If you are ready to get your money working for you, then you’ve come to the right place. The first step is to take inventory of your personal finances and do a little financial planning. Don’t let the term financial planning scare you off. We like to keep it simple and let our financial plan fall around both our short term financial goals and our long term financial goals.
In this article, we are going to focus specifically on short term financial goals. That said, the way in which we set financial goals below can be applied to your long term goals as well. Let’s dive in.
What is a Short Term Financial Goal?
Short term financial goals are generally one to three-year financial goals. They can be singular goals, and once reached you are done. Or they might be incremental steps to much larger financial goals.
Short term financial goals stand in contrast to long term financial goals which take 3 or more years. This might be saving for your child’s college or building your retirement accounts.
Short Term Financial Goals Might Include
Short term financial goals look different for everyone, but some examples include:
- Building a 6-month emergency fund
- Paying off a specific debt
- Saving for a specific trip
- Tracking your spending for a month
- Creating a using a budget for three months
How to Determine Which Short Term Goal to Set First
Your financial goals should be reflective of what you need in order to build wealth AND what you need in order to stay balanced as a human. This means you will likely have a few short term financial goals at any given time. If you’re new to financial goals, I don’t recommend having more than 3 as it may be overwhelming.
That said, below are your top two priorities for short term financial goals.
Start with an Emergency Fund
One of your short term financial goals should be a fully-funded emergency fund if you don’t have one already. A fully-funded emergency fund means it will cover your bare-bones expenses for a specific period of time. This might be a 3-month emergency fund or a 6-month emergency fund. I encourage you to set a number you are comfortable with.
Having an emergency fund will not only give you peace of mind (i.e. help you stay balanced as a human) but it will also act as a buffer to keep you out of debt and on track with your future financial goals. That’s because when life inevitably goes wrong, you have something you can fall back on that is not a credit card.
Focus on High-Interest Debt Next
High-interest debt, likely credit card debt, can cripple your finances and keep you from reaching long-term financial goals. That is why it’s second on the list for short term financial goals.
If you carry a balance on a credit card or have another loan with a high-interest rate (7% or more), then it is time to create a debt payoff plan. If you need help with this short term financial goal, I made a handy debt payoff plan worksheet you can use to take inventory of your debt and make a plan.
Then, You Get to Pick Because Personal Finance is Personal
These two financial goals are no easy feat, but once you conquer them your short-term financial goal options are limitless. Maybe you decide to move on and tackle more debt like your mortgage. Maybe you add a travel fund savings plan as your short term financial goal. Or maybe you do BOTH, because you’re a money boss (and you just can).
If you need ideas for more short-term goals (and actions you can take to make your goals happen) check out this article.
How to Set a Short Term Financial Goal
If you want to reach your short term financial goal, then you need to set an attainable and attainable goal. Let’s get into the nitty gritty of creating a financial goal you can actually achieve.
Set A SMART Financial Goal
I learned about SMART goals as a teacher, and they changed how I set goals for all things personal, professional, and financial.
‘SMART’ is an acronym and stands for each component of your goal.
- S- Specific
- Precisely what do you want to accomplish?
- M- Measurable
- How will you measure your progress?
- A- Achievable
- How can the goal be accomplished? How will you know it is accomplished?
- R- Realistic
- Do I have the resources to make this happen right now?
- T- Timely
- How long will this goal take?
Example of a SMART Short Term Financial Goal
One of my short term goals is to pay off my student loan debt. But just stating ‘pay off student loans’ isn’t a good goal because it has zero parameters. So here is my exact student loan debt SMART Goal
My goal is to pay off the remaining $34,000 student loan balance plus any accrued interest within three years. I will make this goal happen by paying above the minimum payment between $950 and $1000 each month for 36 months. I will know I achieved this goal when my student loan balance reaches $0.
Here is a script you can use for your smart financial goals:
My short term financial goal is to _____ within (amount of time). I will make this goal happen by ____ (action item) for _ (again, the amount of time or duration i.e. every two weeks). I will know I achieved this goal when _______ (final measurable portion).
Why You Should Set Both Short and Long Term Financial Goals
It’s important that your financial goals span both the short term and the long term. That’s because some things take much longer to save for, like buying a home or the largest expense of all- saving for retirement.
For example, we set up an emergency fund and we do not have any high-interest debt. Because of this, we made the long term goal of investing each month a priority right along with paying off my student loan debt. Could we pay off my student loans faster if we gave up this long term goal? Yes. But our goals reflect balance for the short term and the long term.
How We Set Financial Goals as a Couple
If you are setting your financial goals with a partner, I suggest the activity to below:
- Each of you writes down your short term financial wants and needs.
- Review the lists together and acknowledge each and every want and needs. (Nothing is bad here)
- See where there is overlap.
- Make that overlap your first few short term financial goals.
Having a similar goal in common will help you both get on the same page with finances. Short term financial goals are a great way to start.