Creating a 10-year financial plan requires a long-term view. Planning a decade into the future could encompass goals like buying a house or sending a child to college, but such a length of time will also be key to your lifelong financial health and stability. It will not only impact your retirement, but can also play a key role in helping you prepare for retirement. Creating a 10-year financial plan can help set yourself up to make smart financial decisions, grow wealth and achieve financial aspirations.
If you’d like guidance or personalized recommendations when it comes to building your own five-year financial plan, consider reaching out to a financial advisor.
10 Things That Should Be Part of Your 10-Year Financial Plan
Creating a comprehensive 10-year financial plan is essential for achieving long-term financial stability as well as reaching your financial goals. These 10 components can help you build a strategy to ensure your financial success over the next decade:
- 1. Set financial goals: Determine what you want to achieve over the next decade. Maybe it’s buying a first or second home, starting a business, or saving for your children’s education. Having specific goals will give you direction and make it easier to track your progress. It can also motivate you to make more-informed financial decisions.
- 2. Track your spending and create a budget: Determine where your money is currently going, and create a budget that will help you reach your long-term goals. For example, if you notice you spend a lot of money going out to eat, you might consider cooking dinner at home more often, reducing your expenses so you can put more towards your goals. You can also utilize budgeting apps or spreadsheets to keep you on track.
- 3. Eliminate high-interest debt: High-interest debt can significantly hinder your financial progress, making paying off debts such as credit card balances an important part of a 10-year financial plan. Reducing your debt frees up more money for savings and investments, accelerating your progress toward your goals.
- 4. Save for emergencies: Part of being financially stable is having an emergency fund. Unforeseen medical bills, car repairs or needing to buy a new car, or losing a job can derail your financial plans if you’re not prepared. The last thing you want is to have to dip into a retirement fund or accrue a large amount of high-interest debt in the event of an emergency. Many advisors recommend having three to six months’ worth of living expenses in an easily accessible account that you can rely on.
- 5. Plan for retirement: Planning for retirement should be a priority when you’re putting together your 10-year financial plan. The earlier you start, the more time your investments have to grow. Consider maximizing your contributions to retirement accounts such as 401(k)s or IRAs to take advantage of employer matches and tax benefits.
- 6. Plan for taxes: Reducing your tax liability can help you further increase your savings. One way you can do this is by taking advantage of tax-advantaged accounts like retirement plans, health savings accounts (HSAs), and education savings accounts (ESAs). You can also use tax-efficient investment strategies, such as holding investments for longer than a year to benefit from lower long-term capital gains taxes.
- 7. Invest toward your future goals: Investing is perhaps the most powerful tool we have for achieving our long-term financial goals. You can choose from stocks, bonds, mutual funds and even explore alternative investments and real estate. You’ll also want to consider your risk tolerance and time horizon when choosing investments. If you need help choosing investments that align with your situation and goals, consider reaching out to a financial advisor for help.
- 8. Diversify your investments: Diversification is key to managing risk in your investment portfolio. Spreading investments across different asset classes, industries and geographic regions reduces the impact of any single investment’s poor performance. It also helps protect your portfolio from market volatility and enhances long-term returns. For example, a mix of domestic and international stocks, bonds and real estate can provide a balanced approach, providing both growth and stability.
- 9. Enhance your financial well-being: Your financial well-being involves more than just saving and investing, it also includes improving your financial habits and literacy. You can educate yourself about topics such as budgeting, investing, and retirement planning by attending workshops, reading books, or consulting with a financial advisor to expand your knowledge.
- 10. Estate planning: Estate planning is often-overlooked, but it’s an important part of a 10-year financial plan. You can ensure that your assets are distributed according to your wishes by creating a will, setting up trusts, and designating beneficiaries on your accounts, depending on your assets and situation. You could also consider appointing a power of attorney and healthcare proxy to make decisions on your behalf if you become unable to do so.
What’s Next?
Once you’ve created a 10-year financial plan, you’ll want to take time to regularly review your progress and make any necessary adjustments. You might have to make adjustments for a variety of reasons, such as market or economic changes, or life events like having a child or changing a job.
Financial tools and resources such as budgeting apps, spreadsheets and online calculators can help you track your progress toward your goals.
Bottom Line
Building a 10-year financial plan is an integral part of securing your financial future. By managing debt, preparing for emergencies and investing, you can create a strong foundation for your long-term success. Regularly reviewing and adjusting your plan according to life’s changes can help keep you on course and in pursuit of your goals and financial security.
Financial Planning Tips
- If you’re creating a financial plan, a financial advisor can help. Finding a financial advisor doesn’t have to be hard.SmartAsset’s free toolmatches you with up to three vetted financial advisors who serve your area, and you canhave a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals,get started now.
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