One of the problems that has been cropping up lately is the fact that people say that they want to retire in five years, even though they only have enough savings and cash in their accounts to last them two or three years (or less) in retirement. Realistically, can you save a 30-year retirement in five years?

While it's possible (you could choose an amazing stock, or win the lottery), it isn't exactly probable. And that leads to one of the problems that many of us have with planning our financial goals: Wishful thinking.

Get Real about Your Finances

In order to make an effective financial plan, you need to get real about your finances. You need to be realistic about where you stand right now, and you need to be realistic about what actually needs to happen if you want to make your financial dreams come true. The problem is that we are often in denial about both of those things.

First of all, too many of us don't recognize that we're in financial difficulty. We don't realize how much debt we have, or how little we have saved up. To a society that thrives on instant gratification, and that has a fairly low savings rate, having $10,000 or $20,000 in an account seems like a huge accomplishment. And it is a decent financial accomplishment. Unfortunately, it's not enough to retire on, or to help you meet many other financial goals.

When you think about how much debt other people must have, it doesn't seem so bad to have $15,000 in credit card debt. However, that is a pretty hefty sum, and the interest payments are draining your wealth away each month. Rather than trying to say that you are “average” when compared to others in your situation, you need to take a realistic view of things. Chances are that your debt is holding you back, and that you aren't saving nearly enough.

Be Prepared to Make the Tough Choices

Too many of us think that we can fix things by changing a few small habits, and adding an extra $200 to our retirement accounts each month. Unfortunately, this isn't realistic. You aren't going to be financially free in five years if you decide to put $100 extra toward your debt each month, and another $200 in the retirement account. Instead, you have to be prepared to make the tough choices.

Honestly look at the reality of your situation and recognize that you might need to make some serious changes to your life. You might need to live more frugally, sacrificing some of what you enjoy. You might also need to look for ways to earn more money so that you can increase your savings and reduce your debt faster. When you are in a financial hole, it's hard to get out. We like things to be relatively painless. Many of us have bought into the idea that we can fix our finances while still doing largely the same things we have done for years. This just isn't the case. It's time to get real about your finances, and what it takes to reach your financial goals.

Realistically, can you save a 30-year retirement in five years? It's time to get real about your finances, and what it takes to reach your financial goals.

About Tom Drake

Tom Drake is the owner and head writer of the award-winning MapleMoney. With a career as a Financial Analyst and over eight years writing about personal finance, Tom has the knowledge to help you get control of your money and make it work for you.