Setting Short-Term Financial Goals
Setting short-term financial goals is the first step towards getting financially secure.
If you have a financial goal, like buying an automobile or paying an offer to buy a home, it is not enough to hope you will get there. A plan will significantly improve the odds of reaching your goal.
Being a day-to-day person without a financial plan in place could cause you to overspend and end up with a shortfall when you have to pay for unplanned expenses and depend on high-interest credit cards.
Financial goals for short-term financial planning are usually things you aim to accomplish within three to one year. They could be a single goal which, when you have achieved them, will be done. They could also be small steps towards more essential objectives in the financial realm (such as financing your retirement plan, the repayment of a mortgage, or paying for your school tuition for your child).
Setting and achieving short-term financial goals can provide you with the confidence boost and knowledge base you require to reach larger goals that require more time.
Although everyone’s goals may differ, here are some financial plans to begin working on.
Build an Emergency Fund
An emergency fund could serve as a cushion to help you stay out of debt.
Of course, one of the most critical short-term financial goals you can achieve is establishing emergency funds.
It’s cash savings that could cover three to six months (or even more in some instances) in living costs in case something unexpected happens to come up, like an unplanned medical bill, job loss, or an expensive car and home repairs.
Being aware that you’ve got money in your bank in case of an emergency could provide peace of mind and help you pursue those other objectives in financial terms.
An emergency fund may also be used as a buffer to avoid financial trouble, as you’re less likely to depend on credit cards in the event of an unexpected occurrence.
You can make your emergency savings by investing the money in it every month, or making it happen faster by funneling a significant payment, for example, tax refunds or bonuses, directly into the account.
Monitoring Your Spending
Understanding the amount you’re spending every month is a crucial step to achieving both long and short time financial goals.
This can be done by keeping track of your expenses for about a month before setting up an achievable budget that will aid you in deciding how to spend your money rather than spending it randomly. This could cause problems when it’s time to pay your bills or have any savings left).
You can monitor your spending with an app for budgeting. Our app is one example that lets you connect all your accounts to one dashboard and then categorize the transactions of your credit transaction and debit cards based on budgeting categories.
You can also make an old-fashioned budget by going through statements from your bank, bills, or receipts of the previous few months and categorizing each expense on a spreadsheet, as well as on paper.
If you can see the place where your money is spending it, you could find some unexpected costs (such as the $200 per month for lunches out) as well as ways to reduce your spending.
You could even decide to pack your lunch at home for at least a couple of days per week. You might also want to rid yourself of seldom used streaming or subscription services or even drop the gym membership to work out at your home.
This freed cash can be put towards your savings goals, such as making your emergency savings account, purchasing an apartment, or even funding your retirement.
Repay Credit Card debts
If you are in the middle of credit-debit card balances, you might want to make the process of paying it off one of your primary goals for financial planning in the short term. This is because the interest rate on credit card debt is too costly and can make other financial goals more challenging.
One method to pay off credit-debit card balances is to use the approach of avalanche, which requires you to pay the minimum amount on every debt, excluding the highest rate. Then, you put the extra cash on the card with the highest interest. Once that debt is paid in full, it is then possible to transfer the additional payment into the account with the next highest interest rate and so on.
Another alternative is to use the snowball method that involves paying the minimum amount for all credit cards. Still, you use additional cash for the payment of a debt that has the lowest balance. Once that debt is paid off, you then move to the next debt that is the smallest, and the cycle continues. This gives you a sense of satisfaction that keeps you focused.
Repay Student Loans
Student loans can be a burden on your budget. The process of paying down student loans and then eventually getting rid of these loans could let you free cash to help you save for retirement or other goals.
One option that could aid in refinancing is to make an existing loan that has lower interest rates. Check your balances and rates of interest for both private and federal loans, then input them into the calculator for refinancing student loans to see if refinancing can provide advantages.
It’s crucial to be aware that there are many different refinancing options available. Not all of them are created to be equal. Many bad online actors claim to eliminate all your debts, but they will ultimately harm your credit score. If you consider refinancing, it is essential to ensure that you’re working with a reliable lender.
If you’re in the middle of multiple student loans but don’t be able to benefit from consolidation, think about applying the snowball or avalanche technique of repayment (described in the previous paragraph) to get them paid off quicker.
Start saving for retirement.
If you’re still not saving money for retirement, a fantastic long-term financial plan is to begin saving. If you’re investing only a little every month, you might want to consider increasing the amount.
If your employer has a 401(k) and offers matching funds, as an example, it’s advisable to contribute at a minimum to the match provided by your employer. Then, you can increase your contributions gradually every year.
If you don’t have access to a 401(k) or 401(k) plan, you might be able to set up an IRA and begin saving for retirement there. (Keep your eyes on the limitations on the amount you can contribute to a retirement account per year, based on the age.
Although retirement is a long-term and not a short-term financial goal, taking advantage of this savings option will lower your tax burden. The money you invest in retirement funds is taken from your earnings before taxes are determined).
Save More Money
If you have an emergency savings account, you might want to begin planning what you’re looking to purchase or attain in the coming years, as well as beyond.
It could be anything, like buying a new gadget or going on a beautiful trip, making a downpayment on the house, or undertaking an extensive renovation.
Making a plan to save to achieve this goal, instead of paying for it using a credit card, will help you not pay for these items in the form of high-interest payments.
If you are looking for financial goals that you would like to accomplish sooner, consider placing this money into an account earning more than traditional savings accounts. It should allow for access to the funds when you need them, like the money market account or an internet-based savings bank or money management accounts.
For savings that last longer, you may want to think about opening an account with a brokerage.
It can be described as an investment account that permits you to purchase and sell investments such as bonds, stocks, and mutual funds. A taxable brokerage account will not provide the same tax benefits as an IRA or 401(k) 401(k). However, it is more flexible as to how and when funds can be used.
While our day-to-day activities tend to get the focus, it’s crucial to keep an eye on larger goals.
The short-term financial goals are goals you’ll want to achieve with your money over the next few months or even years. The most important short-term goals are making a budget, creating an emergency fund, and the repayment of the debt.
In the meantime, you might be tempted to begin saving for items you’d like to purchase or perform in the near future. You may also want to consider making investments to accumulate wealth over time.
If you want to learn about investing, our automated investment platform could be a great starting point. There aren’t any management costs, and you’ll be able to access financial advisors who will provide individualized advice. The advice is based on your objectives and time horizon, as well as the risk you are willing to take.
If you’d like to be more involved, we also offer active investing in which you can purchase and sell stocks for free.