The 5-Year Plan

Many businesses have 5-year, 10-year or 15-year plans. But very few individuals or families do these types of plans for themselves. I want to change that! I think they are useful in so many ways. I have broken these benefits down to the 4 P's:

1) Prioritize
2) Plan
3) Pay
4) Picture

When you prioritize what's important to you, you can plan for how to pay for it, and turn that picture you have of your future into a reality.

Start with the 5-year plan. Make a list of all the things you expect will happen in the next 5 years: births, birthdays, vacations, graduations, career changes, raises, pay cuts, reunions, new cars, appliances, house maintenance, etc. Next, write down your current expenses.

Now all you have to do is plug in the years.

Look at my 5-year plan example below to see how you do this. You put your expected income, expenses, and then the costs associated with expected life changes (like a graduation or change in career) down on a chart. This lets you see exactly how these life changes affect your budget. Do you have enough money for when that time comes? Or do you need to cut your current expenses to plan for that day?

Writing down and then agreeing on what your family will fund for the next 5 years allows your family to prioritize. What matters to each of you? When I met with the Carolus family for my new show "We Owe What?" there was some debate between Tammy and Ed as to where they wanted to put their money. This type of debate is great and so important. It is key here to listen to everyone invited to the discussion. When I say listen, I mean really listen- don't just assume you know what they are going to say and shut down. Insist that you are granted the same courtesy. Get the kids involved too! Tammy and Ed were surprised to learn that their daughter Beth put volleyball over racecar driving. What you will get from the discussion is support from the whole family. Everyone knows how and why decisions were made.

Remember, this is not meant to discourage dreams. It allows you to plan for them. Will you need extra funds in 3 years to pay for that dream trip to Italy? Do you want to retire earlier? Seeing exactly where you are, financially, the year you want to act on something is fabulous. You will see "Yes, I can afford it" or "I need to work a side job to make that happen" - either way you are creating your own destiny!

The plan allows you to see how you will pay for things. Do you have enough in savings, or should you cut something else out so you will have enough? Is this something you want to buy on credit? How much of a burden will that add to the years ahead? You will see it all!

Finally, this is a place for you to picture the type of future you want and then come up with the best plan to pay for it. I encourage families to picture their future -- it makes the work we do today easier because we are reminded of why we are working so hard!

Click here for an example of a five-year plan.

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