Life is full of uncertainties. Your car may suddenly break down, or you may have to cover an unexpected medical treatment bill.
Short-term monetary goals include not only being able to cover unexpected emergencies, but also for purchases such as a new car, home improvement costs, a University degree, a family trip away, and so on.
In this article, we’ll explore the importance of having short-term financial goals.
What Are Short-Term Financial Goals?
Anything that you want to achieve within five years falls under short-term goals. Most importantly, these milestones serve as a foundation for your long-term financial goals.
As we mentioned before, any financial goals that you’d like to achieve within five years qualify as short-term goals. These objectives, however, sometimes overlap with mid-term goals. Let’s take a look at some common examples.
- Debt Payments: This includes student loans and credit card payments. Debt payment may even include clearing up your mortgage as an incremental step to achieve long-term goals.
- Vacations: Taking some time off from your busy schedule to relax comes at a cost. Many Americans want to take a vacation every summer, so they save a portion of their salary each month to be able to fund their holiday later
- Emergency Funds: Emergencies happen – you may unexpectedly lose your employment, become sick, or need to help a family member. The need for an emergency fund can never be over-emphasized.
Why Set Short-Term Financial Goals?
Having monetary goals does not only help us in an event of an emergency but is also a great foundation for long-term goals. With this in mind, let’s look at some reasons why you may want to plan your short-term financial future.
- Manage your spending: Having a clear picture of your monthly budget is key to managing your money. When you’re aware of your expenses, it’s easier to identify areas in which you can cut back. That’s the way you are most likely to adopt new and improved habits and reduce financial anxiety.
- Create checkpoints for your long-term goals: Lifetime plans are usually overwhelming. So, we may tend to postpone them to later dates and, at the end of the day, fall short of our potential. By breaking lifetime plans into short-term financial goals, they become much more manageable.
Key Takeaways
No one wants to break into a cold sweat whenever they think about their financial situation. Also, while we each have our version of the American Dream, trying to achieve these lifetime goals overnight is a futile task.
To set yourself up for stability and success, it’s vital to develop financial goals. Some key short-term goals include setting up an emergency fund and settling debts or having a budget for purchases.
It may not be easy to set targets and achieve your financial goals in one swoop, but the important thing is consistency and getting back on track whenever you fall short.
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