Revising your financial plan: 20 circumstances that may require a review

Today being World Financial Planning Day, it’s time to review your financial plan. A financial plan is a living, flowing document that should be flexible enough to change and adapt to your personal and financial circumstances. While it’s always a good idea to review your financial plan at least once a year, there are other circumstances that may require you to review your plan more frequently. In this article, we explore 20 life events that may cause you to revisit your financial plan:

A change in your income: Your income forms the basis of your financial planning because your goals can only be achieved by allocating your income correctly. If your income changes in any way, it’s always a good idea to review your financial plan. An increase in your income can allow you to reach some of your financial goals sooner or to start channeling funds towards a goal for which you have not yet started funding. This may mean you can channel a larger amount into your retirement pension or afford a more comprehensive medical aid plan. The danger of earning more is allowing your lifestyle to happen – buying more house, vehicle or material goods than you actually need – without first determining how your extra income can be used to bolster your financial future.

Buying real estate: If you’ve purchased real estate, whether it’s financed or not, it’s always a good idea to review your financial plan. Remember that buying real estate may require updating your will. Also, if you have taken out a home loan, you may need to adjust your death cover to ensure there is no loss of income in the event of death or disability. Additionally, there are additional monthly costs associated with owning a property, and it is always advisable to adjust your monthly budget to account for these costs.

Receive an inheritance: Receiving an inheritance will likely mean that you will have to make investment decisions regarding the inherited funds. Now is also a good time to revisit your goals, keeping in mind that a large inheritance can give you the financial freedom to plan a different path and pursue different lifestyle goals.

Job change: Moving from one employer to another can lead to a number of financial planning discussions, including funding your group retirement and risk coverage. First, you may need to make investment and/or withdrawal decisions regarding your group retirement fund and the various tax implications that apply to it. Secondly, you will need to understand to what extent your new group pension cover meets your needs and if additional solutions must be put in place.

Retrenchment: Being made redundant will undoubtedly give rise to a number of key decisions that need to be made, and it is almost always advisable to seek financial planning advice – preferably at the start of redundancy negotiations. You’ll need to make critical decisions about your severance pay and severance pay, while making sure you fully understand the tax implications of each decision. In addition, the loss of your group risk cover may require you to take out personal cover to ensure that you remain sufficiently protected. Depending on the decisions you make about your plan to cut expenses, you may need to make investment decisions and update your retirement plan accordingly.

Start a business : Deciding to start a business usually means seeking start-up capital, withdrawing from investments to fund the business, replacing group risk coverage with individual insurance, tightening your budget, and preparing business cash flow projections to support your business. business project. You may even need to realize an asset in order to help fund your business idea or take out a loan to help fund the start-up, in which case a financial planning review is a must.

Consider retirement: Retirement is an important step to take and it is always advisable to seek financial advice several years before official retirement. There are a number of critical decisions to be made in the years leading up to retirement, so avoid waiting until after retirement for professional advice. In the years leading up to your retirement, you will want to make sure that you are sufficiently funded and appropriately invested for retirement, and that your post-retirement goals are realistic and achievable. If there are retirement funding anomalies or shortfalls, you at least give yourself time to change course and update your retirement plan.

Adding financial dependents: Any new dependents, such as the birth or adoption of a child, or the financial care of an aging relative, may require you to reconsider your planning. The arrival of a child will involve updating your will and estate plan and reviewing your life cover to ensure your child is properly provided for. You will also need to review your budget, start funding education, and factor the costs of raising a child into your financial plan. You may also need to change beneficiary designations on your policies and investments.

Contemplating emigration: Before making the decision to emigrate, it is advisable to review your plan to ensure that you fully understand the financial impact of such a decision. No matter where you intend to move, emigration is an extremely expensive undertaking that requires meticulous planning. Moving your assets overseas is a complex and time-consuming process, and it is advisable to plan your emigration with an experienced adviser.

Change in financial goals: The financial plan you have in place should be fully aligned with your stated goals and objectives – and any changes to your goals should require review. For example, if one of your goals was to fund a trip abroad in five years, your investments would be geared towards a five-year investment horizon. If circumstances change and a trip abroad is no longer planned, you will have to redefine your objectives and adapt your investments accordingly.

Marriage: Marriage almost always requires a financial planning review as there are significant financial implications for both couples regardless of the marital regime you choose to implement. Not only will each of you want to update your will, but you’ll likely need to develop a joint family budget and update your risk coverage to protect each other in the event of a tragedy. This is also the perfect time to undertake a shared goal-setting exercise and begin the process of joint financial planning.

Divorced: Similarly, a financial planning review is almost always required in the event of a divorce, although it is best to seek advice from your financial planner before signing a settlement agreement. Depending on how your assets will be divided in the divorce, a number of key decisions will need to be made – many of which have tax and CGT implications.

Diagnosis of critical illness or disability: A diagnosis of disability or critical illness is likely to impact your income and future earning potential, which, in turn, will require a fully updated financial plan. If you have critical illness coverage and/or disability coverage, your advisor should be able to guide you through the claims process and ensure that any payments received are invested appropriately. Depending on the diagnosis, you may also want to make sure your will is up to date and that you sign a living will or advance health care directive.

Retirement: Formally retiring your retirement funds requires making critical decisions about your investments, purchasing an appropriate life or life annuity, selecting an appropriate drawdown rate, possibly downsizing your primary residence and reinvesting capital , preparing a post-retirement budget and determining future cash flow throughout your retirement years, and this process is best managed with guidance from a retirement planning expert.

To make donations : If you plan to help your adult children financially, give financial gifts to your grandchildren, or donate to your charity, make sure these intentions are included in your financial plan so you don’t end up paying too much. gift tax. Make sure your financial plan is updated to include your intentions to give or donate money and is backed by a tax-efficient timeline.

Purchase of offshore assets: If you intend to buy assets overseas, talk to your adviser about the financial implications of doing so. Depending on the jurisdiction in which you intend to purchase your asset and the nature of the asset, you may need to draw up a foreign will to manage these assets. It is also important to understand the tax implications of buying and selling assets overseas, and how this will affect your estate planning.

Divestment: Divestment of any investment will have tax implications which you should be aware of before making a transaction to avoid paying unnecessary taxes. Depending on whether you’re investing in stocks, bonds, real estate or cash, it’s important to understand the tax implications of doing so before you divest.

Create a trust: If you intend to set up a trust to house certain assets for the benefit of your children or other beneficiaries, be sure to review your financial plan, as transferring assets into a trust will significantly affect your planning, especially your estate plan. It is important to be clear about your intentions for creating a trust, the implications of transferring assets into a trust, what it means to lose control of those assets, and how the trust should be structured to best achieve your objectives. .

Death of a spouse: The loss of a spouse will require a complete reset of your financial plan. Considered one of life’s most traumatic events, the financial implications of losing a spouse cannot be underestimated. Every element of your financial planning, including income, expenses, budgeting, money management, risk hedging, retirement funding and estate planning, will be affected by the death of your spouse, and the sooner you revise your financial plan, the better.

Market fluctuations: Market fluctuations can make long-term investors nervous and edgy and cause them to make rash decisions about their investments. If investment markets are particularly volatile and you need to understand the implications for your long-term investments, schedule time to meet with your advisor before making any rash decisions. Short-term market fluctuations are normal, and sometimes all it takes is reassurance from an experienced investment advisor to refocus on your long-term goals.