Creating an effective financial plan is a key step toward gaining financial security, stability, and longstanding success. But life is full of surprises, and events like marriage, children, career changes, or unanticipated expenses can have a huge impact on one’s financial goals. According to Scott Tominaga, an expertly designed financial plan needs to be adaptable enough to adjust to such changes without becoming out of track to reaching long-term goals. Here is a guide on how people can develop a financial plan that keeps on working despite the surprising changes in life.
- Create Clear and Logical Financial Goals
The basics of any stable financial plan should be well-defined, measurable as well as realistic tuned with its objectives. Regardless of, whether it is meant for retirement savings, buying a property, or financing a child’s education, objectives show the route. Breaking down long-term objectives into smaller and manageable sequential milestones makes it easy to monitor the progress rate. For instance, rather than saving a one-time sum for retirement, defining targets for annual savings in varied retirement funds will make the objective seem easily achievable while creating a quantifiable route to accomplishment.
- Create an Emergency Fund
An emergency fund works as a monetary buffer to counter any unforeseen circumstances such as medical emergencies or job loss happens. Financial advisors like Scott Tominaga suggest keeping three to six months’ living costs in an easily liquidated account. Having an emergency fund allows one to ride out life changes without dipping into retirement funds or going into debt. Replenishing and refreshing this fund regularly, particularly as living costs change with life events, is essential.
- Plan for Big Transitions of Life
Major life changes, including marriage, the birth of children, or career changes, may bring on new financial pressures. It’s crucial to consistently go back over and update a financial plan in light of them. For example, budgeting for child-care costs—e.g., for daycare, schools, or healthcare costs —ought to be incorporated into the plan as soon as they happen. Likewise, a career transition could influence expected salary, meaning an adjustment has to be made to savings objectives or investment programs.
- Diversify and Adjust Investments
As per Tominaga, individual investment plans should consistently change and diversify with life changes. For instance, a person about to retire may change their investment portfolio to integrate more conservative investments. On the other hand, a younger person with less financial commitments or debt may invest more in higher-yield and higher-risk, investments. Periodic review and amendment in the portfolio in response to changes in life will keep it in balance with financial objectives and capacity of risk tolerance.
- Remain Flexible and Review Often
Flexibility is perhaps the most significant element of a financial plan. Circumstances in life can shift suddenly, and therefore it’s essential to review and revise financial plans from time to time. This could involve revising the budget, reassessing retirement funds, or changing priorities due to unexpected events. Periodic reviews ensure that the plan is still applicable and realistic in the event of new challenges or prospects.
Developing a financial plan that is responsive to life’s changes is a continuous process that needs to be well thought out and adjusted from time to time. By following the above steps and staying flexible, people can make their financial plan resilient – irrespective of what life changes occur.