You can move from being broke to having financial plan stability in that period. You can get out of debt and live a happy, debt-free life.
Doesn’t it seem like five years from now is a long time? But the truth is that five years flies fast. Despite the rapid speed, creating and working on a 5-year financial plan can drastically change your world in that time frame.
It isn’t going to happen on its own. It will necessitate a substantial amount of effort and dedication. Do you want to know how to build a five-year plan? Let’s get started! Do you, on the other hand, have what it takes to succeed? A strategy.
What Are The Benefits Of Making A 5-Year Financial Plan?
If you merely write “Buy a house in the future” on your financial plan, it will not have the same impact as “Save $50K for the down payment on my new house in 2.5 years.”
You know how they say if you aim at nothing, you’ll always hit it? It applies to every element of your life, including your financial situation. Creating a five-year financial plan benefits you in three ways. To begin with, it aids you in forming a vision for the changes you wish to see in your life and provides a road map for getting there.
Even this Harvard Business School study backs up the idea that those who have precise goals are more likely to succeed. Which do you believe you’ll be able to accomplish? The latter, without a doubt.
Second, 5 years isn’t too short to leave you with no time to make changes (e.g., obtain a new career, relocate), but it’s also not too lengthy to feel like you have an eternity to accomplish your objectives (e.g., unlike thinking of saving for retirement).
Finally, it will significantly improve your financial and goal-setting perspective. The truth is that any meaningful transformation must first take place in your head. You’ll automatically be able to put a strategy into action after your mind has been altered.
You’ll be well on your way to success! Check out our course on how to shift your money thinking if you want to kickstart your money mindset.
How do you make a five-year financial plan?
So, let’s have a look at how to construct a 5-year plan step by step.
1. Make A List Of Your Objectives
List these objectives in order of importance so you can see what will have the most impact on you in the next few years.
To begin, set aside some time to thoroughly consider actual, measurable items that you want to implement for yourself over the next five years – not wishful thinking, but things that will truly bring you closer to the life you’ve always imagined for yourself.
2. Calculate The Cost Of Achieving Your Objectives
Next to each item, write an expected budget and the year you intend to complete it by. What resources would you require if you want to establish a business? Some enterprises can be established with no money, while others require careful financial planning.
Some objectives are unrestricted. Consider the expense of a gym membership or a diet modification if you’re trying to live a better lifestyle. Others, without a doubt, will have a cost.
3. Face Your Fears
Push over the agony and worry that comes with big ambitions, and you’ll be halfway there. If your ambitions don’t terrify you, you’re probably dreaming too big.
The only way to truly overcome fear is to confront it head-on. Cast the vision and go after it with everything you’ve got! And casting a vision for yourself in the near future is the first step to overcoming financial anxieties.
4. Keep Track Of Your Progress Toward Your 5-Year Financial Strategy
You’ve written down your objectives and are working toward them, but without measuring your progress, you’ll never know how close you are to attaining them! “What gets measured gets managed” is a saying you’ve probably heard before. Mid-term objectives are expected to take more than a few weeks to complete. It could possibly take a couple of years in some cases. Are you putting up $50,000 for a down payment on a home? Make a plan to put aside $10,000 per year toward that objective. But don’t stop there; break down the objectives even more.
Consider how you’ll save $10,000 this year. Determine a safe savings rate that you can achieve each month to meet your goal. Take it a step further and divide it into weekly objectives.
Within your yearly goals, break them down into smaller parts. Making one step at a time is the only way forward.. What’s the best way to go about doing it? Breaking these goals down into weekly targets will help you achieve the small goals that will eventually lead to the major goal’s success!
5. Keep A Journal To Record Your Thoughts
Writing down your 5-year goals is a good start, but journaling can really help you maintain your momentum. You can journal about what you’ve accomplished thus far; you can journal about the problems you’re encountering as you go; or, one of my personal favourites, you can journal as yourself five years from now, having accomplished all you ever dreamed of. Writing can be achieved in a range of ways.
6. Become Immersed In Things That Will Help You Achieve
The route to success isn’t always a straight line, but seeking advice and focusing on self-improvement are two methods to make it as straight as possible.
You’re most likely correct. You may never be able to meet with those people one on one, but it doesn’t mean you can’t learn from them. You may now be thinking to yourself, “I have folks I’d like to mentor, but there’s no way I’ll ever get access to them.” Are you a huge fan of someone? Take the time to read the book. Take an online course with them. Information is available at the press of a button nowadays. Take a look at their podcast.
It’s never been easier to immerse yourself in useful stuff, but it also alters your thinking, which is the first step toward living the life you want.
It not only provides you with a tactical strategy to make great changes in your life, but it also provides you with a framework for doing so.
While digital media is beneficial, in-person connections are crucial. Take the effort to find mentors who have successfully walked the route you want to follow and who are wonderful models of where you want to be in five years. According to conventional thinking, we are the average of the five individuals with whom we spend the most time.
Looking into the future and back can help you overcome mental hurdles like fear, which can make some ambitions seem unreachable. There’s a psychological reason why we overspend and don’t think about tomorrow. Journaling can assist you in bridging that gap and becoming closer to your objectives!