Financial Plan Review is important step of Financial Planning

Financial planning comprises of many assumptions like inflation rates, Income growth rates, Investments rates etc. which keeps on changing with the change in the economic factors. So it is very important to do the Financial Plan review on regular intervals. Financial Plan Review carries more weightage than creating a Financial Plan.

Corporate Also do Financial Plan review

Have you ever thought why corporates declare quarterly results?  You thought this is a regulatory requirement. Yes, you are right in one way but along with that it also helps the shareholders and management to understand the progress and growth rate of the company. Every corporate exists to grow, so they keep check on their performance parameters quarter-on-quarter, year-on-year. This will help them to be abreast with the economic changes and get a fix on those factors which are hampering the growth rate. Being an owner of the company, every shareholder has the right to ask the management about the reason for fall in growth rate as compared to last year and managers are liable to answer the same.

Same goes for those people who a few years back have come to know the importance of financial planning. Either by a friend’s advice or due to their own interest, they start learning the nitty-gritties of personal finance. Some have even appointed financial planners to get a financial plan written for them. But sooner than later the financial plan gets buried between other files. If the company you are working for or you have invested in does not pay heed to the last quarter or yearly results or in other words does not do financial plan review, then how would they find out- are they on right track or not. You have to understand that when your company wants you to work 24×7 to help them grow and improve their results then why can’t you give this kind of time to your financial plan which involves your financial future. Well, in the latter case, you may not have to devote your full time but two-three hours a week might be enough.

Why Financial Plan Review is Important?

Having a financial plan is not enough, you need to implement it properly and do the financial Plan review on regular basis. Even though there are no changes in your income, profile or goals targeted, the economic and investment scenario keeps on changing which affects the financial plan in an indirect way. Like quarterly corporate results provide shareholders and management a direction and understanding of progress, strengths and scope of improvements, a financial plan review helps you and your financial planner make the necessary changes looking at the micro and macro environment. It is much easier for those who have appointed a financial planner and not that difficult for the “Do it yourself” category who are equipped with basic financial literacy and are doing these calculations themselves. In both the categories, it is important to have a written document in place so you can relook at the status of when it was prepared and act upon it as per the current scenario. You can make changes in the asset allocation, review your insurance and make additions, deletions wherever required.(Also Read Financial Planning case Study)

Time to do your Financial Plan review is NOW

Since half of the financial year has already gone by, those who are in service are through with their performance appraisal and must have been provided with their new goal sheet and responsibilities.  At corporates too, strategies are being devised to beat last year’s target. So I feel that this month onwards pressure must be starting to mount on all of us. And if you have not yet paid any attention to your personal finance strategy then you may not find enough time next month onwards and will see yourself at the same place next year. So buck up, you have to improve on your last year’s mistakes. Here I am advising you on some points relating to your financial plan review. I am sure you can relate to at least one of these if not all.

  1. Go and check your bank balances:  By now you must have understood the importance of emergency fund. And your financial plan must be telling you about a figure that you have to keep in your bank account for that purpose. It’s time to work on that. Hope your annual bonus is still not lying idle there and even if used you must have used it as per the plan and not at per your desires.
  2. Have you worked on your insurance policies yet: You must be having some unwanted insurance policies in your kitty, which do not suit your financial goals in any way.  If yes, then what have you done to get rid of it? If advised by your planner, then please get up, go to the Insurance Company’s office and do the needful. I hope your planner must have provided you with the reason for doing that. Please understand tax planning, retirement planning and child future planning does not mean purchasing insurance policies with different names and beneficiaries. As far as purchasing Fresh Insurances, you can do it online any day after dinner or even on a Sunday.
  3. Work on provident funds during Financial plan Review: The most supportive but most ignored instrument for saving towards retirement is EPF (Employee provident fund). If you have recently or lately switched job and your EPF balance with the previous company is lying idle there, then start working to merge it with the current company. I know that you may still feel that your retirement is far away and you will get serious, only in your late 40s. So at least don’t disturb the current compulsory savings towards that. Believe me, this will help a lot. And for those who are really serious about this, redo the calculations, find gaps if any and fill it as soon as possible.
  4. Redo your tax calculations and start saving towards that to avoid last minute rush.
  5. Check out how your investments are performing. Discuss with your financial planner and do the rebalancing of your Investments as per the advised asset allocation. Do remember that you have to look at the after-tax-returns. These days bank recurring deposits and fixed deposits are providing with good returns, but they are still not good for those who come under 20% or more tax bracket.  Moreover gifting someone in your family and investing in his/her name also attracts Income tax clubbing provisions. So be sure about taxes before entering into any product. Do proper planning rather than trying to evade tax.
  6. Write a will: if you think you are too young to write a will then please revisit the reason for buying life insurance policies. Moreover , to be more sure that the family uses the inheritance the way you want to , it’s always better to write a will and that too in proper way.

Don’t avoid Financial Plan Review

I know that morning walk, yoga, eating healthy food, maintaining body weight, going to gym, not smoking , less drinking and then having a proper sleep at night may be difficult to achieve… but at the end, this is how you can keep yourself healthy and fit. Same way, a small portion of your time devoted to your finances can make your financial life healthy and fit. And believe me if your finances are well managed, then proper sleep at night is assured. Thus Financial planning and regular Financial plan review is very important.

Now you must have understood the importance of Financial plan Review, So its high time to act on it.

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He’s MBA ( Finance) gold medalist, a CERTIFIED FINANCIAL PLANNER, Chartered Trust and Estate Planner and SEBI Registered Investment adviser. He has authored a Book in collaboration with CNBC TV 18 Network 18 bestesellers , tiltled "The Art of Being Good with Money". An ex banker , having a 17+ years of long experience in financial services industry he manages clients across the globe. He is a regular contributor to various leading Media and publication houses. He has written for Moneycontrol, Dainik bhaskar, Business standard, Live mint, Indian Express, The Tribune etc. He has also appeared in TV shows by Zee Business, ET Money, National Door darshan, Jagran Online. He also delivers training on Various personal finance topics to various corporate houses. You may get in touch with him at [email protected]



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