Why Short-Term Financial Goals Are Important

short-term financial goals
May 7th, 2021 0 Comments

We talk a lot about long-term financial planning goals at Saddock Wealth. How to plan for retirement, the importance of effectively allocating your assets so that you have a diversified portfolio down the road, making plans for the succession of your business when you inevitably move on, why it’s never too early for estate planning — the list goes on and on.

Now, though, we’re going to talk about the short-term. Because the truth is that unless you can effectively plan and budget for your short-term financial goals, it will be extremely difficult to plan for the long term.

In this article, we will review the pillars of short-term financial planning and goal setting. We will talk about how to set financial goals, why it is important to set financial goals, some examples of smart short-term financial goals to aspire to, and how to prioritize, save, and budget for your future milestones.


Reasons To Plan For The Short-Term

Let’s start with the why: why is it important to set short-term financial goals for yourself? There are many reasons.

1. Manage Your Spending

For one, creating a budget and outlining your financial goals and priorities will make it so much easier to manage your spending. With clear goals and a plan to achieve them in mind, you will be much more likely to adjust your spending habits to reach those goals.

2. Focus Your Financial Intentions

This brings up the next reason: having financial goals provides an intention for your saving and budgeting. Sometimes saving money can feel aimless, like you are saving money just to save money and not any other reason, and that is when you are typically less likely to actually save.

However, if you have savings goals, the promise and benefits of financial independence, eliminating your student loan debt, saving for retirement, or whatever else your goals are will be a strong motivation to start saving.

3. Create Checkpoints For Your Long-Term Goals

One of the most important reasons to set short-term financial goals is that passing your shorter-term financial checkpoints will set you up to be able to develop and realistically achieve your longer-term financial checkpoints. Oftentimes, it is extremely difficult to achieve long-term goals until you are financially secure (and debt-free) enough to save and plan for them. Achieving financial security is what short-term financial planning is all about.


How To Set Your Financial Goals

Now that we have discussed the reasons for setting financial goals, let’s delve into how exactly to go about doing so. Every person will favor a slightly different method when considering how to best achieve their goals, but there are some pillars that are quite useful across the board.

It is also important to mention — especially if you have a large debt burden or more ambitious or specific short-term goals — that hiring a financial planner to assist you in the process of setting and achieving your financial goals can be extremely helpful.

The goal-setting process can be convoluted and is often deeply personal and even emotional. Having an objective, experienced expert at your side will likely save you a lot of headache in the long run.

Define “Short-Term”

The first thing to consider is what exactly a short-term financial goal is. It can be tempting to get carried away in the financial goal-setting process and start thinking big — try to resist this temptation.

Sure, retirement savings, Roth IRAs, and succession planning are great things to aspire to, but if you’re focusing on short-term financial needs those are way too far down the line. Short-term financial goals should be things that you can realistically achieve in a year or so, like creating an emergency fund or improving your credit score.

Write It Down

A good way to organize your thoughts, goals, and priorities is by making a goal chart. This should be a sort of action plan and timeline combined. If you can get down on paper what your goals are, when you think you can achieve them, and the steps necessary to achieve them, you can start to visualize and understand realistic time frames for each goal.

This can also be a great time to brainstorm ways to save extra money. Should you stop ordering delivery? Take on a little more work? Cut out spending holes?

Narrow Your Focus

After reviewing all of these ideas, goals, and plans, you should be ready to pick one or two to focus on. It is a good idea to either start with a small, achievable goal (it could even be something like saving up for a short vacation) or to start with a high-priority, short-term goal. Give yourself some time to see these first two or three goals through, then depending on your progress, start to think about the next goal you want to tackle.


The Goals To Prioritize

We have mentioned a few examples of short-term financial goals throughout this article, but in this next section, we want to hone in on what are typically the most important short-term financial goals to focus on.

Of course, everyone’s personal finances, goals, and desires are different, but there are several areas that are critical to take care of early to achieve long-term financial health, success, and sustainability.

Work On Tackling Your Debt

One of the most important financial habits to establish early on is to decrease your debt as much as possible.

Three of the most crippling and problematic types of debt:

  • student loan debt
  • credit card debt
  • healthcare debt

This is, of course, easier said than done. Chipping away at a seemingly endless amount of debt payments can feel like throwing money down the drain, but it is absolutely worth doing. And the sooner you start paying everything off the better.

Paying off these debts will not only free you up to spend your money on other things, but it will also increase your credit score, which of course opens many more financial doors down the road. Creating a payment plan for yourself can be an effective way to approach paying off debt.

When creating a plan, it is important to consider the interest rates of your various debts. One effective strategy to paying off multiple debtors at the same time is to pay the minimum monthly amount on your low-interest debts, and then to make as many extra payments as you can on your debt with the highest interest rate.

Create An Emergency Fund

In conjunction with paying off debt, the other most crucial short-term financial step to take is to create an emergency fund in your savings account. An emergency fund is exactly what it sounds like: a chunk of money that you can turn to in case something unexpected happens.

Unfortunately, circumstances like this tend to come up more than we would like. Something as simple as a necessary car repair can be catastrophic if you don’t have the money set aside to pay for it. The amount of your emergency fund will vary based on your financial circumstances and lifestyle, but a good rule of thumb is to have at least three months’ worth of expenses set aside at any given time.

If you have the financial flexibility to do so, transferring a fixed amount of money each month into your emergency fund can be a good way to quickly bulk up your savings.

Invest Intentionally

Another important short-term financial step that will pay dividends (literally) in the long run is to be intentional about investing.

If you don’t invest already you should start, and if you do, you want to make sure that you’re doing it in a way that fits your financial goals, needs, and will benefit you in the long run.

Once you have started on a few other critical short-term goals like creating your emergency fund, paying off debts, and establishing a budget, you should be ready to give your investment portfolio some thought. By this point, you should have a good idea of the amount of extra money you have to spend on the stock market.

This is an area in which having a financial planner would come in very handy — there is a lot to think about in regards to investing. What is your risk tolerance? Are you investing for the short, mid, or long-term? How much money do you have to invest?


Saddock Wealth Can Help You Reach Your Goals

Discussing your personal financial situation with an expert will give you a better idea of how you can comfortably allocate your assets, take on risk, and more.

We at Saddock Wealth have helped many clients develop and follow through on personalized financial goals for periods of time ranging from the short to long term. We are happy to consult with you on anything from a debt repayment plan to saving for retirement.





Image Attribution

Article Name
Why Short-Term Financial Goals Are Important
Creating short-term goals while financial planning is just as important as looking at the long term. Explore how to take the next steps here!
Financial Planning, Saddock Wealth
TAGGED : , , ,