In all member states of the North Atlantic Treaty Organisation and the European Union, capabilitybased planning has been declared to be the basis for long-term defense planning. With the beginning of the new millennium, war conflicts and crises have been marked with uncertainty and unpredictability of environment security, which significantly complicates defense planning. Therefore, this paper will elaborate the long-term defense planning process, the purpose and the approaches that are being used. Also, this paper provides an overview of the challenges and threats of the modern age. The trend of focusing on “small wars” has shifted to the ability of waging conventional conflicts with an equal adversary, just as it did during the Cold War. In addition to the challenges mentioned, there are many threats that are not exclusively in the military domain such as climate change, illegal migrations, and global pandemics. All the above is putting pressure on defense budgets at a time when political elites and Western societies are not in favor of military spending. The paper covers approaches and implementation in defense planning. Also, the shares of budgets in different segments within one state were compared. Defense planning in the Republic of Croatia faces many challenges and there is much room for further progress in this area. As a conclusion of this paper, the answer to the question of whether capability-based defense planning is just a myth is being imposed.