by Sanjeev Kumar Gopalakrishnan, Investing
26 Oct , 2018

Why Is Flexibility a Critical Factor in Your Personal Financial Planning Exercise?

Personal financial planning is all about mapping your money to your short- and long-term life goals, essential expenses, and unforeseen emergencies. It’s the critical first step to getting your life organized. But despite our best financial planning efforts, life’s uncertainties take their toll and your well-planned investments might not seem to be the right fit given the new circumstances. But you might think that this whole concept of flexibility in personal financial planning is not fair! After all, you have followed all the rules, from the 50-20-30 rule of expenses-savings-spend to planning sensibly for retirement. Yet what are these circumstances that might lead to your financial planning spiraling out of control? Let’s find out.

Life circumstances that necessitate flexible financial planning

Sudden change in job scenario or business returns

Most jobs and businesses hold the promise of a healthy yearly appraisal. But what if that raise does not meet expectations. What if your business goes through a rough patch? What if your job shift does not give you the desired monetary benefits? What if your new job gives you additional income that you might tend to waste away? All these life scenarios mean that you need to have a strong investment protocol that gives you the flexibility to invest more, to take a step back temporarily, or to withdraw money from short-term investments

Changing policies

One of the most uncertain elements of financial investments is their changing values, especially in the high-risk investments, when the tax slab varies or the interest rates change. There’s often no way to predict how these numbers swing and which government policy or market scenario will affect our savings in a positive or negative way. This speculation is what makes the investment scenario unstable. Hence maintaining flexibility in your portfolio is essential.

Increasing inflation

Inflation is the indicator of your country’s health. Drastically increasing inflation definitely has a disastrous effect not only on the country’s economy but also on the value of your investments. With price rise and decreasing currency value, the best way to maintain flexibility in investments is to add more money when the economy is doing good.

Unexpected illnesses

Your family and your health are probably the largest source of insecurities that constantly haunt your financial plans and investments. Investing in health plans are a critical aspect of a robust personal financial planning approach. However, the members you invest in and the amount are always a question mark. Ensure that you start on your health plan as early as possible – the moment you start earning and allow for flexibility in your plan to accommodate unforeseen medical emergencies.

Other emergencies or events

Health is not the only sudden event that turns your life goals upside down. Certain good and bad events could change the course of your life, a change in your child’s education plans might require additional money, building your home might lead to additional expenses, or a wedding in the family might require your monetary assistance. In such case always have an emergency fund stashed away for easy access.

Final thoughts … don’t say no to financial planning, but ensure that it’s flexible

Starting early in life is one of the best approaches to incorporating a healthy level of flexibility in your financial plans. Yes, your life goals will change considerably but you can focus on some critical life goals, health plans, insurances, and emergency funds along with short-terms investments to bring flexibility into your financial plans. Take the help of a registered investment adviser or financial advisory services, who can deliver expert guidance on planning a perfect investment portfolio, taking all the insecurities into consideration. Ensure that you never ignore your insurance, health, and emergency funds. Do not accumulate debt and focus on repaying them on priority. Most important, get your financial advisor to constantly monitor your financial plan and the market scenario to quickly make adjustments.

Many events in life cannot be controlled, but you can definitely control the influence these incidents will have on your investments. All you need to do is to be a little more vigilant and money smart.

PrognoAdvisor is your trusted online financial planning service from India, with extensive expertise in understanding your specific financial and life goals and guiding you achieve these goals with confidence. Connect with our financial advisors to understand how you can simplify the entire process of personal financial planning.

 About The Author

Sanjeev Kumar G, an IBS Chennai Alumni, is a Certified Financial Planner (CFP) from India, since 2005. He has 22 years of experience and is an expert in various personal finance areas like portfolio construction, investment research, life insurance and financial planning.


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