• How Often Should You Review Your Financial Plan

    by  • September 20, 2013 • Retirement Planning • 0 Comments

    Financial PlanYou care about your health. Very much like the annual physical checkup that your doctor recommends, your trusted financial advisor recommends a regular examination of your financial plan. After all, good health, be it physical or financial, is extremely important.

    Your financial plan must be based on the current standard of living and should also consider your assets and liabilities. A yearly review and (if required) a change of financial plan is essential to assess the progress made towards achieving the financial goals.

    Here is what you should look out for when you review your financial plan:

    Income and expenses: It is very important to understand and monitor your cash flows, that is, from where the cash comes in and where it gets expended to. With regards to income you should be aware of the length a particular income stream is supposed to last. It’s important to differentiate between one-time, temporary and recurring income. Prepare a budget based on past financials and predict the probable future income.

    It is also very important to factor in inflation as part of the financial plan. If your income exceeds your expenses on a consistent basis; it could be a sign that the financial plan is working for you. This means it is time to revisit the plan.

    Standard of living: This affects current expenses and savings and determines the kind of funds that you will need beyond the earning years.

    Care should be taken to ensure that the standard of living is consistent with the income earned and that sufficient funds are set aside to be able to maintain the same standard of living in golden years. This is particularly important because income levels will fall post-retirement.

    Goals: A good financial plan lists down the long term and short term goals and this should help you understand and predict the future expenditures better. You should review goals each year and check whether these have been achieved, the progress towards achieving these and any changes that are needed to achieve these goals.

    For example, have an emergency fund for unexpected expenses, or for a child’s education, marriage, and so on.

    Again, some goals could be for post-retirement period, such as travelling abroad and special planning should be made for these.

    Risk level: You should always keep in mind that insurance is critical and ensure sufficient insurance coverage. It is advisable to regularly check the coverage and to estimate current and future insurance needs – be it for vehicle, home, life or medical, and then consider if there is sufficient insurance cover or if you need to increase/ change the coverage. For instance, if you take a life insurance policy before marriage, the sum assured may be less.

    It is prudent to increase the sum assured after marriage and when you have children. This is especially important if you are the sole earning member in the family.

    You should make certain that the financial plan does not remain stagnant and the net worth keeps growing. Net worth is the measure of financial health (that is total assets less total liabilities).

    You should ensure that your financial plan is up to date, and based on your financial goals – this will safeguard a growing net worth.

    Always ensure that the financial plan is flexible. A flexible financial plan is necessary since the future is unpredictable and priorities change every year. A financial plan health check is a continuous process and needs to be updated after every stage or any new circumstance in your life.

    Keep in mind

    • A good financial plan should be made and reviewed regularly (at least once a year)
    • Take into account financial goals, insurance coverage, standard of living, income levels
    • Review your plan keeping inflation in mind
    • Keep your financial plan flexible since priorities could change
    • Your financial plan should help grow your net worth

    What do you do to maintain your financial health? How often do you review your financial plan? Feel free to share in the comments section below.




    Tim Mobley is a Louisiana licensed professional who has over twenty years of experience serving the community. He is passionate about working with clients and his goal is to educate and inform them so they feel confident in the decisions that will shape their future. Whether you are concerned about getting out of debt, outliving your retirement, paying too much tax on Social Security benefits, or keeping your money safe in a changing global economy, Tim is a trusted source. His business and personal focus is to coordinate your investment objectives from a tax planning perspective.


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