Setting Short Term Financial Goals
By the Pachyy Editorial Team The Pachyy Editorial Team comprises a diverse and experienced team of writers, researchers and subject matter experts whose aim is to provide you with useful insights, guidance and commentary on all matters related to your personal finances.
Having clear financial goals can greatly assist in managing your budget effectively and attaining financial independence. Surprisingly, a staggering 70% of individuals in the United States have pledged to establish personal goals for the year 2023.1 Financial goals can be categorized into three types: short-term, mid-term, and long-term. Short-term goals can be accomplished relatively quickly and serve as a stepping stone towards setting long-term goals to ensure a secure financial future! With dedication towards improving personal financial habits, anyone can set and achieve their financial goals. Continue reading to discover helpful tips on how to establish and attain your own financial goals!Types of Financial Goals (with Examples)
When it comes to financial goals, there are three main types you can consider. Take a look at some practical examples for each category below.| Type of Financial Goal | Time Frame | Examples | Key Considerations |
| Short-Term | Up to 1 year | – Creating an emergency fund– Clearing credit card debt– Saving for a family vacation | – Generally requires less planning – Allows for quick achievement, providing motivation for other goals |
| Mid-Term | 1 to 5 years | – Purchasing a new car– Obtaining a degree or certification– Saving for a wedding | – May involve loans or financing– Calls for a more detailed financial plan |
| Long-Term | 5 years and beyond | – Building a retirement account– Buying a home– Saving for a child’s education | – Require a long-term commitment– Can involve investment options such as stocks or bonds |
Understanding Short-Term Financial Goals
A short-term financial goal refers to an objective that you can accomplish within a year. The best part is, these goals don’t require extensive financial planning. By achieving short-term goals, you’ll realize how effortless it is to successfully manage your money. Common short-term goals that people set for themselves include paying off debt, creating a budget plan, and starting an emergency fund.Paying Off Existing Debt
Many borrowers have the short-term goal of paying off their debts. Being debt-free not only increases your monthly income but also reduces your financial stress. In fact, you can experience benefits without repaying every debt you owe! By reducing the amount of debt you carry, you can improve your credit rating as credit debt contributes approximately to 30% of a FICO score. The most common forms of debt that consumers have in America include:- Credit card debt
- Student loan debt
- Medical bills
- Cash advance loans
- Payday loans
- Mortgages
Creating a Budget Plan
Budgeting is crucial as it ensures that you spend your money wisely. Surprisingly, only 32% of U.S. households prepare a monthly budget.2 Therefore, a fantastic short-term goal for yourself would be to set up a budget plan. By following a budget, you can save money, achieve your goals, and improve your overall financial situation.Starting an Emergency Fund
Having an emergency fund is essential for everyone. In the event of a financial emergency, you won’t have to pay money to borrow from a lender. An emergency fund serves as a reserve for unforeseen expenses like car repairs, medical debt, or unplanned travel. By starting an emergency fund, you will achieve a great short-term financial goal that provides you with financial security!What is a Mid-Term Financial Goal?
A mid-term financial goal refers to a goal that takes longer to achieve than a short-term goal but is not as time-consuming as a long-term one. Typically, mid-term goals span between six months to a couple of years. Some common examples of mid-term goals include purchasing a new car, obtaining a degree or certification, and saving money for a wedding.Purchasing a New Car
Buying a new car is a common and important goal for many people, especially in a country where public transportation is unreliable. Having a car is essential for quick commutes to work, running errands, and transporting family members. While most people opt for auto loans to finance a new car, it can be beneficial to save up for a down payment as well. By avoiding a down payment, you will have significantly higher monthly payments. Additionally, if you have a low credit score, you may receive offers with high-interest rates. Using a credit card for a car down payment is also an option, but it can be costly due to accumulating interest charges. Nevertheless, setting a goal helps motivate you to improve your credit rating and save for a brand-new car!Completing a Degree or Certification Program
Investing in yourself by completing a degree or certification program is a valuable goal that increases your career and financial opportunities. Since obtaining a degree or certification takes time, it is often categorized as a mid-term goal. The duration of these programs varies depending on whether you are studying part-time or full-time, as well as the length of the courses.Saving for a Wedding
Weddings are often extravagant events and can end up costing an average of $28,000 for the ceremony and reception! Saving money for a wedding is a common financial goal for many people. However, some individuals also utilize personal loans in addition to their savings. It is important to note that financing a wedding with bad credit may result in paying a significant amount of interest. When setting a financial goal for wedding expenses, consider the type of venue you desire and the number of guests you intend to invite. The venue typically represents the largest cost, averaging around $10,500. Additionally, when choosing a wedding date, take into account the time needed to save enough money for down payments.What Exactly is a Long-Term Financial Goal?
A long-term financial goal is an objective that takes several years to achieve. It is meant to ensure your financial security in the future and provide meaning to your work. Some examples of long-term financial goals you should consider include saving for retirement, a down payment on a property, or your child’s college education.How to Save for a Down Payment on a House
Having a substantial down payment can significantly reduce the cost of buying a property. The more you save for a down payment, the lower your monthly mortgage payments will be. While many believe that saving 20% or more of the purchase price is necessary, this is not always the case. The amount you should have available for a down payment depends on the type of mortgage loan you want to use and the financial institution you are working with. For instance, for borrowers with FICO scores above 580, the minimum down payment for an FHA loan is only 3.5%. Suppose you plan to buy a $200,000 condo using an FHA loan. In that case, you’ll only need to save $7,000 if your credit score exceeds 580! You may be eligible!Why Saving for Retirement Is Important
The retirement age might seem distant, but it creeps up on you sooner than you think. Starting to save for retirement early can help you maintain a comfortable lifestyle later in life. There are various retirement accounts to choose from, and the best one for you will depend on your financial goals and employment situation.How to Save for Your Child’s College Education
Obtaining a higher education can be expensive, but it’s an investment that pays off. Tuition costs increase annually, but with early savings, you can contribute a significant amount towards your child’s college education. Parents can start setting money aside at any time. According to the College Board, annual tuition for a four-year public college is approximately $10,560. If you aim to fully finance your child’s college education, your savings should amount to about $42,240.How to Build Your Savings Account: 5 Easy Steps
If you’re looking to save money, we’ve got you covered! Follow these simple steps to start building your savings account today:Step 1: Calculate Your Monthly Income
Take a moment to review your bank statements or paycheck stubs to determine your monthly income. Make sure to use your after-tax income, as that reflects the actual amount available for saving. If your income varies each month, it’s a good idea to calculate your average monthly income. Add up your income for the past six months and divide the total by six to get your average.Step 2: Calculate Your Monthly Expenses
Calculating your monthly expenses may seem tricky, but it’s important for understanding your spending habits. Check your bank and credit card statements to see how much you’re spending each month. This will give you a clear picture of where your money is going and help identify areas where you can cut back.Step 3: Cut Monthly Costs
Once you have a grasp on your monthly expenses, you may realize you’re overspending in certain areas. For example, those ad-free monthly subscriptions for HBO Max, Netflix, and Disney Plus bundled with Hulu can add up quickly! Assess your bills and identify where you can make cuts to save money and improve your finances.Step 4: Create a Budget
A budget is a powerful tool that can help you manage your money effectively. It allows you to allocate funds for savings, debts, goals, and more. With your monthly income and expenses in mind, choose a budget plan that aligns with your financial objectives.Step 5: Open a Savings Account
Ready to take the next step? It’s time to open a savings account! Don’t worry, the process is simple. You can do it online or in person at a local branch. Most banks only require basic information, a Social Security number, and a government-issued photo ID. In some cases, you may need to make a minimum opening deposit, but there are also banks that allow you to open an account with no initial deposit required.Want to Keep Track of Your Monthly Spending?
Tracking your monthly expenses can help you control your daily spending and save money. Below, we have some helpful methods for keeping track of your spending.Expense Tracker Apps
There are various apps available that can assist you in tracking your spending. Here are a few options:- Mint — Mint is a fantastic expense tracker app that is free to use. It allows you to track your spending, set reminders for bill payments, and monitor your credit scores.
- Goodbudget — If you prefer a more hands-on approach, you can try the Goodbudget app, which uses the envelope budgeting method.
- Honeydue — For couples managing money together, the Honeydue app is a great choice.