Save Money

Why You Need a 5-Year Financial Plan!

When you think back to 5 years ago where were you? I’m going to assume you’re pretty much a different person because we change so much in 5 years, especially if you’re in your 20s.

Having a 5-year plan can really have you moving in the direction you want and getting you to reach your goals!

Have you ever written a 5-year plan? When I was a senior we had to write a 5-year plan for an assignment and I thought it was silly. I didn’t know where I wanted to be at 22 when I was 17. But the thing is, you know what you want in life and really reflecting on your goals and dreams is key to reaching them! 

5 year plan

Our blog posts often contain affiliate links, you can learn more in our very long (and very boring) affiliate disclosure!

What is a 5-year plan?

A 5-year plan is a written document (you can hand write or have it in a word document, whatever you prefer) where you write down exactly where you want to be in 5 years (duh, what a bad explanation). We’ll go into more detail of how to write a 5-year plan and how it works later. 

A 5-year plan is a great way to focus on your goals and really figure out what you want with your life. A general 5-year plan can include all aspects of your life (i.e., money, health, friends, family, career, travel plans, etc.), I’m mostly going to focus on the financial side of a 5-year plan because that’s what I do best!

A 5-year plan is going to help you to say yes to the things that will bring you closer to your goals, and say no to the things that will keep you further from your goals. It’s just a great way to track exactly where you’re going and see how far you’ve come.

So what can you think about in your 5-year financial plan? 

  • paying off debt (credit cards, student loans, etc). 
  • building a side hustle for extra money 
  • saving for retirement 
  • building up your savings 
  • getting a promotion/raise 
  • and so much more 

Why Have a 5-Year Plan?

Usually, as people, we have an idea of where we want to be in 5 years time. Unfortunately, life gets in the way. When we don’t have a plan for the future we just start reacting to things that life throws at us instead of really having control over our future.

A 5-year plan will really help you to stay motivated about your goals and it’ll really focus you on what’s most important TO YOU. The best part about a 5-year plan is even if your goals completely change you can use it to see who you were 5 years ago!

How to Create a 5-Year Plan For Your Money

Step 1 – Think about where you want to be in 5 years

You really need to have a good picture in your head of what you want to be doing in 5 years. 

Do you want to be travelling the world? Do you want to be starting a family? Where will you live? Where will you work? What will you drive?

The answers to all of these questions are going to determine your financial plan for the next 5 years!

Now, you want to be realistic when answering these questions, but we still want to have a little fun with it.

For example, if you just graduated University and you think in 5 years you’ll be married with 2 kids, making over $100,00 a year, you may need to cut back a little bit. It’s a great goal, but 5 years may be too short of a time period to attain it.

You should put some time aside to really create a vision of where you want to be. Having a great vision will focus you on what’s important to you and will give you something to create a plan for! 

Step 2 – Start with small, incremental milestones 

Just creating your plan isn’t going to get your there, you really need to work to make it happen. The next step is to work hard to split these 5-year goals into smaller goals that you can accomplish in a year.

This may sound kind of overwhelming, but it’s totally doable. If your goal is to pay off your $100,000 of student loans in the next 5 years, you’ll need to pay off at least $20,000 a year. What will you do to work towards that? Will you establish a side hustle? What is your plan for next year? 

To make this make a bit more sense, I’m going to use my own 5-year financial plan as an example! 

My big goals 

When I picture my life in 5 years, it’s pretty crazy how much has changed. In 5 years, I’ll be 28 going on 29 years old which is a lot different from where I’m at now.

I want to be my own boss, working from wherever I want, whenever I want from my computer. 

I want to be travelling half of the year and have a cute condo to come home to. I want to have my own dog (possibly 2 by then) that I spoil like crazy. 

I want to be a full-time successful blogger who’s killing the game and changing people’s lives.

I want to be happy and healthy and feel loved in all of my relationships.

I want to be debt-free except for a condo mortgage, and possibly have my first rental property to start making more passive income.

I want to have life insurance, and a good amount of money invested and have started a good chunk of my retirement savings. 

Year 1 – 2018 

Pay off my student loans entirely and be debt free by the end of the year – focus on paying off debt and don’t get FOMO when friends are doing crazy fun things! 

Get blog income to $3,000 a month – Focus on Pinterest strategy and creating great, evergreen content and start going heavy on affiliate marketing! 

Make $2,000 a month on furniture – In addition to this blog, I also flip furniture to make extra money! It’s really great money and I can work up to $2,000 a month! 

Get life insurance! 

Year 2 – 2019 

Start saving for a condo downpayment – I currently live at home with my mom and baby sister, and would love to soon own a condo that’s all mine. 

Get blog income to $5,000 a month – Release first digital product, keep focusing on affiliate marketing and marketing on Pinterest! 

Now that I’m debt free, start saving for retirement – I’m going to put 15% of my income into my retirement savings

Do you get the picture? You do this for all 5 years of the plan! 

Step 3 – Work towards it and don’t let anybody steer you the wrong way 

It’s very important to just work towards the plan and not focus on what everybody else thinks or what everybody else is going. You know exactly what you want and you now know what you need to get there! 

A 5 year plan can be the difference between success and failure for so many of us. It's so important that you have a 5 year plan for your finances!

Taylor O'Halloran

Hey! My name is Taylor O'Halloran and I'm a huge fan of saving money any way I can.I'm obsessed with dogs and I love all kinds of cheese even though my stomach hates it.  I'm a recent university graduate who just wanted to do her own thing and see what happens! Follow me on the journey!

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *