7 Reasons To Update Your Financial Plan
Have you developed a comprehensive financial plan? Even if you have, it may need additional attention. Consider these seven reasons to revisit your plan.
1. Keep on track for meeting goals.Kristen Jankowski, owner of Financial Planning Outsource Services in Florham Park, N.J., specializes in preparing financial plans for financial advisors. Jankowski says that while having a plan is an important first step, success will depend on staying focused on what’s needed to meet the plan’s objectives. “A review shows how you’re progressing and what your next action items need to be,” she says.
2. Reflect major “life events.”If something significant has happened—you’ve gotten married or divorced or changed jobs, for example, or you have a new child or grandchild—you may want to consider changes to your financial plan. You’ll also need to think about revising beneficiary designations for retirement plans, IRAs, and insurance policies.
3. Take the latest tax legislation into account. State and federal tax laws are in constant flux, and it’s crucial that your plan reflect recent changes—such as the new estate tax law that provides a larger individual exemption and could require adjustments in the language of your will or any trusts you may have.
4. Reallocate or rebalance your portfolio. The stock market continues to be volatile, and a mix of investments that seemed comfortable before may not fit your current needs and risk tolerance. And even if you don’t change your target allocations, periodic rebalancing will be required to keep assets at the appropriate percentages. If stocks have advanced more quickly than bonds have, for example, you may need to sell equities and purchase more bonds.
5. Tighten your budget due to a job loss. Not having your normal income will throw any plan out of whack. You’ll likely need to reexamine your priorities and look for ways to cut back on spending, particularly for major purchases that you had planned to make. Unexpected medical expenses could also require belt-tightening.
6. Utilize new sources of income. On the other hand, if you’ve landed a high-paying job, sold a business, or come into an inheritance, you may be able to save more for retirement or your children’s education or set aside cash for a memorable vacation.
7. Review options as retirement nears. If you’re retiring soon, your plan may require a complete overhaul. For instance, if you hope to sustain your current lifestyle on less income, you might need to adjust your spending habits or rethink your goals. Working longer or moving to a smaller home could also have an impact.
How often should you review your plan? At least once a year, suggests Jankowski. Please call for an appointment.
This article was written by a professional financial journalist for Legend Financial Advisors, Inc. and is not intended as legal or investment advice.