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So, you just finished creating your financial plan. Way to go!

Whether you're just starting out or you've been managing your finances for years, having a financial plan is crucial.

Now all that's left to do is follow through on it until you’re ready to retire in financial security. Right?

Think again.

In reality, a financial plan is a living document that needs to be revisited and updated regularly. The biggest mistake people make after finalizing their financial plan is thinking it’s a one-time task.

Whether you hired a professional or decided to do it yourself, your financial plan is not one of those things you can “set and forget.”

These plans should serve as your personalized playbook for achieving a secure and prosperous future. They help you manage your income, investments, and expenses efficiently, ensuring that you’re on the right path to achieve the financial goals important to you and your family. A good financial plan should encompass your priorities, short- and long-term goals, and the specific steps you’ll take to achieve them.

Imagine your financial plan as Google or Apple Maps. When you set out on a journey, you enter your starting location and your destination, and then let the turn-by-turn directions guide you. As you progress along your path, these navigation services are constantly checking the route to ensure it’s giving you directions based on the most up-to-date information. Whether there’s a traffic jam, a road closure, or a faster route available, your map adjusts and redirects you. You trust it to get you to your destination, even with detours or unexpected turns.

Your financial plan works the same way. Life is full of changes and surprises, just like a road trip. To make sure you reach your financial goals, you need to regularly revisit and update your financial plan to make sure it’s based on the most current information. Whether it’s a new job, a raise, a family change, or market volatility, updating your plan ensures that it reflects your current situation and goals. This way, you can trust that you’ll still reach your end goal, even if the route you take is a little different than what you first expected.

Knowing that you have a plan in place to handle life's financial challenges — even the ones you weren’t expecting — will give you peace of mind and reduce anxiety about the future.

The 4 Life Events That Should Trigger a Financial Plan Update

Most experts recommend reviewing your plan at least once a year. This annual check-up ensures that your plan stays in sync with your goals, financial situation, and timeline.

If you decide to work with a professional money manager or financial planner, part of their job will be regularly checking in with you to see if your plan needs any updates. As a bonus, they’ll also be aware of any legal or regulatory changes happening at the government level that could necessitate a plan update. But even someone managing their financial plan on their own should perform these routine updates.

During this review, you’ll want to reassess your financial goals, budget, investments, and other components of your plan. Adjustments may be necessary to stay on track and address any changes in your financial circumstances.

But your annual check-in isn’t the only time you’ll need to review and update your plan. Life has a way of throwing us curveballs, and certain events can significantly impact your financial situation.

Here are four key moments when you should revisit and update your financial plan:

1. Change in Financial Circumstance

Whether you earned a well-deserved raise and promotion or suffered a job loss (or reduction in hours), a major change in your financial circumstances should prompt a plan update.

If you have more money coming in, you’ll want to make sure that additional income is allocated effectively and not just piling up in your checking account. You could consider boosting your retirement contributions, paying off debt faster, or investing more. Or maybe everything is on track and you use some of the surplus to confidently take that family trip to Europe this summer.

If you’re dealing with a job loss, having a financial plan can help you feel secure even when facing a drastically reduced income. In the short term, you’ll want to re-evaluate your budget, cut unnecessary expenses, and use emergency funds wisely to preserve capital. But you’ll also want to make sure you look at the long-term implications of less income, as well. If you’re contributing less to retirement while you weather this period, how will you need to adjust to eventually make up the difference?

2. Change in Goals

Want to retire sooner? Want to travel more? Travel a lot less? Thinking about buying a second home? Awesome! Just make sure to update your financial plan to reflect a change in your goals and priorities.

For example, someone wanting to retire early will likely need to adjust their savings and investment strategies to ensure they have enough funds (or a secure alternative income stream) to stay afloat until they’re old enough to qualify for retirement distributions. Someone wanting to travel more or make a large purchase (like a second home) will need to assess their budget and savings to see where they can pull funds while not putting their eventual retirement needs in jeopardy.

3. Change in Family Status

These life events can result in some of the biggest shifts in your financial landscape. For example, tying the knot can mean combining finances with your partner… as well as combining financial plans! You’ll want to reassess combined income, debts, and goals, and develop a joint strategy that aligns with both partners' aspirations.

Divorce represents another significant shift in your financial landscape. You’ll have to contend with division of assets, potential changes in income, and new financial responsibilities. Updating your plan to reflect these changes will help create a new path forward.

Other changes in family status that should prompt a plan update include the birth of a child (think about childcare, education savings, and additional insurance coverage) and the death of a loved one (consider how certain goals may change, whether your estate plan and/or beneficiary information are affected).

4. Major (Major) Market Volatility

Most financial plans will be able to handle the daily ups and downs of the stock market, but truly significant market events (Covid crash, 2008 financial crisis) can have a big impact on your investment portfolio. The good news about those kinds of events is that the market tends to recover in just a matter of years, but if you’re close to retirement, it could require a reassessment of your retirement timeline or investment strategy. Regularly reviewing your financial plan during volatile times helps you make necessary adjustments so that you’re not drawing from a cracked nest egg.

No matter how much money you currently have, a financial plan is vital. It is not just for the wealthy or those nearing retirement; it's for anyone who wants to take control of their financial future. By providing structure and direction, your financial plan is your ticket to financial stability and peace of mind, helping you achieve your goals and prepare for the unexpected.

Just remember, your financial plan is a living document that needs regular updates to stay relevant and effective. Keep it current, and you'll be able to navigate life’s financial journey with confidence that you are on the right path to meet your financial objectives — no matter how many twists and turns you ultimately take along the way.