When to Update Your Financial Plan

by Kent E. Irwin

Certain life events can make significant changes to your overall finances and necessitate updating your financial plan. This list of life events is provided to alert you to circumstances that may affect your overall plan.

1.     Receiving a large amount of money

 “Money is the world’s curse. May the Lord smite me with it! And may I never recover!” This sentiment was spoken by the Tevye character in Fiddler on the Roof. Most of us would like to receive a large sum of money whether through prize winnings, inheritance, or a nice bonus. If you do receive a large amount, we hope you will avoid the most common mistake of immediately buying something. Before you do anything else, consult your financial plan. Windfalls, when not handled correctly, can sometimes cause more problems than they solve. For instance, before spending any of it, consult your tax advisor regarding taxes that may be due.  Another common mistake is buying something that will require more money over time than the actual windfall. For instance, vacation property, boats, expensive cars, or other large expenses may have hidden expenses over time such as maintenance, taxes, higher fuel costs, etc. A thorough review of your financial plan will help you determine the best use for your windfall whether you decide to reduce debt, increase your emergency savings retirement fund or college fund, or use it toward a well-thought-out large purchase. If you don’t have a financial plan, start an eFinplan financial plan today. Your eFinplan financial plan provides “what-if” scenarios so that you may see how your entire financial plan may change depending on how you use your windfall. We also highly recommend discussing your dreams and plans with your family. Don’t let this blessing create a division in your relationships.

2:     Incurring Large Expenses

If you incur a large expense, don’t panic—plan instead. If this expense was planned, then update your financial plan accordingly. If the expense was unplanned, review and update your eFinplan financial plan to see how this expense affects your overall plan. 

3:     Buying or Selling Property or a Business

If you buy or sell any type of real estate, a business, or a valuable possession, be sure to consult your financial plan, as well as your legal and tax advisors. There may be a whole host of issues that your trusted advisors can help with to not only make the transaction more profitable but to prevent financial, legal or tax problems.

4:     Assuming or Paying Off Debt

If you recently have assumed more debt, it is important that you adjust your financial plan, so that you know how it may affect the other areas of your finances. If you have paid off debt and have extra money freed up, now is an excellent time to look at your financial plan’s implementation checklist to determine if there are items that you have not yet done, such as saving additional funds for your financial goals. If you do not have a financial plan, now is an excellent time to start an eFinplan financial plan, so that you can adjust your finances for this new obligation or increased cash flow.

5:     Having a Child

If you are preparing for an upcoming baby or adopting a child, you also need to prepare for the adjustments this dramatic change brings to your finances. This is an excellent time to look at (or start) your eFinplan financial plan. Also, please read the article entitled “Preparing for a Child” at eFinplan.com.

6:     Changing your Marital Status

Whether you are getting married, divorced, or have become widowed, your financial plan will be greatly affected. Please read the article titled “Financial Planning Tips for Engaged and Newly Married” and run “what-if” scenarios in your financial plan to see how different choices you make in your finances may affect your financial future together. If you do not have a financial plan, you will find it difficult to achieve your joint goals harmoniously together. Prior to eFinplan, only wealthy couples could afford to receive a financial plan. We hope that you take advantage of this unique new opportunity.

There are a number of great articles on the internet, as well as several books, providing sound financial advice for people who are becoming single—whether through divorce or death of a spouse. The eFinplan “what-if” scenarios may also be beneficial to you in planning during this difficult time. Of course, it is crucial for you to seek the advice of your trusted legal, tax, investment, or financial advisors during this time.

7:     Changing your Employment or Income

If you have a change in employment, your income and benefits may change. You may also have money from retirement plans that you may want to roll over into an IRA. How will the changes affect your financial plan? The only way to know is to have a financial plan. If you already have a plan, such as an eFinplan financial plan, update your plan with the new information. Your overall plan may only change slightly or it may change significantly, but by updating your plan, you will have the information you need to stay on track for your future goals

8:     Changing Employee Benefits

Whether you change employment or not, your employer-provided pension, retirement, life insurance, disability and health insurance may occasionally change. When these changes happen, input this new data in your financial plan, if you have one. The eFinplan easy online access allows you to update your plan from anywhere, and make the necessary changes to your financial plan.

9:     Receiving Updated Investment Information

You should be receiving investment statements from all of your accounts each month and quarter. At least once a year, update your financial plan with the new account balance information. The investment results, new deposits, and withdrawals should be reflected in your financial plan.

10:     Buying or increasing your Life, Disability and Long-Term Care Insurance

Your financial plan will indicate any gaps in coverage that you may have for your life, disability, and long-term care insurance. If you implement these changes with the help of your trusted insurance advisor, be sure that you update your financial plan to include these new policies.

11:     Drafting New Legacy Planning Documents

If you have drafted a new will, trust, or other legal documents, make sure that you make all the necessary changes to your beneficiary arrangements on all of your accounts (life insurance, retirement, annuity, transfer-on-death accounts). If you draft more complex documents, the attorney may advise some of your property to have a change in ownership arrangement or type. Be sure to follow through on all ownership and beneficiary changes.

12:     Making Changes to Your Plan

If you have a financial plan, you probably will have a checklist of action items. If you have an eFinplan financial plan, you will have a Checklist of Action Steps. In addition, your plans, goals, objectives, and priorities may change. Make sure to update your eFinplan. Don’t forget to notify your trusted professional financial, investment, insurance, tax and legal advisors of the changes that pertain to them.

Summary

Certain life events can significantly alter your financial plan. Make sure that you update and adjust your financial plan accordingly. If you have an online financial plan through eFinplan, you can easily make the changes anytime online. We have created eFinplan to help you create and maintain an affordable financial plan and have supplemented the plan with helpful articles on the eFinplan website because we believe that financial knowledge should be available to everyone—regardless of their income level.

Kent E. Irwin is CEO and founder of eFinplan, LLC. He is also a Chartered Financial Consultant (ChFC), a Chartered Advisor in Philanthropy (CAP) and a Chartered Life Underwriter (CLU). He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . For more information about eFinplan, go to the website efinplan.com.

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