Making long term plans can be hard. Making plans with money can be hard. So why wouldn’t you want to make a five year financial plan?
I use to think that financial plans were only for rich people to have. The truth is financial plans are for everyone.
Why you need financial plans
Thinking through what financial goals you want to accomplish over the next few years is extremely valuable.
It gives you a guideline to help out with life big decisions.
And you if don’t think money should be involved in those situations you are wrong. Think of every life change that has to happen to you I guarantee you they all have financial implications.
If you got married, how are you going to handle finances as a couple? Buying a house it will affect you financially. Same with having kids it will also change your financial situation.
This is my first financial plan I made. It happens after I was offered a permanent part time position when I was working full time as a causal. What is better have a position with benefits or working more hours?
While I was thinking that though I stumble across a post about five year financial plans. Partly as procrastination and partly for help making a decision I came up with a five year financial plan.
I used this method here. Which made it easy to come up with a financial plan.
Now I don’t think I’m in a position where I can teach you how to create a financial plan yet. This is only my first one after all.
Instead, I thought to share my five year financial plan with you.
So without further ado here is my number one goal for the next five years.
To have multiple income streams including passive streams
I don’t want to be reliant on anyone one thing.
I heard somewhere that the average millionaire has seven streams of income. That sounds good to me.
On a more personal note. I don’t want to work for someone else forever. At some point, I would like to do something on my own.
I’ve also mention passive income streams in my number one goal. The logic behind that is I slowly get away from exchanging my time for money. Passive income will let me do that.
My main reason for my goal was to be independent. I don’t want to need help financially. So that why I working towards financial independence.
You might have heard of the FIRE movement before. For those not familiar it stands for Financial Independence Retire Early.
Now I not sure on the retire early part yet. I’ve only been in the workforce for a few years. And wouldn’t know what to do if I wasn’t working on something.
The financial independence part of it appeals to me for one reason I like having choices.
Choice are good because I don’t know what going to happen in the next five years. This is a crazy and unpredictable world we live in.
I might lose my job. I might get married. I might get seriously injured and not be allowed to work. I might find my dream job
A lot of things can change in five years. Do I think I’ll reach financial independence in the next five years? Probably not.
Since the future is hard to predict I try to make choices that will help me in the future. Having a bit of financial freedom I believe will help in the future.
Now, of course, I don’t know for sure this will work. If you need evidence first check back in five years.
How do I plan on achieving the goal of multiple streams of income?
There are a few different ways I plan on going about it.
My first thing is to cut my spending, so I have more money to save and invest. I’m lucky enough that I currently not in debt, I want to stay lucky and have enough in savings that I don’t need to go into debt.
Part of the reason I’m starting from such a good position is due to my budget. Here how you can set up your own budget.
But spending less in and of itself won’t help me reach this goal. I also need to be setting up other income streams.
I’m starting this blog to give myself a platform and grow my opportunities. And yes ideally I would also be making money off this blog.
This is my second blog and my first blog did fail so we’ll see how things go.
Another way to grow my income streams would be to take all the work I can get. Whether it more hours at my day job, babysitting or cleaning.
Having more money coming in will help me reach my goals faster.
Now not all of these might sustainable income sources but they will give me extra money to help build these income streams.
SMART goals in my five year financial plan
Well obviously the more places I’m getting money from the better but that isn’t a SMART goal. To make this all a bit SMARTer lol, I’m writing some more detail goals.
So by the end of year 1, I want to have 3 income streams of which 2 are passive.
At the end of year 2, I want to have 5 income streams of which 3 is passive.
By year 3, I want to have 7 income streams 4 of which are passive.
At the end of year 4, I would like to have 10 income streams of which 6 our passive.
And for year 5 I would like to have 13 income streams and for 9 of them to be passive.
All the goals above are long term. So to keep my motivation up and make sure that I’m heading in the right direction I thought I make some short term goals.
That would include earning my first $100 in passive income. Than upping that amount to $500, $1000 and even $5000.
Having my first sustainable income stream set up and earning me money.
I also made a few broader goals like earning my first $100 outside of my day job than upping that amount.
Have my monthly income grow to $3000, $5000, and higher.
Increasing my saving rate to 50%.
Every time I hit one of those goals I will have more money in my pocket which means more money to build income streams. Then ideally, that begins a cycle in which more money makes me more money.
As you might have noticed I don’t really have any solid plans on how to achieve these goals. That isn’t to say I haven’t thought about it. The plan is not fully formed yet.
My plans change frequently in daily life so I can only imagine it will get worse the longer the period of time.