So you have a good pension, your money is making you a good return on investment and you have protection insurance in place. You might think your financial planning is done. Sorry to say, it isn’t! And here’s why.
Financial planning is an ongoing process
If you have all the building blocks of a sound financial plan in place – emergency fund, pension, investments, life and health insurance, education fee plan etc – you are undoubtedly in better shape than most. Give yourself a pat on the back.
But don’t be lulled into a false sense of security. Unfortunately, financial planning is never done. It is a dynamic process that evolves over time. A well-crafted financial plan isn’t a ‘do it and cross it off the list’ kind of task. Life changes, and your plan will need to change with it.
Of course, big life events will require a major re-evaluation, but even without the births, marriages, deaths and divorces, you should be constantly monitoring and evaluating your plan to ensure it remains relevant and effective.
When should I review my financial planning?
These are the key catalysts that indicate it’s time to review your financial plan:
- Major life events
If you get married, enter into a civil partnership or get divorced, this will inevitably affect your financial goals, budget, insurance needs and estate planning. Having a child will need major adjustments in saving, life insurance and other insurance coverage, and you might want to consider an education plan. A close family member dying will raise estate planning and inheritance issues while a major career change can seriously impact income, retirement contributions and investment strategies.
Whenever you experience any of these major life events, make an appointment with your financial adviser to discuss what you need to do to update your financial plan.
- Financial milestones
Major purchases such as buying a home, and other significant investments like starting a business will alter your financial landscape and should trigger a review. Be aware too of how debt repayments and significant loans will influence cash flow and savings strategies. Once retirement is within sight, you’ll need to seriously rehaul your plan in order to work out adjustments to your savings and withdrawal strategies. Don’t tackle this without professional advice because a mistake could cost you dearly.
- Changes to the economic landscape
When financial markets get volatile, inflation soars or interest rates fluctuate, canny investors will seek to understand how changing market conditions might affect their investments and risk tolerance. They understand that it may be necessary to rebalance a portfolio.
When the economic landscape changes significantly, you’d be wise to schedule a review with your financial adviser to see if your financial plan remains fit for purpose.
- Tax law adjustments
Updates in tax legislation can massively impact retirement accounts, estate planning and investment decisions. For example, let’s say the government announces a 25% reduction in the annual allowance for pension contributions. Those making maximum contributions will need to make changes to avoid potential tax penalties.
One of the benefits of working with a well-respected financial advisory firm is that they will keep abreast of changes and let you know when you need to take action.
- Changing personal goals
Life’s goalposts are constantly shifting. After 20 years building a career, you may decide you want to set up a business, or an inheritance may mean you can afford to retire early. These decisions will warrant adjustments in savings, investments and retirement strategies. Talking these through with your financial adviser and using a cashflow analysis can help you visualise the long-term impact of these big decision.
- Annual reviews
Even in the absence of significant life changes, we recommend at least an annual review of your financial plan to ensure it adapts to any subtle changes and stays aligned with your goals.
By staying proactive and responding to life changes and economic shifts you’ll ensure that your financial plan remains relevant. A financial planner can provide valuable insights and guidance to navigate any changes effectively, maintaining your financial stability and protecting you and your family, whatever life throws your way.
If you want help from a professional to review your financial plan, look no further. Infinity has offices across Asia and can put you in touch with a financial adviser in your region.
A leading provider of expat financial services and wealth management services across Asia.
