New Delhi. Life is never the same. Sometimes there is a change in job, sometimes income increases, and sometimes new expenses suddenly arise. In such a situation, the most pressure falls on your budget and saving plan. That’s why experts say that a financial plan is not something that can be made once and then forgotten, rather it is a process that changes along with your life. In changing circumstances, it is important to review the financial plan timely, so that the future remains secure and financial stress is reduced.
Here we are telling you about those 5 situations when you should immediately re-check your financial plan.
1. Increase or decrease in income
Our income varies from year to year. Whether the salary is increasing or decreasing, in both the situations it is very important to update the financial plan.
- When salary increases – At first glance it seems that with increase in salary the expenses also increase. This also happens in the initial years, because the lifestyle becomes expensive. Instead of spending every increasing amount, it is important to invest a part of it. If you invest part of the increased salary, you will be able to create a strong fund for the future. For example, if you increase your SIP by 10% every year, your long-term corpus grows tremendously.
- When income decreases – in circumstances like job loss, career break, loss of business, both expenditure and savings change. At such times, your primary goal is to keep the cash flow stable. Therefore, in such a situation, make a list of essential expenses and reduce non-essential expenses. Use emergency fund properly. The most important thing is to redraft your financial plan according to the new circumstances.
2. Your desires and goals may be changing
As your income increases, your desires and goals also change. Initially you may want to buy a small car, but after a few years you may think of buying a sedan or SUV or earlier you were planning to travel in India, now you want to travel abroad. Both your spending and saving are affected by such changes. Increase investment according to your new goals. Use step-up option in SIP. If a man does a SIP of Rs 1,000 and earns 12% returns in 10 years, he will make around Rs 2.21 lakh. But if he increases his SIP by 10% every year, the same amount will increase to Rs 3.26 lakh i.e. even a small increase makes a big difference.
3. Major milestones in life
Some decisions in life are so big that they completely change your budget – marriage, birth of a child, children’s education, teaching abroad, growing a family, taking responsibility of parents etc. In these incidents your financial responsibilities double-triple. Therefore, it is very important to review the financial plan. Update your insurance cover at such junctures. Convert health insurance to family floater. Plan investment for children’s education. Create or update a Will. Increase emergency fund. Without these improvements, your old plan will not be able to handle the new responsibilities.
4. Big purchase decisions and loans
Buying a home in India is often the biggest financial decision of life. Home loan EMI takes up a major portion of your budget for many years. Therefore, it is important to update the financial plan before and after buying a house or taking any big loan (like car, education or personal loan). In such a situation the insurance cover has to be increased. Long term goals have to be reshaped. If parents have taken a loan for their children’s education and the child is not able to get a job, then this loan can become a heavy burden on the family. Such risk should also be included in the plan.
5. Health risks or serious diseases
Nowadays, due to stress, bad eating habits and fast pace of life, lifestyle related diseases like diabetes, BP, heart disease, thyroid etc. are increasing rapidly. Serious diseases like cancer can also suddenly increase the financial burden. Therefore, it is important to update health insurance, critical illness cover, emergency fund etc. from time to time.
