Creating a Five Year Financial Plan that Works


When people make goals without considering their financial commitments, this many times leads to failure. This is especially true when people try to create a five year financial plan. While success cannot be measured by finances, having money most definitely makes life easier. When it comes to creating a plan that works, the most important thing to do is make a plan that is realistic. Let’s take a close look at how to create a five year financial plan that will actually work.

Step #1: Take a Financial Assessment

Many people have no clue as to what shape their finances are in. In fact, many people have a completely distorted view of their money-situation, not realizing how awful it is until it is too late.

To stay ahead, people must assess their financial situations, taking into consideration much more than just their monthly expenses. The most important thing to do during a financial assessment is to be honest. People must look beyond their monthly expenses and income level, focusing on their overall financial status.

When assessing the finances, people must take into consideration all of their credit cards, all of their mortgages, including first, second and third, and all of their student loans. In addition, it is important to look at any investments, assessing how the investments perform and whether or not they are worth staying tied to.

Step #2: Create Goals

By gaining a vivid understanding of one’s financial situation, it now becomes easier to set realistic goals. It is important to keep in mind that a person may not know where he or she will be working or living in the next five years, but it is still possible to set financial goals that can be accomplished.

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The number of one thing a person can do to improve his or her financial situation is to get out of debt; this should always be the first thing listed on a five year financial plan. When it comes to paying off debt, it is first important to pay off credit cards and mortgages. After doing this, student loans can be paid off. The only reason student loans are usually left to pay off last is because they normally have a very low interest rate associated with them.

No matter the goals that a person sets for him or herself, it is important to write them down; this helps to reinforce the goals. Plus, as each goal is accomplished, it can feel exhilarating to cross them off the list.

Step #3: Talk to a Financial Planner

If at anytime it becomes overwhelming creating a five year financial plan, it is wise to speak with a professional financial planner. This type of professional has the knowledge and experience it takes to help clients create a financial plan that will work.

Step #4: Obtain Life Insurance

All financial plans, whether they are for five years or 25 years, should include a life insurance policy; this is especially important if a person is the main income supplier of his or her family.

A life insurance policy should be well planned out, providing beneficiaries with plenty of money to take care of all their basic needs in the event that the policyholder was to become deceased. It is important to remember that a life insurance policy is not supposed to make beneficiaries rich. Instead, it is meant to be a financial cushion.
Step #5: Obtain Education

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Managing one’s finances can seem somewhat complicated, especially if no financial education has been obtained. By investing in financial books, knowing the ins-and-outs of one’s financial state can be somewhat easier. Other great ways to obtain a financial education includes attending seminars and listening to financial experts.

Author: Brenda Panin – Follow her on Google+.

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