Financial planning advice typically focuses on long-term goals like saving for your children’s education, building a retirement fund and estate planning. But depending on your financial situation, you may need to set short-term goals to reach those financial plan milestones. Here are four common short-term goals that you should keep in mind when putting your financial plan together.
A financial advisor could help you put a financial plan together for your short-term and long-term financial needs and goals.
Short-Term Financial Goal #1: Save for a Down Payment
One of the most common short-term goals Americans set is to save money for buying a home. Whether you’re looking for a single-family home, a condo downtown or a vacation home at the shore or on the lake, buying a home is a commendable goal for any individual or family. It absolutely takes planning, though, so if buying a home is something you think is in your future it’s the perfect short-term goal to work.
The first step is to figure out what your price range is. You’ll likely need to put down a down payment of at least 3% of the home’s total price, but most pay more, up to around 20%. Once you’ve figure that out, start saving! You can put some of your savings in a money market account, but you could also invest in an index fund in hopes of getting some capital gains to increase your house fund. Just remember that a market downturn is possible, so be careful.
Short-Term Financial Goal #2: Pay Off Debts
Carrying some debt is a fact of life for many American families. Between student debt, mortgage loans and credit cards, there are simply many places to accrue debt in the modern world. Debt can make it difficult to move forward with other plans, so looking to pay down some of your debt is a very worthwhile goal.
Start by doing a thorough accounting of all the debt you have. Then, look at which debts have the highest interest rate. Your student debt may seem huge, but it likely has a very low interest rate. Credit card debt, on the other hand, may be loading you up with huge interest payments each month. Pay off the debt costing you the most first. Look at your monthly expenditures and see where you can find excess money to pay bigger chunks of debt.
Short-Term Financial Goal #3: Set a Budget
This one seems simple, but it’s one of the single most important things you can do to effectively manage your money. The most basic piece of personal finance advice you can give to someone is to make sure you are spending less than you make. The easiest way to do this is to look at how much income your family has each month and make a plan to see that you are spending less than that hopefully with some leftover to save for the other goals you have.
SmartAsset’s budgeting tool is a good resource, but you can start by making a list of all of your expenses and, if needed, cutting back in some places. That might mean eating out less or canceling the streaming service you signed up for four years ago to watch one long-finished true crime documentary.
Short-Term Financial Goal #4: Save for Vacation
Let’s face it: the past few years have been very strange because of the COVID-19 pandemic, and a lot of people haven’t been on a proper vacation in awhile. Traveling is a great way to spend any extra money you have—and to create lasting memories with family and friends.
Once again, the first step here is to figure out what you want and how much money you’ll need to do it. The cost of a road trip up the coast is going to be significantly less than buying four airline tickets to Hawaii, for instance. Once you’ve figure out what price range you are looking at, start saving! In this instance you probably want to keep the money in a savings account or money market fund—just make sure you earmark a certain amount for your vacation fund!
Short-term financial goals can be whatever you want to achieve. What’s important is that you set the goal intentionally and make a plan to achieve it, whether that means budgeting, saving for vacation, getting ready to buy a house or paying down debts.
Financial Planning Tips
- A financial advisor can help you achieve short- and long-term financial goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If investing is part of your plan, use SmartAsset’s free investment calculator to see how your money could grow, given a set rate of return.
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