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.

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Posted on September 28, 2012, in Economics and tagged , , . Bookmark the permalink. 2 Comments.

  1. “Most people don’t plan to fail, but they do fail to plan”……quote I heard somewhere once.

    I’ve always been a planner. Sometime written, sometime in my head. And it depends on the end goal as to how far ahead I plan.

    Retirement, for example, I started planning and working towards in my 30’s. Living below our means, setting funds aside, working towards being debt free, that type of thing. I retired at 60, wife at 59……retired meaning we no longer work for a paycheck as such, but work everyday on the homestead to provide for ourselves.

    Some goals are shorter term…maybe a year or so out. A hoop house to extend our gardening season, for example. Adding solar hot water heat to the greenhouse we built several years back. Adding more panels to the existing PV system. Building a couple more 3 cord wood sheds. That type of thing. You can’t run a somewhat self sufficient homestead and NOT be a planner. You always have to be looking ahead to next year, and how to improve, or what new shed to build and so on.

    Longer term thinking is: Should I build a small rental cabin to house a college student in exchange for labor around the farm. As we age, mowing, firewood cutting, that type thing will get harder for us to do, so having a resident source of part time labor would be quite handy. Been putting off doing it, still thinking about whether it would work or not, but may have to get started on it soon. Another possibility is if the economy gets as crappy as I suspect it will some day down the road, there will be a world of homeless folks willing to move in that cabin in exchange for some farm labor.

    My wife looked at me one day recently when I was in the middle of building a concrete form to pour a wingwall sorta thing on the end of a culvert that keeps washing out in heavy rains and says “What do NORMAL people do when they have a problem like this ?”……..and I replied “Heck if I know……I don’t know any normal people”…….meaning I only know folks like me, that are constantly looking ahead, and working to improve their lives. I don’t tend to hang around folks that live day to day, paycheck to paycheck, and never think about winter coming.

    • They always say lead by example. It sounds like you’re setting a good example for those that know you. Prior planning is the key to accomplishing anything but some people just don’t get it. I guess they’ll find out the importance in the next few years.

      Tom

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