What’s Your Five-Year Plan?

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“What do you see yourself doing five years from now?”

Granted, this isn’t really an ice-breaker question, but whenever I get to know somebody decently well, I like to bounce this off of them and see how they react.

Most of the time, their response starts with….

*Crickets*

They have absolutely no idea!

People spend more time planning a vacation than they do planning their own lives!! Sad, but true…

What’s Your Five-Year Plan?

If you ever meet me in real life and want to avoid the *crickets*, then you’d better start figuring out your five-year plan!

More importantly than just not looking foolish though, realize that this is an incredibly important step to becoming financially successful. As Zig Ziglar always said, “If you aim at nothing, you’ll hit it every time.”

five-year planIn other words, if you just wander through life, you’ll definitely end up somewhere, but is it really where you wanted to be? Probably not! I mean, think about what you’re doing today. Do you have the life that you’ve always dreamed of? If not, then it’s time to start living your life with some intentionality. Make a five-year plan and then start taking action on it today.

I’m going to help get you started:

My name is ________. I’m _____ years old and my net worth is _______. My yearly income is _______.

In five years, I plan to:

  1. Raise my income by $_______ a year.
  2. Increase my net worth to $________.
  3. __________________________.
  4. __________________________.

Still need some help? Here’s our five-year plan:

My name is Derek. I’m 32 years old and my net worth is $$$ (less than a million ;)). My yearly income is $$ (less than $100k).

In five years, we plan to:

  1. Raise our income by $40,000 a year.
  2. Increase our net worth to $$$$ (near a million dollars).
  3. Start putting Addi through private schooling.
  4. Move into a larger house with acreage.

Map Out a Plan For Each Goal

It’s great to say that you’re going to increase your income by $10,000, $20,000, $40,000 (whatever it is), but how are you going to do that? Can you achieve that increase within your current place of employment (ie. are there advancement opportunities)? Or do you need to either switch jobs or start your own business?

If you said your net worth was going to jump $500,000, how in the heck is that going to happen? Is that windfall coming your way through investment returns? Or do you plan to dump $500k of cash into your IRA somehow?

The point here is, it’s great to have a goal and write it down, but you also need to work your way backwards to make sure it’s attainable. Otherwise, it’s just a hope…not a goal.

Here’s a real-life example:

Two of my goals were to:

  • Put Addi through private school,
  • and move into a larger house with some property.

To make this possible, Liz and I have decided to keep living frugally still today and save up as much money as we can by the end of the year. If all goes well, we should have enough to make another rental purchase with cash. Those two rental incomes will produce more than enough money to put two, maybe even three kids through private school.

In the meantime (since Addi is only 1-year-old right now), Liz and I will stash away the rental income for the next three years (likely totaling $60,000). On top of this, by continuing to live frugally, we’ll be able to save another $75,000ish from my day job.

That gives us $135,000 plus the sale of our current house (probably $165,000 by then), which means we can buy a modest $300,000 ranch house on 7-10 acres of land in our area.

BOOM! Now THAT’s a five-year plan! Haha…if all goes as planned anyway. But even if it doesn’t, we’ll still be much better off than if we made no plans at all!

When Will YOU Start on Your Five-Year Plan?

Are you thinking about your future? Have you laid out your five-year plan and specified how it’s all going to happen? If you haven’t, what are you waiting for?

  • an inheritance?
  • a stroke of luck?
  • someone else to do it for you?

None of these reasons (achhmmm, excuses…) are going to happen. If you want your life to change tomorrow, then you’re going to have to start doing something today.

Fill in the blanks, plan the details, and start kicking butt! Oh, and be sure to tell me all about it. I love to hear everyone’s success stories!

Have you figured out your five-year plan? Put it in the comments below!

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14 comments to What’s Your Five-Year Plan?

  • Good luck! I like your goal of a house + land. We recently achieved one of our goals when we purchased a house + 10 acres here in northern Michigan for a pretty affordable price tag! I look forward to following along and hope to see you and your wife achieving great things!

    • There is a house next door to us that we might be able to get a bargain on. Since we’re not too excited about landlording a property right next door to us, we might buy it for cash, fix it up, flip it, and speed up the whole process to 3 years instead of 5! Who knows, but it’s possible!

  • Great insight! This seems so simple, but yet it’s so important. As you say, I am amazed the extent to which many people have no sense of where they want to be financially in 5 or 10 years. I always had a certain mental expectation, mostly tied to my job, for where I would be financially in the next few years. This just seemed “normal” to me, and it wasn’t until I got into personal finance blogging that I started to realize that many, perhaps most, people don’t do this sort of planning (mental or written). I credit my “normal” mindset with allowing me to become a small business owner with the choice now of retiring at age 52, which is my current plan. I hope some people take this to heart and start their 5 year plans today!

    • Great work, Karl!

      There are so many people that just live in today, and then today, and then today… and before they know it, it’s 10 years from now and they haven’t advanced from their “today” way back then! To truly enjoy life, we must grow as people, as financiers, as leaders, as servants, etc. etc. Unless we’re considering the future, we’ll never have a better tomorrow.

  • Bruce

    Derek, as someone a bit older, it is fun to look back at plans / life goals and see how we did… or did our priorities and objectives change over time. I like the goal regarding net worth. We were focused on retirement date (age) and cash flow needed by that date. Obviously, this backs into a net worth number. Now, in our circumstance, we met this target, but also are working part time to supplement the cash flow stream. I do believe that part time work at younger retirement ages keeps one engaged and can be very fulfilling.

    Life will throw curve balls to you. For example, in the article, you mentioned two or three kids. As you know with Addi, there are many benefits from children, and the decision on how many kids isn’t just based on finances (of course, many times, the decision isn’t one that we make either– a child may be one of those wonderful curve balls thrown to you!). Other curveballs may be support of parents, job losses/relocations, etc. These will adjust plans, but as you know, that’s okay– the key is starting with a plan!

    • Always profound, Bruce. I think we’ll have to touch base again soon! Thanks for reading, oh and thanks for recommending my page to others (I heard from Stew recently)!

  • Good luck on your goals.

    We like to think of having a plan the same as having directions when your driving.

    Would you get in your car and just drive around, hoping to eventually get to your vacation? Or would you print out the mapquest directions, load it up on Google Maps or Waze, and go to your destination in the best route possible?

    Most people would choose #2 and that is the best way in life to get where you want!

    Thanks for the reminder.

    • You got it! Only a crazy person would just hop in their car and randomly start looking for their destination. But, people do this all the time with their lives. That’s maddening! What’s your five-year plan, MD?

  • Wow I need to do this. We did our goals for the year for the first time and have some ideas for goals for next year.
    Never thought about making a 5 year plan.

    Will have to review our bucket list and make a 5 year plan tonight!

  • Great post! I’ve been writing out my goals much more than usual and the effect has been impressive. I always knew I had a vision but specific deadlines, weekly and even daily goals hold me accountable.

    • Yeah, it’s amazing what they can do! I have a few big specific goals for myself for this site and because they’re defined and I look at them every day, I always find myself doing something to fulfill them! And THAT’s the power of the five year plan!

  • Nicole

    Having a plan and goals really are helpful. I am hoping my realist 5 year plan ends up being 3 years.I have got to make some things happen though to reach that goal. I can do it! Thanks for all the great articles Derek.

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