How to Stick to a Personal 5-Year Financial Plan for Best Results?

source: eringobler

There is no denying the fact that financial stability is a key determiner when it comes to the practice of leading a good life. Having a personal 5-year financial plan helps you address your aspirations and simultaneously achieve the daily milestones.

Before we begin discussing methods on how to prepare a personal financial plan, it is necessary to understand its importance. To know these things in more detail, continue reading.

A 5-year financial plan includes a collection of strategies required to accomplish all the goals within the projected period. Nowadays, you can even find a 5-year personal financial plan template on several websites, which are immensely helpful and affordable.

If you wish to take it a further step ahead, then consider visiting financial consultancy providers to get a more customised solution on:

• Debt clearance
• Cutting down utility expenses
• Finding better measures to save for contingency fund
• Looking for profitable investment opportunities
• Devising new income streams as per your skillset, etc.

When you set up a personal 5-year financial plan, you already have the steps required to accomplish the end goals summed up in your head. These guidelines urge you to take actions aligning with long-term plans.

Also, before you decide to follow these outright plans, you generally consult with your family members to get their moral support. Sharing these goals makes you feel more accountable, which in turn assists you in staying disciplined with your spending habits. Lastly, writing down your goals keeps you motivated. Additionally, you do not forget midway through why you decided to make such a plan.

Step 1: Set Some Realistic Goals

Step 2: Make Sure the Goals Are Precise

Step 3: Record Every Decision

Step 4: Address All the Key Elements While Making a Plan

Now, this is actually where you step into the explicit personal 5-year financial plan creation process. First, you calculate your approximate net worth. To find this, you should know the total amount of available funds; get a precise idea of existing debts and insurance policies.

Then you must devise investment ideas to create a revenue source for all your needs. Finally, you must plan for retirement funds and long-term goals following any conventional savings principle that suits your income status.

1. Establish SMART Goals

2. Become Habituated to Sound Financial Decision-Making

3. Helps to Establish Performance Standards

When referring to performance standards, we mean deploying various ways to track progress in savings, expenses, investments, etc. Some ideal benchmarks that can be set up while beginning a course of action as per a financial plan include:

• Completing 50% of the house loan repayment by the end of 10 years
• Securing a 15% increment in savings rate by the age of 35
• Procuring family health coverage of ₹10 lakhs by the end of 2027, etc.

When set up in advance, these definite goals ensure smooth progress towards the end goal. Also, you stay motivated as you break the targets into smaller segments instead of getting demotivated while chasing the bigger goal.

First, you must ensure that the goals are written on paper or saved in a document format. Then you have to review those elements against your performance for the past few months.

You can do this manually by maintaining a log or downloading and filling out a personal 5-year financial plan template. The idea is not to lose the urge to work towards your goals systematically. If you choose to go passive for long, it will not only hamper the chances of spotting an advantageous opportunity but may also result in substantial financial loss. If the latter scenario occurs, your long-term goals will get delayed causing acute financial hardships like increased dependency on loans.

A personal 5-year financial plan ensures your resources get to work evenly to realise multiple goals simultaneously. Therefore once you have drawn a plan, the idea is to keep on reviewing it and making necessary changes. As the 5-year period is an ideal timeframe to cast meaningful changes in one’s financial standpoint, you will eventually appreciate the pronounced benefits.