A Guide to Reaching Your Short Term Financial GoalsSubmitted by Castlebar Asset Management on February 18th, 2016
All of us have big audacious long term financial goals that we would like to achieve. With these big goals set, short term goal should be a cinch to get checked off our list, right? Not so fast! We can get distracted easily when trying to reach our short term goals. Here is our guide to achieving your short term financial goals.
A short term financial goal is one that you are trying to achieve in the next 12 months with a maximum length of 18 months. Usually these goals will only take a few months to achieve. Short term goals usually won’t have huge price tags associated with them since you are not giving yourself all that long to reach them.
Identify your goals: Before you can reach your short term goals you have to set your goals. Make a list of the short term financial goals you want to achieve. Don’t confuse short and long term goals. You will want to list your short term financial goal, define how much you need to save and the timeline to achieve your goal. For instance, let’s say you want to take your family to Disney. You expect it to cost $5,000 and you want to go in 7 months. It is just that simple!
Prioritize and focus: Rank your goals that you want to achieve. It can help to pick a goal that will give you a quick win. This will motivate you to move on if you achieve some early success. Don’t multitask on a bunch of your goals at once. Focus on knocking off one at a time and it will help you be more effective.
Check Your Budget: Your budget sits at the core of all your financial decisions. Hopefully you have a budget in place but if you don’t it is a great time to build one. A budget does not just show you what you are spending your money on but what you can and cannot spend moving forwarding. You will have to add a new item to fund your short term goal.
Automate: If your goal is to save for your emergency fund or pay off your credit card balance it is best to automate as much as you can. Set up a direct deposit to a savings account at either your bank or credit union to build up your emergency fund or you can use auto pay for your credit card. If you set up automated systems, you will be less tempted to stray from your plan.
Track: You won’t reach your short term goals unless your monitor your progress. By setting a clear goal with a financial outcome and a timeline to reach this goal you can track your progress.
Enjoy: When you have reached your goal you can celebrate. Enjoy your vacation, the peace of mind knowing you are debt free or whatever other short term goal you just achieved. Repeat the process to move on to your next short term financial goal.
Roger Whitney from The Retirement Answer Man Podcast refers to short term goals as a series of SMART sprints. These little burst can help keep you stay focused on your goals. Here is what Roger says about SMART sprints.
“It’s something you focus on for a shorter period of time, and as you do so, you give it all you’ve got. You’ll be surprised how much a time of focused intensity can help you overcome some obstacles or set some new habits that will enable you to progress faster over time.”
What are some short term financial goals you might save for?
Down Payment: A down payment for a home or car. If you are looking to buy your first house or upgrade you may need to add a short term saving burst to get yourself in the best financial position to afford a new home.
Emergency Fund: If you read our blog frequently you know that I focus on having your emergency fund in place before you move onto other goals. A short term goal may be taking your rainy day or emergency fund from a few weeks of expenses to a few months.
Minor home improvements: Depending on your income a small home improvement project or major may be a short term goal. Paying cash may be better move than tapping your home equity for a remodel or home improvement project.
Paying off Debt: Being debt free is a great goal to have. A short term goal may be to knock out a credit card balance you have been carrying or paying off the last chunk of student loans you are still carrying.
Contribute to Your Retirement Account: A short term goal may be making a contribution to your retirement account. Increasing your contribution amount by a one or two percent of your income is a great way to use a short term action to help a long term goal. A little bit more will help in the long run.
Vacation: Recharge your batteries or take some much need time away with the family and save for a vacation. You’ll have a more enjoyable time if you have saved in advance because you won’t be stressed about how you’ll pay for it once you get back.
Splurge on a luxury: Everyone has something we want to treat ourselves to. A clothing item, a performance road bike, jewelry or Royals season tickets. The short term high you get from splurging may where off but if you save ahead of time you won’t be saddle with a credit card bill once your initial excitement wears off.
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.