How Often Should You Review Your Family Financial Plan?

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A family financial plan not only helps you define your priorities but also allows you to set goals and build wealth. It involves creating a budget, making investments, planning for retirement and so on. The plan also serves as a road map to secure your family’s financial future. However, sticking to your family financial plan may not always be advisable if you don’t update it regularly.

This is because your financial demands fluctuate during your life. Furthermore, market circumstances are variable. Therefore, you must have a money management strategy in place to limit risk in such turbulent times. As a result, you should never overlook this component and regularly revisit your family financial planning strategy.

In what situations should you review your family financial plan?

Change in income
Your income can fluctuate depending on the nature of your work. For example, a salaried person may observe a change during a promotion, job change, job loss, sabbatical leave, etc. On the other hand, for a businessperson, the profits may see a change during inflation, variations in demand, recession, and more. Under such circumstances, your family financial plan would need a close review, especially if there is only one breadwinner.
Occurrence of a life event
Life event refers to a significant event in someone’s life. This could be marriage, childbirth, illness, bereavement, buying a new home, and so on. These pivot points urge you to alter your priorities to accommodate the additional financial responsibility. That’s when you would want to review your family financial plan.
Considering a big loan
When you’re facing major financial commitments, like buying a new home, it’s essential to review your family financial plan. Home purchases involve significant costs, such as a large down payment and ongoing EMIs, which can impact your overall financial health. A thorough review helps you assess whether your current resources, savings and income are sufficient to handle these expenses while still meeting other financial goals.
Change in risk appetite
As you grow older, your ability to take risks changes. For instance, a young person can make aggressive investment choices. This could be either by investment in financial markets or bonds, mutual funds, etc. On the other hand, an elder person is more likely to invest in debt instruments for saving the principal. Depending on the number of family members, it is critical to review your financial plan as per individual risk appetite. Therefore, a healthy balance between high and low risk investments should be created to secure the family’s future.

Approaching wealth at different life stages

Each life stage needs a different approach to wealth. Below are some steps to help you stay prepared and reach your financial goals as they change. They will make you better equipped to handle your financial needs:

Wealth initiation: This stage marks the start of your career and lays the groundwork for your financial future. These years are crucial for building a solid financial foundation, setting you up for long-term success.  
Wealth generation: Once you have a stable income, your attention needs to shift to saving. The focus must be to grow your financial reserve for a child’s education or retirement.
Wealth attainment: It revolves around retirement. This is when you can reap the benefits of your years of hard work and planning.

What are the benefits of reviewing your family financial plan?

Reviewing a financial plan at regular periods can assist you in the following ways:

Adapt to changes: Whether you are transitioning from newlyweds to expecting parents or from parenthood to retirement, regularly reviewing your family financial plan can help you swiftly align with your current situation.
Identify risks and opportunities: The financial landscape is quite dynamic. It evolves at a soaring pace, and new opportunities and risks emerge over time. If you regularly review your family financial plan, you can identify them sooner. In this way, you can maximise your returns by investing in a growing market or reduce risk by diversifying your investment portfolio.
Increases the likelihood of achieving goals: Creating a family financial plan ensures stability and success. It also helps you address any deviations from goals, stay on track, and achieve a secure and prosperous financial future.
Reorganise financial goals: Over time, your priorities might shift. For instance, you might initially focus on saving for a house but later prioritise funding your child’s education. Reviewing your financial plan allows you to reassess and reorganise your goals based on their importance.

Apply for a separate savings account for handling family expenses

To manage your family expenses in a more streamlined manner, consider applying for a zero balance savings account with Kotak811. Use this separate account to track household expenses under one roof. You can identify avoidable expenses, unexpected expenses, and even impulsive spends. This way, you can have a better hold on your finances and protect your family’s future.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.