Life moves fast, and so do your finances. That’s why an annual review of your financial plan is a crucial habit. Think of it as a health check-up for your money, helping you stay on track with your goals and adapt to changes in your life or the market. Let’s explore why this matters and what life events should trigger a financial review.
The Importance of an Annual Financial Review
Just as you service your car regularly, your financial plan needs maintenance too. Over time, your income, expenses, and priorities evolve. An annual review ensures your financial plan aligns with your current goals and future aspirations. Here’s what you can accomplish:
- Adjust your savings and investments based on life changes.
- Reassess your debt repayment strategies.
- Optimize your tax planning for the year ahead.
If you’re new to financial planning, check out our Beginner’s Guide to Budgeting for Canadians to get started.
Key Life Events That Should Trigger a Financial Review
Some moments in life call for more than an annual check-in. Here are events that demand a financial refresh:
1. Marriage or Divorce
Marriage means combining finances, setting joint goals, and possibly buying a home together. Divorce, on the other hand, often leads to separating assets and revising your financial strategies. A comprehensive review during these times is non-negotiable.
For tips on managing finances post-divorce, visit How to Manage a Joint Bank Account After a Breakup.
2. New Job or Career Change
A new job can bring higher income or better benefits. Use this opportunity to revisit your budget, retirement contributions, and investment goals. Conversely, a job loss or career switch may require tighter budgeting or alternative income strategies.
3. Having a Child
A new family member means new expenses—childcare, education savings, and possibly a larger home. Consider setting up a Registered Education Savings Plan (RESP) to secure their future.
4. Buying or Selling a Home
Real estate transactions significantly impact your finances. Whether you’re upgrading, downsizing, or buying your first home, revisit your budget and mortgage terms. For a deep dive into mortgage tips, read How Mortgage Amortization Affects Your Payments.
Steps to Review Your Financial Plan
1. Assess Your Income and Expenses
Start by listing your current sources of income and monthly expenses. Use budgeting apps or spreadsheets to track these changes accurately.
2. Check Your Investments
Are your investments performing as expected? Adjust your portfolio if needed, keeping your risk tolerance in mind. For guidance, read How to Balance Risk and Reward in Your Investments.
3. Evaluate Your Debt
Look at your outstanding loans and credit card balances. Can you refinance, consolidate, or pay off any debts faster?
4. Revisit Your Insurance Policies
Ensure your life, health, and property insurance policies provide adequate coverage for your current situation.
How to Stay on Track Year-Round
While an annual review is essential, keeping tabs on your finances throughout the year can make the process smoother. Here’s how:
- Automate your savings and bill payments.
- Set monthly or quarterly reminders to check your budget.
- Regularly review your credit score.
Learn how your credit score impacts borrowing power in our post How Your Credit Score Affects Your Borrowing Power.
Conclusion
Reviewing your financial plan annually is more than a good habit—it’s a necessity. Life changes, and so should your financial strategies. By making this a priority, you can adapt to changes, achieve your goals, and secure your financial future.
