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6 Reasons to Update Your Financial Plan Now

Feb. 13, 2014
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By Pamela Plick, CFP®,CDFA™, AWMA™  

Learn more about Pamela on NerdWallet’s Ask an Advisor

You’ve worked with a financial planner to create a solid plan to help you achieve your long-term financial goals. But since then you may have experienced some major life changes. We all encounter a lot of change in our lives, but there are some big events that affect us financially as well. To be successful in achieving your financial goals, you’ll need to update your financial plan when you have a major life change.

Here are six reasons you need to update your financial plan:

1. Marriage

Now that you are sharing your lives and financial responsibilities, you need to update your financial plan. For various reasons, we sometimes have the tendency to not want to talk with our significant other about financial matters. It is important that you both have an understanding of the family finances and be able to set goals as a couple. Either of you should be able to step in and be knowledgeable about everything from the monthly budget to insurance and investments.

2. Divorce

Divorce can be a difficult time not only emotionally but also when it comes to finances. Whether you are trying to maintain your financial situation or getting back on your feet, there are some key areas of your financial plan that need updating:

  • Know where you stand financially– Before you can move forward financially, you’ll need to organize and understand your expenses, savings, debt, etc.
  • Create a budget-You’ll need to know what your income and expenses are to keep your spending under control.
  • Review credit reports-You’ll want to know what is on your credit report and you’ll need to make sure that you have credit in your name.
  • Have an emergency fund-Since your household income has dropped, you’ll need to build a cushion for emergencies.
  • Update your estate plan– Remember to update your will or trust and any beneficiary designations.

3.   Children

Adding children to your family is exciting. Whether you’re expecting, thinking about adoption or building a blended family, you’ll need to plan for the added expenses. According to a 2013 report from the U.S. Department of Agriculture, the typical middle income family will spend an average of $241,080 to raise a child born in 2012 through age 17, up 23% (in 2012 dollars) since 1960.

You may also need to revise your budget to accommodate expenses such as child care or to allow one parent to stay home. In addition, you may need to review your insurance policies and estate plan to make sure your family is protected. You may also want to reallocate resources to start funding for college.

4.   Career or Job Change

Whether you have experienced the loss of a job or are considering accepting a new job offer, it is a good time to talk with your financial planner about your key financial concerns.

Losing a job can be stressful but doesn’t have to be financially devastating. Whether you were let go due to a termination, merger or layoff, the key financial concerns may include loss of income and medical and other benefits.

Or, you may be currently employed but considering a career or job change. You want to consider how this new job will affect your current retirement plan or whether or not the benefit package is sufficient to meet your family’s needs.

5.   Retirement

Retirement can be one of the most rewarding stages of your life. Unfortunately, if you don t plan properly you can run the risk of not living the retirement you envisioned. This is a good time to meet with a financial planner to update the answer these key questions:

  • When do I plan to retire?
  • How long will I spend in retirement?
  • What are my sources of income?
  • What are my expenses?
  • How much have I saved?
  • How long will my money last?

6.   Death of a spouse

Dealing with the death of a spouse can be overwhelming both emotionally and financially. You’ll want to compile a list of tasks and issues that will need to be addressed. Your financial planner, along with your estate planning attorney, can help you though this process.

A financial plan is not a static document. It should be reviewed and updated on an annual basis and/or as your goals change. It is also important that you revisit and update your plan when your have major life changes. If you have had one of these major life changes recently, now is a good time to schedule a meeting with your Certified Financial Planner™ professional to update your plan.