The 5 Times When You Should Review Your Financial Plan

1. Review It When All Is Calm, Between Life Transitions

The key to successful financial planning? The planning part! You want to develop a process, system and strategy for managing your finances and achieving goals before you need to make critical decisions. It doesn’t do much good to experience an event and then say, “You know what? We should make a plan.”

Be proactive. Even if you feel like you don’t have a ton of goals or lots of things that need to be done ASAP, put your financial plan in place — because the truth is, the best time to plan is always yesterday. The second-best time is today. When things are calm and there isn’t some fire to be put out in your financial life, that is exactly when you want to create a financial plan because you actually have the energy and attention to do it.

And then make sure to review that plan before leaping into a major transition, like switching to a career you love but losing access to equity compensation at your current job, or hitting a big life milestone, which could be anything from getting married and merging finances to preparing for retirement. That will help keep you grounded within your financial reality, and allow you to make more informed decisions and choices during busy periods or seasons of life.

2. Review It When You Have a Lot of Goals to Prioritize

Most of us have a lot that we want to accomplish. The problem? We also have limited resources, and there’s only so much time, money and energy to go around. If you find yourself with an abundance of goals but little direction on what to do when, review your financial plan.

This can help you sort your goals, prioritizing them based on how each may impact your finances both in the short term as well as over the long haul. If you’re in your 30s or 40s, those goals might look something like this:

• Maintain an annual budget for travel
• Save up for kids’ college tuitions
• Get an advanced degree or switch careers
• Move closer to family
• Reach financial independence by 55

In addition to reviewing your financial plan, it might help to remember your values, too. Putting goals in a priority order (opens in new tab) (or ordering them on a timeline to determine what to work toward first) is a task made much easier if you know what’s most important to you and ensuring that your top-priority goal aligns with that core value.

3. Review It after Finalizing Major Changes or Transactions

I focus on working with clients in their 30s and 40s, and that means things are always changing. Between buying homes and starting businesses and growing families and growing assets and wealth for the future, major life changes and big-ticket transactions are the norm in my clients’ lives.

Each time a change occurs, from a pay raise to a home sale, we want to gather the new numbers and financial data associated with the event and use them to update the overall financial plan.

Anytime you experience a big change in your own life, make sure to review your plan and keep it up to date with accurate numbers. This is usually easier to do after the dust settles and numbers are finalized, because you don’t have to guess or make assumptions. You know what they are.

Of course, this is most effective when you reviewed your plan before you went through a change or big financial shift. You want to be proactive above all else — just don’t forget to circle back to your plan and confirm its accuracy when all is said and done. Anytime you have a chance to replace an assumption (like how much your bonus may be or what you think you could net if you sold your house) with a fact, take advantage and make the update.

4. Review It When You Have Questions about What to Do Next

When uncertainty arises, your financial plan can provide clarity and peace of mind. Presumably, you committed your plan to paper in more stable and less emotional times — so taking time to review that when things feel shaky or when you’re in a heightened emotional situation can remind you of the strategic, rational course of action to keep.

This is especially helpful when the uncertainty arises because financial markets are volatile. In such times, most people want to do something, anything, to respond to the discomfort that can come from seeing your investment portfolio go for a roller-coaster ride.

But if you already set a plan and strategy, then you need to stick to it (opens in new tab). Don’t let short-term events (especially when it comes to your investments) shake you off your long-term course. Ideally, you’ll have an investment policy statement as part of your financial plan, which serves as a written reminder of what you committed to doing. Review that, and then follow the path it lays out — rather than tinkering with your portfolio and deviating from your strategy.

5. Review It at Least Annually, on an Ongoing Basis

I always say a good financial plan is not a static document. Financial planning is a process (opens in new tab), and something you consistently engage in over time. Things tend to become outdated the moment they’re put down on paper, and this is only compounded by the fact that a defining characteristic of life is that it changes.

Every time your situation changes, it has the potential to throw your plan out of whack because it’s no longer an accurate reflection of your new reality (whether that change is positive or negative). That’s why it’s critical to review your plan at least once per year, to ensure the data you’re working with is accurate, your plan reflects your goals and priorities, and you’re clear on the action items that you need to proactively manage over the next six to 12 months to keep things on track.

Financial planning is a process, and it’s one that requires proactivity to work well. While some of the other milestones listed here are good indicators that it’s time to review your plan, don’t wait until something happens to do something about it. That means you’re constantly on your heels, just trying to react to past events. Get proactive and fully engaged in this process if you want to fully use your money as a tool to live well today and plan responsibly for the future.