Are you starting to think about short or long term financial goals? Today, we are going to review what this really means, how to create them, and some of my favorite financial goals. We will start with explaining short term financial goals and then move into the long term goals later on.
Why are financial goals important?
Financial goals are so important because goals are the key to life. When you have a goal, you usually feel like you have a purpose.
M1 Finance says that 66% of American would have trouble coming up with $1,000 in case of an emergency. Money Tree Network is here to help change that! To have motivation to save that money, you should have some financial goals.
Setting up SMART goals is one of the best ways to create your financial goals. I will talk more about this next.
What are SMART goals?
SMART goals are one of the most popular types of goals around. I talk more about this in other blog posts but I will quickly go over what a SMART goal is here as well.
SMART stands for:
- Time Bound
Creating SMART goals will help you achieve your short and long term financial goals because they get you to dream in high-definition. So instead of saying my goal is to go on vacation, maybe you say I would like to save $5,000 to go on vacation in Aruba within 6 months.
If you want to go even further, think about the hotel that you want to stay in and think about the things you want to do while you are there.
Short Term Financial Goals
What is a Short Term Financial Goal?
A short term financial goal is a money goal that you hope to achieve within the next 3-5 years or less. They are usually things that you are really thinking about right now.
Short Term Financial Goals examples include:
- Building your emergency fund
- Going on vacation
- Going to a private school
- Paying off debt
- Small home improvements
- Buying clothes
- Personal entertainment
This is certainly not all the short term financial goals that you may have, but it is a start to get you thinking like an expert! Having short-term goals helps you to budget, spend, and talk about your finances. I suggest using SMART goals to create these because you may have a little extra motivation.
According to M1 Finance, approximately 54% of Americans don’t have an emergency fund. Don’t be one of them! Your very first short-term financial goal should be building an emergency fund.
How to Create Your Own Short-Term Financial Goals
To create your own short-term financial goals, you have to know what you want. Ask yourself where you would like to be in a year. What could change in your life to improve it.
Is it having an emergency fund so that you don’t have to worry about going into more debt?
Is it that you want to go on vacation so that you can have a little time to relax?
Ask yourself this question to help you create your own goals. Once you come with a couple goals write them down! This is one of the most important tips that I can give you. Always write your goals down.
If your goal is to go on vacation, you could even print out a picture of where you want to go to help keep your mind focused.
Long Term Financial Goals
What is a Long-Term Financial Goal?
Long term financial goals are usually larger financial goals that you have. They are goals that may take a little bit extra effort to achieve.
Long-term Financial Goals Examples:
- Buying a house
- Having a kid
- Paying off your mortgage
- Starting a Business
Again, this is certainly not a full list of all the long-term financial goals that are out there, but it is a list to get you started thinking about it. SMART goals will be extra helpful when planning long-term financial goals because it can take years to achieve these.
How to Create Long-Term Financial Goals
Creating long-term financial goals is similar to creating short-term ones. Think about how your life could improve and then write down your goal, and figure out what it will take to achieve it.
Let’s pretend that your long-term financial goal is to buy a house. Start searching for a couple houses in the area that you want to live in. Figure out how much they cost, and then start thinking about what you need to do to achieve this goal.
This may include picking up a 2nd job, cutting back on entertainment, or not going on vacation for a few years.
Pay-Yourself First Budgeting Method
Although the pay-yourself first budgeting method is not my favorite of the 4, I believe it works great here. When you are creating your financial goals, you will have to backtrack to figure out exactly how much you have to save each month in order to achieve them.
With the pay-yourself first budgeting method, you will be set aside a certain amount of money each month and then build out your budget from there.
Let’s say your SMART goal is to save $10,000 for your emergency fund within the next 10 months. This would mean that you would automatically put $1,000 away each month for the next 10 months and then any extra income you have, you would be able to put towards your budget.
This budgeting method is especially useful when planning your short-term financial goals because your income is not very likely to fluctuate during the time.
To Sum It Up…
Hopefully, if you read through my post about how to create short or long term goals, you have learned what they are, some examples of them, and how to achieve them. Always have goals in life…even if they aren’t financial. This will allow you to have a purpose and something that you are working towards.