The next five years are, as they say, up in the air. You have no idea what could happen—but you have plans about what you want to happen. You often daydream of where you might be and what you might accomplish in that time. That includes finances. The good news is you can plan financially for the next five years, if only loosely. Here’s how.
Create a Budget that Leaves Nothing Out, i.e. Groceries, Entertainment, Bills, etc.
What are your current expenses? Where do you foresee your expenses in five years? Make a list of your current and foreseeable expenses per month for the next five years. Leave nothing out. Do the obvious ones, like bills and groceries, then factor in the indulgent ones, like entertainment.
Put 20% of Each Check into a “For the Future” Fund—More if You Have the Cash to Spare
When planning for your future, preparedness is key. You never know what unexpected scenario could roll up and blindside you financially. Keep a “for the future” “just in case” budget that consists of 20-percent of every paycheck you receive. Have more to spare? Put more in but make 20-percent your baseline.
Tip: Just in case funds and emergency funds are two different things. After you get 20-percent in your just in case fund, throw another 10-percent into your emergency fund for any medical issues you might experience throughout the year.
Make a List of Your Debts from Most Important to Least Important and Eliminate Them, one at a Time, Until They are Completely Gone
What does your debt look like? Are you drowning in student loans? Or are you getting into the hang of having your first credit card now? Or are you finally talking to a real estate agent Lake County FL for your next big move?
Wherever you are in the financial world, you have debts of some kind, and those debts need to be paid. Make another list of your debts, from most to least important. Then work on them one at a time to eliminate your debts.
Tip: If you are great with odds and numbers, invest in something that could double in the next five years. Stocks, for example, are unpredictable but fun ways to rack up a bit of cash for your future.