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Why should I have a five-year plan?

By George Hadgelias

Everything about our world is ‘now’. Entertainment at the touch of a button. Overnight success. Instant meals. 

It’s not hard to understand why we might apply the same thinking (or lack of it), to our financial and property lives. But finance experts say that’s a recipe for disaster.

Throwing in the towel after a year-long search for our dream home turns up empty, or beating ourselves up because we’re not saving fast enough does nothing to bring us closer to our goals.

If anything, it transforms them into unrealistic pipe dreams – judgemental ideals that make us feel inadequate and small.

Why should I have a five-year plan?

Taking a long-term view enables you to break down your distant property dream into a series of realistic goals. This not only helps you get organised, by providing a clear plan of action, but also increases the likelihood you’ll stay the course, by providing you with more opportunities to experience morale-boosting success.

According to Joe Sirianni, executive director of Smartline Personal Mortgage Advisers, five years is the ideal time over which to spread your property goals.

“Five-year plans require an ongoing commitment, but the end goal doesn’t feel like it’s going to take forever to achieve, because the finish line isn’t too far away,” he said.

Here are a few five-year plans that helped Sirianni’s clients bring their property dreams into reality:

Buying your first home

A young couple expecting their first child wanted to buy a house with a backyard near their family, but they couldn’t afford one.

Their five-year plan was to buy two small investment units and do their best to reduce their debt over that timeframe. After five years, they would either sell the units and buy a house, or use the equity in the investments to buy the house.

They ended up keeping the units and used the equity to buy a spacious home for the family.

Upgrading your property

A couple with three young kids lived in a 2.5-bedroom house. They wanted to upgrade to a 4-bedroom house, but couldn’t afford the renovation costs. So they purchased a $300,000 investment property (the rent almost covered the combined mortgage repayments) and started paying down debt with every spare cent. Five years on, they began their renovations, having sold their investment property for a capital gain.

Paying for retirement

A man in his mid 50s needed to boost his retirement savings. His goal was to own two investment properties that would pay him $1000 per week to live on when he retired at 60. To do this, he purchased five smallish investment properties. Six years later, he sold three of these properties and used the proceeds to clear most of the debt on the remaining two investments. At 60, he now makes $800 per week, after paying his remaining mortgages.

Moving to greener pastures

Another couple wanted to live in a suburb well out of their price range. Their five-year plan was to buy a fixer-upper for close to land value, pay down the debt and then build a new house on the block. They significantly reduced their mortgage and have just had their construction loan approved. They’re on track to move into their new house at the five-and-a-half-year mark.

“Each of these people talked to us about what they wanted to achieve, and used our advice to formulate their action plans,” Sirianni said.

What’s your plan?

While the above are all investment-centric plans, it’s important to understand that there’s no ‘right’ dream. The white picket fence, the gourmet kitchen, the block of units, or the rural retreat. All are respectable aspirations.

After all, the key to success isn’t found in the struggle to fit into someone else’s shoes, but in identifying what matters most to you. Once you’ve worked that out, you need to break down your goal into more manageable chunks and remind yourself that most things worth having aren’t attainable overnight.

So where will you be in 2023?

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