How Long Is Your Planning Horizon?
By: Tom Chatham
The length of your planning horizon will determine how well you are prepared for the future. Most people think about next week or maybe the end of the month and the bills that are due but seldom think further than that. Some people think about a future vacation or their retirement plan contributions but while these things are good, they only offer you a plan for specific items not a whole encompassing plan for daily and weekly actions in the future.
A farmer for example must look forward to his crop rotation for the next year, the price of farm commodities in the future, the timing of planting and harvesting, his bill payments and loans for the next year and the livestock cycles he is bound by. He must always be looking at the next year of production and expenses to insure a smooth running farm. Without this type of planning it is easy for operations to be disrupted by unforeseen circumstances. If it is time to plant and you set no resources aside to buy seed, it could be an economic disaster for your farm.
In the military a planning horizon of 12 months is normally used at the unit level to determine training needs for the coming year. You are constantly looking at the 30, 60 and 90 day windows to refine and define specific elements for that time period. The closer the time period is, the more detailed the planning becomes.
Without this type of planning, it is difficult to succeed in life over the long term. Some people make out just fine without a comprehensive plan but most of these people most likely have a secure job and a good stream of income they always count on to insure everything functions properly. With a large enough income it is difficult for things to go any other way, but what if you don’t have a large income or it is cut off at some point. This is where a long planning horizon can help stabilize things and keep you on course to succeed.
If you are operating with limited funds and have a goal in mind for the future, your planning can get you there one step at a time. If you want to get chickens to help feed your family but cannot afford them now, a plan will help. If you analyze all of the things you need to raise chickens and list the cost of everything then determine how much you can put aside every month to pay for this goal, you will be able to determine at what point you will have the funds to do it.
If you want to purchase and equip a small farm in the future, your planning horizon may be years. It will help determine what you can afford and when you can buy it. It will allow you to make purchases every month that will lead you to your ultimate goal. By listing everything you will need and planning the time you will buy each item based on your income stream, you will know if you are making progress or if you are falling behind and can make adjustments to compensate.
Your planning horizon can also help determine what order things should be bought so if your plans change due to income you will have the most important items on hand to help enact at least the first part of your plan to help you move forward. Those that live in a city will not have the same type of planning needs as a farmer but it is important to know where you are planning to go and how you will get there.
The use of a spread sheet can be very helpful when making these types of long range plans. The listing of your monthly expenses and the determination of how much you have to utilize for future endeavors will be very helpful. Even if things change or take a turn for the worse, you will at least know where you want to go and it will keep you focused on your goals. Without long term goals you are setting out on a trip with no destination in mind and there is no way to know where you will end up. By maintaining a long planning horizon you will increase the chances you will end up where you want to go.