6 Steps for Setting Your Long-Term and Short-Term Financial Goals
It’s easy to feel overwhelmed when trying to set financial goals. Maybe you’d like to save up $1,000 in an emergency fund — but on the other hand, you’d love to take that dream trip to Disney World by the end of the year.
While there are many options at your disposal, money expert Rachel Cruze says it’s important to pick and choose wisely and to tackle your goals in a way that will set you up for lifelong success. “Lots of things can influence the way you set your financial goals, including your motivations, values and dreams for the future,” she wrote on the Ramsey blog. “And the way your parents handled money and even your own spending and savings habits (which are unique to you) also [have] a major impact on how you handle money.”
Cruze also points out that efficient goal planning takes intention and some self-awareness. Below are Cruze’s steps for helping you set your long-term and short-term financial goals.
1. Be Specific
“One reason people don’t hit their money goals is because they’re too vague,” Cruze wrote. Specific goals, on the other hand, help you clearly define what you want to achieve. Vague goals like “save money” or “invest for the future” lack clarity. Whereas specific goals like “save $5,000 for a down payment on a house in the next 12 months,” provide a clear target.
2. Have a Measurable Vision
Measurable goals provide quantifiable results. Instead of vague statements like “pay off debt,” a measurable goal would be “reduce credit card debt by $5,000 in the next six months.” This specificity allows you to see exactly what you’ve achieved.
3. Set a Deadline
“It’s super easy to put off your goals when they aren’t time-sensitive,” Cruze wrote. “Stop saying you’ll start someday.” Once you’ve identified your short and long-term goals, you can start creating a financial plan and timeline to reach them. Additionally, it’s important to regularly review and adjust your goals as necessary to stay on track.
4. Get Personal About Your Goals
According to Cruze, we shouldn’t play the comparison game when it comes to our goals. People often have different starting points in terms of income, assets and liabilities. Comparing yourself to someone with a different financial situation can be misleading and cause unrealistic expectations.
5. Identify Your Priorities
Start by asking yourself what you want to achieve financially both in the near future and over the span of several years. Your short-term goals might include saving for a vacation, paying off a small debt or building an emergency fund. These goals are typically geared towards immediate needs and can often be accomplished within a year.
6. Be Realistic
Long-term goals require a bit more planning and patience. This could be saving for a down payment on a house, planning for retirement or setting up a college fund for your kids. It’s important to be realistic and understand that these goals might take several years or even decades to achieve.
By following these steps, you can set both short-term and long-term financial goals that are specific, measurable, and achievable within a realistic timeline. This will help you make better financial decisions and ultimately lead to greater financial stability and success.