When it comes to short term financial goals, the most important thing is that they are achievable. There are a lot of short term financial goals out there, and it’s easy to get lost in thinking that you should be trying to achieve them all at once.
Without much thought to how they will help you in the future.
Bills, debt, and day to day demands can take over your life and make it difficult to identify what you want out of the future. However, setting and achieving the right short term financial goals sets you on the path for long term financial success.
Don’t worry about setting the exact, correct, short term goals for you as they change over time, but planning for them will help ensure that your short-term financial situation aligns with your long-term financial plan.
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What are short term financial goals?
Short term financial goals are the aims or targets that you have for your money within a shorter timescale than most of your other financial goals.
For me, short term means anything from a few days up to 12 months. I would include buying an engagement ring and paying off a $500 loan as short term finance goals.
What is the importance of short term financial goals?
The importance of short term financial goals is that they can help you to make your other, longer-term financial goals a reality. For instance; you need to have saved up at least $2000 towards a down payment on your first home in 6 months.
This is a short term financial goal which can impact on your long term future plans for owning a vacation home. It’s your first step into real estate, a vacation home could well be your second.
how many short term goals should you focus on at any one time?
The key to successful goal setting is to remain focused on them. Too many savings goals dilute your ability to keep focused on what you need to do to achieve your goals. The less options the better.
Being realistic, because we all want to achieve so much with our money immediately, I think goal setting should be limited to a maximum of 7 short term goals. Any more and you will just get confused.
9 solid priority short term goals
1. create an emergency fund
An emergency fund is a separate savings account used to cover emergencies, like unexpected hospitalization or a car repair you hadn’t planned for. This allows you to pay for these expenses with your emergency funds without resorting to borrowing money at high interest rates.
If you are living paycheck to paycheck or have a high credit card balance, then this is the first goal to work on.
It is hard enough trying to make ends meet with high living expenses and no back up money. You are just a step away from going further into debt if an emergency happens.
Establishing an emergency fund of $1000 is the first step to take in making sure you have money set aside for unexpected expenses. With this fund, you will be able to avoid high interest rate borrowing and pay cash for your emergency needs without incurring debts.
There are many ways that you can save up an emergency fund:
- Cut back on spending
- Take on a part-time job
- Save your change in jars or other containers
Once you have saved up an emergency fund, it is important to not touch the money. It should be used only for emergencies and never for frivolous spending.
If there’s any temptation to use this money just because, move the money into a high interest rate savings account and keep it there for emergencies.
2. Get rid of your debt
It may seem like a huge step, but it’s probably not as difficult as you think. While debt can be overwhelming and anxiety producing (especially if you are paying on multiple accounts), the first step for successful debt reduction is committing yourself to making that goal your priority.
Once you make this simple mental shift, instead of looking at big piles or numbers, you will start to see the way forward.
One of the biggest mistakes people make with debt is assuming that the process is all about interest rates and minimum payments. While those things are important, what also matters when working toward short term financial goals is your timeline.
You have to understand how long it takes for you to pay off different loans and how long until your short term financial goals are met.
Now that we know why paying off debt is a great short term financial goal, let’s talk about how we can make that happen. First and foremost, you have to stop using your credit cards.
It’s hard at first because it is so easy to swipe that small piece of plastic (and get immediate gratification) but improving your credit score over time will be worth the sacrifices in the beginning.
You need a step by step plan for paying off all your loans (including student loans). There are 2 debt payoff options that most finance gurus talk about.
You can either use the debt snowball method – pay off the smallest loan amount first then move onto the next smallest. Or the debt avalanche method – pay off the loan with the highest interest first.
Whichever method you choose, just know that there are many benefits to being debt free.
3. educate yourself about personal finance
Reading books and articles or taking online courses will help you learn more about budgeting, insurance needs, retirement saving and investing. All really important areas to understand if you are to achieve financial freedom in the future and live the life you want.
I’ve read a lot of personal finance books in my time and unfortunately many of them are so dry! It’s difficult to keep reading when you are getting bored!
I recommend grabbing a copy of one of these books to beef up your financial knowledge. I’ve read them all and they’re not boring or dry (thankfully).
4. save for a family vacation
Probably the most common short term financial goal that a family creates is saving for a vacation. Because we all want time away from work pressures, life logistics and maybe some extra sunshine. To create a goal for your vacation you need to consider a few things like:
- When you want to take your vacation
- How far in the future this is
- Your overall budget (remember to include spending money)
Once you’ve thought your vacation plan through the next step is to work out how much you need to save each month to make it a reality. This is quite easy to do. Divide your overall budget by the number of months you have before you plan on taking that vacation.
5. household budget
A budget that works for you is an essential goal for everyone. Without a budget, there will be no plan for how to save and spend your income. This short-term goal can help prevent long term problems with debt and overspending.
A household budget should cover everything that happens in your home, from groceries to car repairs. The first step is making a list of all the things you spend money on each month. Then, compare this with your actual income and consider the following questions:.
- Do you have enough income to pay all your bills?
- Paying off your student loan debt?
- Reducing your credit card debt?
If not, then you may need to reevaluate your budget in order to prevent overspending.
Budgeting is an essential part of financial planning and the benefits of budgeting become clear very quickly. It helps you get a handle on your income and expenses, it makes sure that the money flowing in and out of your household stays balanced.
Without this financial balance, major finance decisions such as a down payment for a home or setting up college education investments become much more difficult to make.
6. Get the correct insurances for your life stage
Getting the right insurance policies to cover every eventuality is so important and needs to be a short term finance goal for us all. For instance, if you are married with kids, then getting life insurance for yourself that will support your family in case something happens to you should be one of your most pressing goals.
It doesn’t matter what stage of life you are in. Everyone should get life insurance of some type – term, whole or universal.
If you have dependants then critical illness insurance is a must. This type of insurance will give you a lump sum if you are diagnosed with a critical illness such as cancer or heart attack and is so important for protecting your family’s future in the event that something awful happens to you.
Unemployment is a big consideration as well. If you have a career that could be at risk, or a college education to save for that only your income can cover, then insuring yourself against unemployment is critical for your short-term financial planning as well as your long term future financial stability.
Getting the correct insurances for your life stage should always be one of your top priorities because it gives peace of mind but also secures your future.
7. Organise your end of life documents
It might feel like a morbid subject but organizing your financial matters in case of death or life changing injuries is something that needs doing sooner rather than later.
Every adult needs a will and power of attorney for both financial and health matters at some point in their life but it is often overlooked.
The reason for this is that most people do not want to think about these things and prefer to ignore them. It might feel too much like planning your own funeral or death and who wants to be doing that?
The truth of the matter however, is that ignoring these things can cause a lot of stress for your family.
Make sure that you have all these documents in place and just think, if anything should happen to you, they will thank you for saving them from any unnecessary hassle.
You should also consider who is going to manage the money you leave behind, to settle your estate, and what happens if you need long term care. This is something that can be a source of ongoing conflict between family members so it’s worth planning ahead.
You cannot plan or foresee when you might die or have a catastrophic accident so putting off getting these documents set up is not an option.
Even singletons need to consider what will happen to their money and possessions when they die, so this is one of those essential goals you need to finalize sooner rather than later.
8. Pay for Christmas with cash
Christmas happens every year so in theory it doesn’t need to be put on a credit card and debt does not need to be the result of the festive season.
However, too many of us ignore this fact and end up scrabbling about trying to pay for everything out of the spare change we have in October and November.
This year set yourself a short term financial goal of saving up in advance of Christmas enough money to ensure that you can pay cash for all your presents and still eat throughout December without going into debt or using credit cards.
If this sounds like an impossible dream you’re not alone in thinking that. However, if everyone had this as a financial goal then the whole country would be better off because there would be less credit card debt.
The important step is to start saving now so that by December you have saved enough to spend on Christmas presents without going into debt.
9. Reduce expenses
Now is the best time to focus on reducing your expenses, one bill at at time. This is an extremely worthwhile goal as it frees up money that you can use elsewhere in your budget to achieve other goals you have.
Goals such as paying off debt, saving for a vacation or even money toward your eventual retirement.
Pick one bill and see if you can get the same for cheaper. Especially if it’s a utility bill or an insurance. These are ripe for negotiating with either your existing provider or a new one. With utilities and insurance, it’s also easy to switch providers.
You can call the customer service number on their website or just go to a different provider altogether if your are unhappy with who you have now.
Make your goals SMART
SMART is: specific, measurable, attainable, relevant and time-bound. A goal is not a SMART one when it’s too broad or if you don’t know how to measure your progress after the first few steps.
For example: “pay off my student loans as soon as I earn more money” isn’t a SMART finance goal because it can’t be measured. You need to define when you will be debt free and exactly what you will be paying toward your loans each month.
example of a smart financial goal
“Pay $50,000 off my mortgage in 6 years (give a specific date)”.
- It is specific,
- measurable (we know when it will be reached and how much we need to save every month),
- attainable ($50,000 is a large amount money but you know your finances better than I)
- relevant (you want to put this money towards reducing your mortgage)
- and time-bound (you have a date by which you plan on achieving this goal).
3 good short-term smart financial goals examples
- “By next June, I will have paid $2000 off my credit card debt”.
- “In 6 months time (give date) I will have increased my credit score by 100 points” LINK
- “I will save $500 in the next three months (give a specific date).
This is specific (I will save 500 dollars) and measurable (it’s not just “save more money”). It also has a defined timeline, which means you’ll be able to track your progress as you work toward achieving it. Finally, it’s realistic and achievable (presuming your finance calculations are sound).
Examples of very short term goals you can set
Here are some examples of very short term goals you can set to achieve quick wins and gain motivation to keep going and achieve your financial goals:
- Save $100 in a month
- Start a $100 investment account
- pack your lunch for work for a whole month
- have a one week no spend challenge
- track your spending for 2 weeks
- have a 1 month clothing, accessory and home decor/stuff ban
By setting short term finance goals, you get an instant sense of achievement when it’s completed and are then more likely to set another one or keep going with your long-term plan. You will also find that you become more motivated and have a better chance of reaching your goals.
What are medium term financial goals?
Medium term financial goals are basically the same as short-term goals except that they last for a bit longer. These also include some long-term goals, but typically these can be accomplished in less than five years time.
Short and medium term financial goals help you keep your eye on where you need to go with your finances rather than just focusing on reaching a certain amount of money by a specific time.
A common way to set medium term financial goals is to identify one step of a long term goal you have and make that step into a medium term goal. For instance, your long term goal might be to pay off your mortgage completely, but it’s $200,000 so not going to happen anytime soon.
Break that goal down into smaller finance goals that you can achieve in the next 5 years. You might set yourself a goal of paying off $30k in 3 years or $10k in one year. The goal is personal to you and your finances.
Using medium term financial goals as stepping stones towards your large, long term financial goals helps you keep focused and feel the achievement when you hit them.
Examples of long term financial goals you may need soon enough
Long term financial goals are those that are both long term in the achieving of and long term in their impact. Long term for me means achieving something a long time into the future, think 5 years plus. Here’s a few examples of worthwhile long term financial goals:
- Pay off your mortgage
- Get a better paying job
- Finance your next car with cash (long term savings)
- Save for childrens education/wedding fund
- Plan and create your retirement funds
By setting these types of goals, you are taking control of your financial future and acting now to secure it which can be freeing in itself. You will benefit from the feeling that comes with being in charge of your money and making smart finance decisions about how it’s spent.
You can enjoy peace of mind knowing that your life is shaping up the way you want it to be financially and that everything is under control, without stress or worry about money holding you back or preventing you from living your best life.
Short term financial planning versus long term financial planning
Are two terms that are often used interchangeably, but they’re actually quite different and you need to have both if you want a solid financial plan.
Short term financial planning is important in order for long term plans to work out because it ensures money will be available when necessary. This may mean having an emergency fund so there’s enough cash on hand if an emergency happens.
Or it may mean having sufficient funds in a retirement account to ensure you’ll have enough money for your needs when the time comes.
Short term financial planning is about being prepared with cash on hand and making sure you can pay all of your bills. It’s also important as part of long-term financial planning because short-term planning helps you make the long-term plan a reality.
The idea behind long term financial planning is that you are planning for your future situation. Long term plans are also those that the path to achievement is long.
For example putting money away in accounts for things that are going to happen over an extended period of time, such as retirement or to finance your child’s college tuition. Long term financial planning typically involves putting money into investments so it can grow and compound.
How do I write out my goals?
The process of creating and writing your goals down can be as simple as putting them in a text document on your computer, phone or laptop. It can be as elaborate and creative as you like! Writing them out is an excellent way to inspire yourself and take action in the present moment.
You can write them out on a vision board, in a money journal or on paper. Keep these some place visible, whether in your kitchen, your wallet or hanging up above your desk.
Make goal setting your priority
If you have not yet set up short term financial goals, now is the time to do so. Not only will they help keep your finances in order and provide a roadmap for what you want to accomplish with money.
But they can also be used as achievement markers that motivate us when we’ve accomplished our goals.
Some people find that setting and achieving small milestones is the best way to stay motivated when working towards larger ones. If this sounds like you, then these are some fantastic tips for things you might want to achieve within one year.
Whether it’s paying down debt or saving more of your paycheck by cutting back on unnecessary expenses (and spending), setting these types of goals may just make all the difference in whether you’re able to reach other long-term milestones like buying a house or retiring early.
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Last Updated on 13th September 2021 by Emma