How To Plan For Your 5-Year Financial Roadmap

Creating wealth is a matter of discipline and using the right tools to achieve your goals. But it all starts with a roadmap that lists your goals. You don’t need to create a map for the next 20 years – start small with a 5-year plan thus:

#1 Articulate your goals.

Think about what you would like to achieve in the next five years, and list these goals. Some of them may be easier to accomplish in five years (buying a new car), while some will take longer (buying a farmhouse). Make a list of about 10 goals that you wish to achieve in 5 years, from having a certain bank balance to buying life insurance, and from diversifying your assets to enrolling your child in an expensive school.

#2 Assign monies to each goal.

Next to each goal in your 5-year roadmap, add the amount of money needed to make that goal come true. For example, next to ‘New car’, write Rs 7,00,000. Similarly, list down the money needed to realise each dream. Add up the total, and now start listing ways that will get you closer to raising the money. It could be as simple as investing in a liquid fund for a short term goal, or selling an asset you don’t need that can pay for one of your 5-year dreams. This step of the exercise lets you know what you are up against in terms of financial resolution of each goal.

#3 Invest in endowment insurance to mature at the right time.

The best way to plan for 5-year and 10-year goals to come true, is to look for instruments that will mature within than time frame. You can create a 5-year tax saving FD to mature at the end of your goal period to pay for one or more dreams. Or you can invest in the best endowment policy or money back policy to pay for another goal. Endowment policies pay a lump sum payout on maturity of the plan, which could be 8 or 10 years. In any case, it is ideal for realising a dream from your 5-year plan that does not get fructified and needs a longer time horizon.

#4 Create a retirement plan.

Apart from investing in endowment insurance, start planning for your retirement during your 5-year plan. Retirement planning should be a part of all your roadmaps till you actually retire. You can invest in a suitable pension scheme or a 15-year PPF account as some of the options to help you create a retirement corpus.

#5 Look for ways to reduce or eliminate debt.

Part of your 5-year roadmap should focus on eliminating debt to save more of your income to realise your goals. If you have expensive debt like credit card or personal loan, do ensure that you pay it off as soon as possible. Also avoid taking new debt for at least one year after closing an old one, to give your credit score time to increase.