However, her husband thinks it might be time to revise their plan. He suggests they buy their own home before interest rates soar. What they had planned a few years ago may no longer work, as their needs, cash flow, and more importantly, the environment around them have undergone profound changes, especially with the onset of the pandemic. She wonders if there should be a fixed frequency or pattern for this exam.
Financial plans should be reviewed at regular intervals – at least once a year. It is a fixed frequency at which a check-up must be undertaken within the family. However, a change in income could be a good place to start. Over the past 5-6 years, the salaries of Chanchal and her husband have been revised upwards. In the early years, lifestyle inflation and family expansion absorbed most of the increase. However, in the future, they need to see if it is possible to move more towards savings and investments.
The couple should realize that there is nothing wrong with yearning for more, as long as they have planned everything and are ready to finance it by increasing their investments. With improved savings ratios, they may want to supplement their SIPs in mutual funds to accumulate a larger corpus at a much faster rate.
Soon, Chanchal and her husband will realize that raising their children is a key step they would like to be prepared for. Therefore, making a down payment for a home loan and providing a quality education for their children are goals towards which they should redirect their savings.
A home loan is likely to create a significant cash flow problem in their financial plan for a long time. This should be taken into account when revising the plan. In addition, it also requires a review of their life insurance coverages. In addition, reduced health insurance coverage can be supplemented with a larger family float.
It may be advisable to review their financial plan and purchase adequate insurance coverages that pay for hospitalization and critical illnesses, as these can cause an avoidable drain on the household’s financial well-being.
(Content on this page is courtesy of the Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)