The Five-Year Plan To Financial Independence

For some of us, plans are the foundation on which we build our lives. We’ve all heard mention of the ‘five-year plan’, and it’s an outline many of us follow. Put simply; a five-year plan is a brief overview of what you would like to achieve in the next five years. The points which appear vary, but they often include things such as get a promotion, children, and so on. 

But, few of us consider applying the five-year theory to other aspects of our lives. Obviously, a brief outline is useful, because it allows for change. But, if you want to achieve particular goals, it's worth applying the plan to an individual aspect of your life. 

We thought we’d test the theory by implementing a five-year plan to financial independence. Many of us are financially dependent for a large chunk of our lives. Most of the time, we’re dependent on banks and money lenders. It’s unpleasant when your finances are tied elsewhere. Hence, most of us would like to regain independence. So, what would a five-year financial plan look like?

Year 1 - Clear your debts

The first year should involve clearing debts. It may be that you develop a substantial monthly repayment. If you have a variety of different debts, it may involve turning to bill consolidation loans to make the matter manageable. Either way, set about clearing your debts as soon as you can.

Year 2 - Get a better grip on your finances

Then, get a grip on your finances. Take this time to calculate your yearly earnings, and get an idea of how much money you have on a monthly basis. Make detailed notes, and keep them safe. 

Year 3 - Start building your savings

Once you have an accurate idea of your finances, you’ll be able to start building savings. To ensure you build a decent amount within your five-year plan, you need to save as much as possible each month. But, you don’t want to put yourself in poverty while doing so, hence you need to refer back to those notes at every turn.

Year 4 - Increase your income

We would all like to see our incomes increase with time. On an essential level, this is to keep up with rising living costs. But, in a fundamental sense, this is how most of us would like our lives to go. Increasing incomes are a primary goal. How you choose to increase yours is up to you. You may want to aim for promotion at work, or develop a second income. 

Year 5 - Spread your money

By the end of your plan, you should have accumulated a decent sum. Once that happens, it’s important to spread your money. If you have a few different nest eggs, you’ll be in the best position. Place money in stocks and shares, insurance policies, and pension schemes. This way, you stand to make more and can rest easy that disaster in one area won’t affect everything else.