The Purpose of Reviewing Your Progress Reevaluating and Revising Your Plan (Step 5) Is to
Emergencies are non the merely events that affect your financial plans and require you to modify them. Life itself keeps changing; so, naturally, your financial program should change also. For instance, permit's suppose you have a very good fiscal plan and are following it carefully. What happens if:
- Y'all accept some other kid
- You go a task that pays y'all much more than you were earning before
- You lot get an offer to go abroad
- Your wife takes upwards a hobby and then makes it into a profession that pays her very well
There are many other happy events in life that affect your fiscal plans and crave you to modify them. Following a financial program should be similar maintaining your business firm...don't wait till y'all have to undertake big calibration repairs, go along making pocket-size modifications from time to time so that information technology is e'er in good shape.
Review of a financial plan
Changing your fiscal plan too oftentimes volition exist as bad equally not having a financial program at all. Then once more, there is no ideal fixed period after which reviewing a programme tin exist recommended. Information technology is up to you to decide on how often to review the plan – every vi months or every year or every ii years or every 5 years.
The factors that volition guide you regarding how often yous should review your plan are
- Financial products - The type of financial products that you have invested in. If there are products that are maturing at short intervals, you may have to review your plan more than often.
- Goals - The types of goals that you accept set up. If you have many brusk term goals, as each goal is accomplished, you need to review your fiscal plan.
- Personal factors – If the number or your dependents increases or decreases, you need to review your plan. If your income increases or decreases, y'all need to review your programme...and and then on.
Reviewing your financial plan involves
- Deciding if all the goals that you have set are still relevant –
- Deciding if the time frames that you set up for the goals are even so the same as y'all had previously decided – Will your child nevertheless be getting married at the historic period of around 25, equally yous had planned or does information technology await like she may marry earlier or later.
- Are the financial instruments that yous chose to meet your goals going as per plan? This is more the case for investments in unpredictable investments like shares or equity mutual funds. In the instance of fixed income investments, you know for how long you are investing and what you volition get. Just in the case of shares, you may have expected them to do well and they don't or they may out-perform your expectations. You demand to run across how these instruments are functioning as per your expectations.
Reconstructing the plan
The whole idea of reviewing your financial plan is to reconstruct it, if necessary. If you are not comfortable with your financial situation after review and you lot feel your financial programme is non taking you closer towards your goals...you lot need to modify information technology. Modifying the programme involves:
- Deleting goals that you take already achieved or do not wish to accomplish anymore from your plan. It also involves adding fresh goals to it.
- Irresolute the time frames that you set for the goals, if necessary. Coming dorsum to our example: If your child is planning to get married next year instead of iv years from now, you will have to rearrange your finances to arrange for the amount that y'all originally planned to collect. Alternatively, if nothing else is possible, you may have to lower the amount that you had originally planned to spend on the hymeneals.
- Investing and disinvesting in financial instruments if necessary. Suppose you have planned to retire at the age of 60 years. As per your fiscal plan, you had been investing in stocks and y'all had decided to gradually have money out of the stock marketplace from the age of 55 years onwards and put information technology in fixed income instruments. This was just to ensure that your money would be safety there. If you take reached the age of 53 years and are very convinced that the stock markets are going to be downwardly for the side by side 5 years, you lot may commencement disinvesting from stocks right away. You may also feel that since involvement rates are loftier at present, you tin can shift a bulk of the coin that yous have collected in shares into fixed deposits to benefit from safety and loftier involvement income.
Restructuring your financial programme is a crucial practice. Nevertheless, it should exist undertaken only if the fiscal plan absolutely needs to exist restructured. Unnecessary interference with the fiscal program will spoil any long term results that a financial programme tin deliver.
Source: Portal Content Team
Source: https://vikaspedia.in/social-welfare/financial-inclusion/financial-literacy/mastering-personal-finance/review-and-revising