A long-term financial plan is a guide for the future. It sets up and tracks progress toward your financial goals and manages your overall finances. But things change over time, and one needs to track how such changes may affect their financial journey. That means reviewing your long-term financial plan. Let’s take a look at some of these signs and what you can do to realign your plan.
Major Life Events Have Occurred
Every time a significant life event happens, you need to review your financial plan. Marriage and having children are prime examples, as you will need to update beneficiary designations and rebalance the household budget to more family-oriented financial goals such as saving for education or reviewing life insurance. It’s crucial to adjust your plan to reflect these new circumstances so that you’d be able to meet new and old future milestones.
Your Financial Goals Have Evolved
The financial goals that are most important to you likely shift over time as you enter various life stages. Early in your life, you’re probably most interested in saving for an emergency fund and saving for a house down payment. On the other hand, if you’re entering deep within your 30s or 40s, your goals may shift well to saving for retirement, investing in assets, or building a college fund for your children.
On a related note, if your financial objectives have changed, so should your strategy. This will help you keep up with your goals while also adjusting to meet new objectives.
You’re Not Achieving Important Financial Goals
If you’re not hitting the financial goals you’ve set, such as saving for retirement, paying off debts, or meeting your investment targets, it means that your financial plan isn’t working well for you.
Sometimes, life gets in the way. Out of the blue, some unwanted expenses arise, while lifestyle inflation or terrible spending habits hold back progress on your goals. You have consistently been failing your targets; hence, it’s time to re-evaluate your plan. Is it realistic? Have you saved and invested enough? Or do you need to cut your spending or revisit the strategy to take control of debt?
Draw up and review your financial plan; mistakes can be corrected, and new strategies can be put in place.
You’ve Accumulated Debt You Can’t Manage
If you find yourself unable to keep up with payments to your Ang Mo Kio Money Lender or other lenders, it’s a sure sign that your financial plan needs an update. Debt can seriously affect your financial well-being, so it must be managed effectively. If you use credit cards, go to college, or own a home, a debt repayment strategy should form part of the overall strategy that falls into place.
In the case of a high or unmanageable debt burden, you might need to consolidate some debts, refinance your loans, or alter your payment schedule, which can make the repayment schedule more realistic and allow you to take back control of your finances.
Debt management should not be limited to just paying off debt. It should be a medium-term plan concerning securing a sound financial future.
You Are Not Maximizing on Tax Savings
Tax planning forms a basic component of any long-term financial strategy. Here in Singapore, you can claim a myriad of tax reliefs and exemptions as a parent, CPF contributions, and many more. If you are not doing so, you will miss out on the chance to optimize your current financial situation.
As your life and income evolve, so does your need to reassess your tax planning strategy. Are you maximizing all the reliefs and available deductions? Discuss tax-saving strategies with a tax advisor and ensure that they find their way into your financial plan.
You’re Experiencing Increased Expenses
Whether it’s a new child, the need to care for aging parents, general cost-of-living increases, such as rising healthcare costs, education expenses, or home maintenance, strains to your finances can hamper you from achieving financial goals.
If you are starting to notice that you’re spending more, it is time to recreate your financial plan. Should you tone down on discretionary spending to establish a balance with your budget? Unless you regularly review your expenses and make the necessary adjustments, life’s uncertainties may always hinder the execution of your financial plan.
Conclusion
A very important way of staying ahead of your financial goals in life is updating your long-term financial plan every few years. After all, your financial situation and aims could change due to shifts in your income and expenses, major life events, or the occurrence of unexpected situations. And the sooner you change your plan, the sooner you will regain control over your life and help ensure a secure financial future for yourself.
