Every day we hear people talk about quarterly reviews of companies, the balance sheet, the result season, etc. If company reviews are so important, then why not the review of an individual's financial situation? In fact, taking stock of your current financial situation should form an integral part of your personal introspection regimen.

But this should not be just a one-time process -- it is important to review your current financial situation on an ongoing basis.

Let us see why this is important:

Life is dynamic! No one knows what tomorrow holds. Everyone's dreams, needs, and aspirations keep on changing with different stages of life cycle or circumstances in life. These circumstances could be anything like:

Marriage: Brings about a very big change in life. An individual's expenses suddenly double up and likewise the income too doubles in many cases. Hence, not only is it important for accounting the increased expenses but also to take into consideration the increased income if any.

Not only will marriage bring about a change in your finances but also in your goals. Goals like buying a house, planning for kids and their future. Hence if a constant review is done, you have an exact idea as to where you are and what kind of adjustments or changes are required post marriage.

Kids: Children bring about a joyful change in life. Additional day-to-day expenses, their educational expenses, medical expenses, getting them married, leaving behind inheritance becomes an integral part of your financial plan. Hence, the change has to be accounted for.

Death: Death of any member of the family can be life changing. In case of death, there can be added responsibilities or deletion in responsibilities. Both ways, there is bound to be a major turmoil in your finances.

Hence, constant monitoring by both the husband and wife helps in keeping abreast with your finances and you are prepared for all eventualities.

Change of employment or business or place: Can have a negative or positive impact on your finances -- whichever way adjustments are required.

Inflation: Again a big factor. I am sure everyone will agree with me especially after what they must have seen in last few year. The adjustment in finances based on inflation is a must.

There can be many other factors like say illness, windfall gains or something else that affect your finances. A constant monitoring of your finance helps you to adjust all of these in best possible manner and also help you in planning your finances in the most optimum manner.

The benefits of reviewing your financial plan

Let us have a look at the benefits of constant reviewing of your financial situation.

Budget is the first step towards organising finances. A lot has been written about budgeting. But how many of you actually sit down to review your budget every month, that is, compare the projected expenses with the actual expenses? Or one month's budget with another or one year's budget with the previous year?

Not only is it important to maintain a budget on a regular basis but also to sit and analyse it. This will help you know whether you are going overboard and if so, where.  Although you might be saving money at the end of the month, with just keeping a regular review you will be amazed as to how efficiently you can cut your expenses and end up increasing your present savings.

Also a regular review of your finances will help you know how much contingent fund or emergency fund is required. Ideally an amount equivalent to three-month of your mandatory monthly expenses can be set aside as emergency fund.

It is also important to prepare a statement of net worth wherein all your assets and liabilities are listed. A constant reviewing is required so as to know whether you are going overboard in borrowing or what is the exact status of all your assets. Opening this sheet gives you an overall view of your financial situation and hence a constant updating is a must.

Insurance is a very important aspect of financial planning. Why a constant review or monitoring?

As explained earlier life keeps on changing and with additions like marriage or children the insurance requirement increases. Again individuals with ULIPs have to monitor their account statements to know how it is performing.

One more important fact: monitoring also helps you to remember to renew your mediclaim insurances and term plans and reminds you to p ay your premium on time. For individuals above 45 it becomes difficult to get a new mediclaim policy.

Investments are done to aide you in achieving your goals and have a financially secured future. It is very important to monitor these. You should know whether your hard-earned money is earning for you or not.

Many a times there are changes happening with regards to an investment, say for example, a fund manager of a mutual fund has changed or change in some rules which might lead the fund to not perform or in stocks like a particular sector is not performing or there is bonus, or problems in company, or rights have been issued.

Monitoring will keep you abreast with all these changes and you know your status and if need be change them at an appropriate time and not after incurring losses.

Frequency of review

Depending on your financial plan (your asset allocation, size of assets, nature of assets) the frequency of review differs for everything.

Budget: Every month.

Investments: At least every quarter. Do note that although you are reviewing the status of your investments every quarter it does not imply that you need to shuffle your portfolio every quarter. If your portfolio is planned as per your goals and time frame in which you need to achieve them then all you need is a review. Shuffling is a big no-no unless, a big change has happened in your life or you are actively following the stock markets and you trade 20 percent of the portfolio or some new guidelines in investment avenues have been announced which might lead you to redeem your investments.

Complete financial plan (which includes review of goals, statement of net worth, insurances and again cash flow and investments): Once every year unless a big change has happened.

Life is uncertain and much more uncertain is the events that happen during a lifetime. While you cannot change the course of events, being prepared at least financially and knowing what your options are at each and every stage of life can give you a sense of reassurance, stability, and the much-needed peace of mind.