What’s your five-year financial plan?

If you want to take care of your finances, you need to draw up, and regularly assess, a five-year financial plan. It’s one of the key building blocks in progressing financially. 

We have a look at the value of aligning your financial plan with your goals, and we consider the questions you should ask when you set up or review your five-year plan.  

Tip: Invest in your future by considering these savings and investment plans.

Align your financial plan with your personal goals

Sheila-Ann Robey, financial adviser at Lifeguards, an affiliate of Liberty, says that the first step to creating a financial plan is to determine what your short-, medium-, and long-term goals are.

This refers to your financial goals, such as saving up for an emergency fund or making your first investment on the stock market, and your life goals, such as getting married. 

“Once you have set out both types of goals, you will be able to design a five-year plan that will enable your dreams to become a reality,” says Robey.

She adds that your personal circumstances will determine what your financial plan will look like.  

“Many South Africans struggle with debt, and a five-year debt management plan may be the most suitable option for them. On the other hand, if you’re not overindebted, and you want to purchase your own property in five years, your financial plan should be devised accordingly,” says Robey.  

READ MORE: 4 Examples of good debt to help build your credit score

How to create a five-year plan

Robey says that you should start by speaking to a professional financial advisor, so that a customised and adaptable plan can be put in place for your specific objectives.

“Every client, regardless of their objectives, benefits from drawing up a monthly budget and doing annual personal spending audits,” says Robey.

She recommends considering these questions:

1. What do you want to achieve in five years?
2. How much do you have to achieve it with?
3. What obstacles will prevent you from achieving it?
4. What actions can you take to limit these obstacles and increase what you have to achieve your objectives?

“When you have a five-year financial plan, you are so much more likely to achieve your objectives,” says Robey.

“The plan itself does not guarantee financial success; committed action to the plan does. If you do have an adviser, make sure you consult them regularly, so that you can ensure that your plan remains relevant to your reality,” says Robey.

Building a respectable credit score is an important financial goal – click here to see what your score is.