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What’s Your Five Year Plan?

Having a long range plan is critical to making correct financial decisions. Flexo at Consumerism Commentary has blogged about the latest buy vs. rent article to hit the streets, this time written by Liz Pulliam Weston [3]. Flexo writes one interesting tidbit that I found troubling… not knowing if he’s staying in an area “is the main reason [he hasn’t] purchased a house yet.” He adds: “I don’t know where I’ll be, and frankly I’m not quite happy I’m still in the same place I was three years ago.” This underscores the importance of having a plan.

Neither easy to devise or certain to finish, a long term plan for what you want to do is necessary for any meaningful financial decisions in your life. Be it five years, three years, ten years, or two – you need to know where your going in order to steer the ship.

What is my long term plan? My current plan is 3 years long and it involves completing a part-time MBA program at Johns Hopkins University. In that time I hope to advance in my career in my full-time job, continue to grow and nurture this blog, and otherwise enjoy my personal life. That plan means I’ll be here for the next three years at a minimum which makes it stable enough for me (even if it’s short by the typical rent vs. buy rule of thumb) to confidently purchase a home. If I was in Flexo’s position of not knowing how long I intended to be here, then I would also made the same (correct) decision he did and not purchase a home at that time.

It’s difficult for someone who has just left the academic (such as myself) or military system to figure out what their long term plan without sitting down and actually thinking about it. You find yourself without clearly defined goal posts and it’s hard to make decisions. In academia, you look towards graduation. In the military (I assume because I have no experience in this), you look towards the end of your service in however many years. Now, you can’t possibly look forty years and have your goal be retirement… it’s simply too far off.

Find some intermediary goals such as X years to a promotion or Y years to starting a family. It can be as short as 1 year to figure out if your current job or location is where you want to be or do you want to sample another part of the country or the world. After you figure out your long term goal, which can evolve, you can decide whether you should buy a house or make some other large decision (financial or otherwise).

So what’s your long term plan?