life as well. Only then you can expect your Financial Plan to work towards the achievement of your Financial Goals.



Charu Hastir, CFPCM is the founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

Comments

Popular posts from this blog

What is Financial Planning?

What is Financial Planning?

One of my friends came to my place for a cup of coffee and while chatting over how life is going, where is it heading, he told me that his elder daughter wishes to go abroad for her graduation. And when I asked him that how is he planning to fulfill her wish, he just laughed it off saying that her graduation is 10 years away, why should he get worried about it now. This attitude of his made me think about the importance of planning ahead of our financial goals and how many of us are conveniently ignoring this very fact.
The Term Financial Planning defines itself as planning your finances well. It is a perfect marriage between your finances and your life goals. Efficiently managing your expenses and savings in order to achieve your future goals is nothing but Financial Planning. What are future goals? They differ from person to person. Some might want to take a luxurious trip abroad and some might wish for own home. But there are few goals which might be com…

5 ways to trick yourself into Saving Money

Saving money has always been a daunting task and most of us fail miserably at it. One can relate more to this after seeing the average savings contribution. Lavish vacation or a fancy car can always distract us from our long-term goal of owning a home. It was easier in the earlier times when the life expectancy was lower and there was no need to plan for the long term. But now with increasing life expectancy and rise in the nuclear family culture, it has become more important for us to save for ourselves rather than depending on our Children or the Government.
When it comes to money management, it is indeed difficult to infuse the savings habit if we are a firm believer of You Live Only Once ideology. Nevertheless, savings is important even if your mind stays more on spending rather than putting the money away for your goals. But as they say there is a solution to every problem. All you have to do is to trick your mind into savings. Here are a few tricks to nudge yourself towards th…

Should you start Big when it comes to your investments?

The other day I met a Startup entrepreneur who was just talking about the importance of starting and that also starting big. As per him, a small game or investment had more chances of failure in comparison to playing big. I could understand being an entrepreneur myself that he is only thinking about launching big obviously with the backing of some deep pocketed private equity firm. But hey, I have also seen start ups who started small and made it big eventually slowly and steadily step by step. Same is the case when it comes to investments. Should we start only when we have a big chunk sitting in our bank account or should we start small in systematic manner slowly accumulating our wealth. Let’s hear out some benefits of investing regularly rather than waiting to strike gold with the larger chunk of money.
1.Less fear of markets If you are a regular investor who invest systematically, you don’t need to time the markets as your investments are going to the markets in regular manner wi…