Why must one make a 5 year financial plane? Five years may not be a very long time to achieve lifelong goals, but this time can help you get started on them. It may not help you buy a house, but it will help you collect enough money for the first down payment.
It can be helpful to settle all your debts in a five year plan as it gives you good enough time to focus your budget on one thing. It is also enough time to build up an excellent credit history in case you are planning on buying a house or starting up a business.
Five years can be ample time to achieve a financial goal that you have been trying to for a while. If you don’t get started on planning your financial moves for the future, you may find yourself living pay check to pay check and never being able to save enough for yourself.
Here’s how to create a five year financial plan:
1. Write It All Down
First thing you have to do is write it all down. No matter how good a memory you may have, writing things down will always put a bit of pressure on you to actually complete the goals that you have set. It will also help you meet deadlines and have a better idea of how much to spend and what to spend it on.
2. Set Specific Goals
When you are making a five year plan, highlight the goals that you have to achieve first and work on it. If you have to pay off all your debt, make sure all the planning is done according to that. In case you need to save up for a new house, start on a saving plan and plan it out month by month for five years.
3. Keep A Check On Your Income
Know how much you make and set aside a specific portion of it to add to your monthly savings, if you start making more in the five year period, add a little more to the savings each month.
4. Emergency Savings
That money which you have been saving for a rainy day, take a sum out of that and put it in another account to save up for a thunderstorm. Life is unpredictable and misfortune can befall anyone anytime. Being prepared is a lot better than being sorry.
5. Eliminate Unnecessary Expenses
Do you really need the subscription to the home decor magazine you once thought you would need? Cut down all the unnecessary expenses that are getting in the way of you saving up. Look at new options when buying things; you might be able to get cheaper groceries at other supermarkets. Explore to find better and cheaper deals.
Every month you’ll start saving and by the end of 5 years you will have enough to have successfully executed your five year planning. It requires patience and hard work but it pays off a lot better.