Importance of flexibility in a financial plan

A financial plan with all your long and short term financial goals is essential for a financially secure future. However, because life is uncertain, your financial plan can be negatively affected by several events beyond your control. Due to these unexpected circumstances, having a flexible financial plan is of utmost importance.


Although you cannot control the effect of these events on your financial plan, you can make your financial plan flexible enough that the effect becomes negligible and does not negatively affect your financial plan.



Importance of flexibility in a financial plan




For the following reasons, it is essential that your financial plan is flexible:



Income change


Everyone hopes that there is a steady increase in overall income every year. However, the main problem with this increase is that it is unpredictable. You can change jobs after a few years with a higher salary than the previous position or rent part of your house to someone for a certain amount of money. What this means for your financial plan is the additional amount of money you can then invest in your financial plan. If your financial plan is flexible, you can put more money into your investments and get more returns. And more returns will translate to achieving your financial goals in less time.



Health care


Every financial plan requires you to make health care plans for your future. It is possible that when creating the financial plan, the amount of money you thought was enough for health care turns out to be insufficient. You should keep in mind that it is quite possible that you or one of your family members may be suffering from a disease that may require you to spend huge amount of money for the treatment. This is where flexibility in your financial plan can help minimize the financial burden that hospital bills will create for you. If your financial plan is flexible, you can make the changes you want to your healthcare plans.



Economic or political factors


Government policies such as interest rates, direct and indirect taxes can negatively affect the financial plan.


For most people, their financial plan is built on the assumption that they will get a particular return on their investments. However, changes introduced by the government may prove these assumptions wrong. The only way to achieve your financial goals after these factors have affected your financial plan is to make specific changes to your financial plans, which can only be done by allowing some flexibility.



Inflation


Inflation is one of the most disastrous and changeable factors affecting the economy. It seriously damages the value of money because it increases the price of commodities and decreases the purchasing power of money. The best way to minimize the effect of inflation is to inject more money into your financial plan whenever you can. Plus, the only way to pump in more money is to have a flexible financial plan.



Uncertain life events


As life is full of surprises, they can happen in a good way or in a bad way. Besides all the factors mentioned above, there are many other factors that can have a big impact on your financial plan. Events like the birth of your children, their education and their marriage can also create a financial burden for you. It is possible that your child is going to a foreign university for a college education or that you have to spend more money on their wedding due to inflation or other factors.


Whatever life throws at you, the best way to deal with each situation is to make the necessary changes to your financial plan. You can create different funds for different needs and a rainy day fund for any other emergencies that may arise. To effectively achieve your financial goals, without letting them be affected by all negative events, you should seriously consider establishing a flexible financial plan.