Financial plans are like road maps that guide you toward your long-term goals. But just like any map, if you don’t keep track of your progress and adjust for unexpected detours, you might not reach your destination as smoothly as you hoped. Reassessing your financial plan regularly ensures that your goals remain aligned with your life circumstances and that you’re staying on track to achieve them. While most experts recommend revisiting your plan once a year, there are also other key moments when it’s a good idea to evaluate your financial situation.
In this article, we’ll dive into why it’s essential to periodically review your financial plan and when the best times are to make adjustments. Whether you’re working on credit card forgiveness or planning for a big life change, this guide will help you understand how and when to revisit your finances to keep everything running smoothly.
Why You Should Revisit Your Financial Plan Regularly
Your financial plan is an essential tool for staying on track with savings, debt repayment, investments, and long-term goals. Without a plan, it’s easy to fall into unhealthy spending habits or put off important financial decisions. Regularly revisiting your plan allows you to stay focused on what’s important, make necessary adjustments, and ensure that you’re on the right path.
One key reason to revisit your plan is to see if your goals are still relevant. As life changes, so can your financial needs. What worked for you in your 20s may no longer be a priority when you’re in your 40s, for example. Reviewing your plan ensures that your financial goals match your current situation.
When to Revisit Your Financial Plan
Here are a few key moments when it’s essential to revisit your financial plan:
1. After a Major Life Event
Life events like marriage, the birth of a child, buying a home, or changing jobs can significantly impact your financial situation. After any major life change, it’s essential to revisit your financial plan to ensure that your goals are updated to reflect your new circumstances. For example, if you’ve recently gotten married, your income, expenses, and tax situation might change, and you’ll need to adjust your budget and savings goals accordingly.
Similarly, if you’ve experienced a major life loss, like a job layoff or health scare, you may need to revisit your plan to reassess how you allocate resources and manage debt. Revisiting your financial plan after such events can help you adjust for new realities and prevent you from feeling overwhelmed by changes in your financial landscape.
2. Annually
Most experts recommend revisiting your financial plan at least once a year. This gives you time to assess how your financial situation has evolved over the past 12 months, including any changes in income, spending habits, and savings. A yearly review helps you spot patterns in your spending and sales and determine if your financial goals are still relevant.
For instance, maybe last year’s goal was to save for a vacation, but this year you realize that you need to focus more on paying off credit card debt. A yearly review gives you the chance to reset your priorities, make any necessary adjustments, and set new goals for the coming year.
During this annual review, you can also evaluate your progress in achieving previous goals. If you didn’t meet your goals, you can figure out why and adjust your plan accordingly. Additionally, you’ll want to check on your savings, investments, retirement accounts, and any major debts, like student loans or mortgages, to see if they’re still in line with your expectations.
3. When You Experience Financial Stress
If you’re feeling overwhelmed by debt, financial uncertainty, or unexpected expenses, it’s time to revisit your financial plan. Stressful situations can cloud your judgment and make it difficult to see your options clearly. By taking a step back and reassessing your finances, you can make more informed decisions and potentially come up with a clearer, more realistic strategy.
For example, if you’re struggling with credit card debt and considering credit card forgiveness, reviewing your financial plan can help you determine if that’s the best solution for your situation. Revisiting your plan can also help you avoid impulsive financial decisions, like taking out an unnecessary loan or ignoring the need to create an emergency fund.
4. When Your Income Changes
Changes in income—whether through a raise, job change, or a reduction in work hours—should prompt a financial plan review. A higher income might mean you can allocate more money toward savings, investments, or paying down debt. On the other hand, if you’re earning less, it’s crucial to revisit your budget and make necessary cuts to your expenses or adjust your debt repayment strategy.
Reviewing your financial plan after an income change helps ensure that you’re making the most of your new situation and staying on top of your financial obligations. It also allows you to adjust your savings goals to match your new income levels.
5. Before Taking On New Debt or Major Financial Commitments
Before taking on new debt, such as a personal loan, mortgage, or car loan, it’s important to revisit your financial plan to ensure you can afford the new financial responsibility. Assessing your debt-to-income ratio, evaluating whether the new debt fits within your budget, and determining how it aligns with your goals will help you make an informed decision about borrowing.
Likewise, if you’re planning a major financial commitment, like starting a business or buying a home, revisiting your financial plan is a must. These commitments can have long-term effects on your finances, so it’s essential to weigh the costs, understand the risks, and make adjustments to your budget and savings as needed.
How to Review Your Financial Plan
When it’s time to revisit your financial plan, follow these steps to ensure you’re making the right adjustments:
- Track your spending: Analyze your expenses from the past year and see where you’re overspending. If you’ve accumulated debt, consider whether a debt repayment plan, such as a debt consolidation program, might help you get back on track.
- Review your savings and investments: Check if your savings are on target for your goals. If you’re saving for a down payment, retirement, or other major expenses, assess whether you’re contributing enough and whether any changes are needed.
- Evaluate your financial goals: Reassess your long-term and short-term financial goals. Are they still relevant? Do they align with your current priorities? If not, update them to reflect your new circumstances.
- Make adjustments: Based on your review, make the necessary adjustments to your budget, savings plan, or debt repayment strategy. If you need help, consider consulting with a financial advisor to help guide your decisions.
Conclusion
Revisiting your financial plan regularly is an essential step in achieving long-term financial success. Whether it’s after a major life change, a stressful financial situation, or just as part of your annual routine, taking the time to review your finances ensures that your goals remain aligned with your current situation. A solid financial plan can help you stay on track with your savings, avoid debt, and make smarter financial decisions in the future. So, take the time to revisit your plan, assess where you stand, and adjust as needed to secure your financial well-being.
