Last week on the Young Adults Perspective series, we talked about how to get back on track financially after a major setback. This week, we will continue to talk about the financial future, but with a positive focus of financial goals in mind. One of the best ways to ensure healthy spending practices is to set financial goals. When you have a specific purpose in mind for your money, you can better plan how you want to spend and save it. Knowing you are chipping away at a future expense by saving is an incredibly satisfying feeling. In this post, we will cover goals setting, and explain the differences between long-term and short-term goals, as well as strategies you should use depending on how much time you have to save.
Setting Financial Goals
What is a long-term goal?
A long-term goal is typically described as any goal that takes more than a year to accomplish. Typically, long-term financial goals are larger, more expensive projects, like purchasing a vehicle or a home, paying for a special event like a wedding, or saving for college. Since they are more costly and take longer to achieve, they are more difficult to save for because, as last week’s post discussed, life can get in the way and throw off a financial plan.
What is a short-term goal?
A short-term goal is a something you wish to accomplish within a year of setting it. For the purposes of this post, we will use six months as a typical time frame. When you start planning for short-term goals, having less time means you have less time to save, but it also means that building a plan is easier. There are fewer expenses, both expected and unexpected, to try to work around, which can make planning a budget an easier task. It’s important to note that not all short-term goals will or should take you a full six-months to achieve. Some financial goals can be met in a matter of weeks with a good strategy. Some examples might be buying new clothes and jewelry, a new television, or a nice gift for a family member or friend.
How to set financial goals
Creating financial goals is simple, though it does require more planning and effort than you think. Here are some key steps:
- Get Specific: First, ask yourself, “What is my specific goal?” Be as detailed as you can in this step. Once you have that determined, you can decide how long it will take you to reach your goal. Be as realistic as you can in this step. If you think it will take you more than six months, then for now consider it a long-term goal that you will gradually save for.
- Set Priorities: The next step is to determine how important it is to achieve this short-term goal. To do so, you can ask yourself some financial questions, such as “how will saving for this impact my long-term plans,” and “am I willing to make sacrifices or use existing savings to pay for this goal if necessary?”
- Establish New Saving Habits: You may have habits for long-term saving, but in order to save for your smaller goals you will need to adopt a short-term saving strategy as well. This is especially important if you normally use credit for purchases instead of saving up for them. It is likely that you will need to re-evaluate your budget and adjust your spending accordingly. For example, where your long-term plans and budget may leave you some money each month for entertainment and miscellaneous expenses, you may consider shifting some of those extra funds towards your short-term savings as part of a new strategy.
- Track Your Success: Continue to periodically evaluate how much you’ve saved and how effective your goals and savings plan are until you reach your goal. As you go, you may find that your goals and interests change. If you’ve found something new you feel is more important, then by all means, change your priorities and goals! Saved money can be used towards any of your plans, whether they are new short-term goals or established long-term goals.
It may require some changes to your budget and lifestyle, but saving towards financial goals is possible, especially if you are willing to work towards them. The CESI Team is committed to helping you reach your financial goals. If debt keeps you from living the life you dream of, contact us for a free debt analysis today and get started on the road to a brighter future!
