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

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.

Generating a comprehensive 5-year plan requires elaborate groundwork on personal financial understanding. We have described the steps here to simplify the process.

Step 1: Set Some Realistic Goals

Goal-setting must not be so ambitious that it becomes next to impossible to achieve them in the upcoming five years, given your current income status. To ensure this, you should rightly assess your present situation and conduct sufficient introspection to identify the lists of ‘wants’ and ‘needs’. We miss this step each time and often establish goals by taking ideas from our peers. Thus the success rate significantly drops given everyone has a unique income potential.

Step 2: Make Sure the Goals Are Precise

Accuracy in goal prediction makes it easy to track progress later on. Thus financial advisors help you to attain specificity when you communicate your intentions roughly regarding time-bound goals. For instance, instead of just hoping to get a substantial appraisal in your current workplace soon, aim for an achievable target. It can be as simple as working to the best of your capacity to attain a salary hike of 15% by the end of the current quarter.

Step 3: Record Every Decision

Once an intention has been formally incorporated into a blueprint, it gets imprinted in your brain. You can revisit the written note or digital document as often as you want to affirm the sense of commitment. Ensure to store it in an easy-to-access location for optimal results.

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.

Whether it is from a social perspective or emotional aspects, a full-proof financial plan casts a positive impact in numerous ways. Some of them include:

1. Establish SMART Goals

As you cannot initiate a financial plan without adequate clarity in goal setting, you assess your requirements and personalise the goals. Moreover, you get the opportunity to revise your goals more often as you expect results within five years. If some of the ambitions are not aligned with available resources or values, you can simply rearrange the list of priorities to ensure maximum progress within a set period.

2. Become Habituated to Sound Financial Decision-Making

Handling personal finance frequently leads to problems as people tend to stay secretive regarding their financial well-being. Such tendencies give rise to even more significant issues whenever you make a big financial decision. Hence, having a 5-year financial plan carved out in advance boosts your confidence and provides you peace of mind.

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.