A financial plan that works in your twenties may not meet your needs a decade later, when a home loan, children’s education, healthcare expenses and responsibilities towards ageing parents begin to affect household finances.
As income, expenses and financial goals change, savings, investments, insurance and borrowing decisions may also need to be reassessed.
However, financial planning is often treated as a one-time exercise, leaving individuals with strategies that no longer reflect their financial circumstances.
How life changes can affect your financial plan
Akshay Gulati, founder of SuperInvesting.ai, an AI-driven financial analysis and stock research tool, illustrates this with the example of a 25-year-old earning ₹1 lakh a month who can save ₹65,000 and take higher risks with small-cap stocks because financial responsibilities are limited.
Ten years later, even if monthly income doubles to ₹2 lakh, expenses such as a ₹56,000 home loan EMI, school fees and medical costs for ageing parents can reduce the amount available for savings. If an unexpected hospital bill of ₹6.5 lakh coincides with a 25% fall in small-cap investments, inadequate insurance and emergency savings could force the individual to sell investments at an unfavourable time.
The issue, Gulati says, is not necessarily the investment itself but a financial strategy that has not kept pace with changing responsibilities.
Kaushik Chatterjee, founder and CEO of lendingplate, a digital credit platform, says major milestones such as marriage, starting a family, changing jobs or a significant shift in income should prompt a review of financial priorities. Existing EMIs and other credit commitments also need to be assessed before taking on additional debt.
What should you reassess?
Ashwini Kumar, founder of DiReFTY, a digital reputation safety and trust-tech platform, says investment decisions should reflect the time horizon, liquidity requirements and ability to absorb risk. Money required for a home purchase in two years, for instance, needs a different approach from retirement savings intended for use 20 years later.
Gulati recommends keeping money needed within five years out of equity investments. He also suggests maintaining an emergency fund equivalent to six months of living expenses, estimating ₹9 lakh in his example, and having independent health insurance rather than relying entirely on employer-provided cover. Insurance needs for ageing parents should also be assessed.
Piyush Beli, director and co-founder of ZapCash, a digital personal loan platform, says financial priorities can shift from building savings early in a career to funding a home, children’s education, retirement or protecting accumulated wealth. These changes may require adjustments to savings, investments and insurance.
Tax planning may also need attention as income rises.
Gulati suggests that people in the 30% tax bracket consider arbitrage funds instead of fixed deposits for surplus money. However, arbitrage funds are market-linked and do not guarantee returns, so their risks, liquidity and post-tax returns should be compared with those of fixed deposits.
How often should you review your plan?
Beli and Kumar recommend reviewing a financial plan at least once a year and after significant life changes, such as a salary increase, job change, new loan or additional family responsibility.
The review should assess whether emergency savings remain adequate, insurance covers current needs, EMIs are manageable and investments remain aligned with financial goals. Chatterjee also emphasises ensuring that borrowing decisions match current cash flows.
NOTE TO READERS
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.