Rajeev is struggling with his finances since he had a job change two years back. Although he got a handsom rise in his salary, unexpected medical emergencies of his parents costed him Rs 4 lakh. He has to postpone all his financial decisions and till date he is not able to take a decision on his other goals. The fear of job loss since his company merged with another is now hovering his mind.
Life changes like above impact our financial lives. Some may happen unexpectedly as with Rajeev while some we would have already preplanned for like marriage. Whatever be the scenario, all the changes leads to revisit our life goals and alter investment strategy in some cases. Some of the changes happen for good and provides more opportunities. Contrary to this some of the changes might create obstacles in reaching the financial goals.
In all situations, a financial plan need to accommodate changes & recreated for an effective approach. Given below are some of the changes which each one of us experience in our life stages and how you should accommodate then in our financial life.
1. Job Change: A job change may happen many times in your career. With this change your income increases giving you more savings in your hand. Sometimes surpluses are received switching from one job to another. Make sure to allocate the increased savings towards your goals if following a financial plan.
2. Marriage: Rightly said “ marriages are made in heaven”. It Is the most happening event of your life. Once married there are numerous concern which start revolving around you. Your financial goals too changes in alignment with your spouse goals. Revise your financial goals and plan accordingly.
3. Child: When a child is born, the moments are difficult to describe. The start of parental life is a pride for any family. Along with it the concern on upbringing, good education and accumulation for child future also starts. As the child grows up the expenses starts increasing. Sometimes the cost of education itself forms more than 50% of the budget. Plan well ahead. While following a financial plan, accommodate the expenses and allocate necessary saving towards the goal.
4. Older Parents: Sometimes there is a stage when your child starts going to college and you have parents dependent on you after their retirement. Your expenses will increase manifold. The cost of education and parents care start hitting your life goals if stretches too far. In such scenarios you need to make sure that your allocation towards long term goals remain intact.
5. Buying a house: One of the dream goal for any family which affects your financial well- being the most. Middle class families tend to rely on housing loans which increases their debt exposure. Your financial situation tends to change from here as you add on liability which although creates an asset for you but reduces your savings capability. During adverse situation this liability might become difficult to service and can severely affect your other financial goals. Review your financial situation before you add a home loan liability. Avoid a loan if it is affecting your other goals and follow a prudent debt management strategy.
6. Divorce: A divorce gives an emotional and financial setback. You become single again and had to put things again back. Reestablishing credit since spouse is not attached, changing beneficiary in your accounts, recreating and monitoring your budget and retirement planning take sthe propriety. You need to realign all your investments and had to rework on your life goals to make sure your financial future is secure.
7. Moving to new state or country: Sometimes in your job, you get relocated to other state or promoted to a new country. Your goals will change with the situation. A new state, especially from smaller to a metro, will increase your expenses on all front. Similarly, moving to a new country will bring change in your lifestyle and goals.
8. Nearing Retirement: The life goals changes once you approach retirement. You plan for 12-15 years of post-retirement where you are not going to earn. Eliminating risk and investing for regular income is now your priority.
9. Emergency: Can arise anytime. Sudden Hospitalization or death of a family member affect emotionally and financially. If not planned adequately, it lowers down the lifestyle of family members’ drastically. Prepare for these. Create emergency fund for any immediate requirement and do a proper insurance planning for giving the right protection to the family.
Some of the changes like marriage and children we all experience. Still most of us delay it till the arrival of the event. This irrational behavior leads to not planning for even emergencies. And when it arises we land up in debt problems. Financial Planning helps in addressing all these concerns related to your life events and gives you a roadmap for accommodating these changes in your lives. By monitoring your financial situation periodically, you make sure that these changes are taken care while you are still accumulating for your life goals.
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