In life, we’re often told to make goals… Fitness goals, career goals, relationship goals, and of course, financial goals! Sometimes these goals are long term, sometimes they’re short term; sometimes they’re difficult to reach, and sometimes they’re not. But out of all the different variations… today, I specifically want to talk about short term financial goals!
What should they be?
How do you make good ones?
And perhaps most importantly… how do you reach them?
Because if there’s one thing that I know personally, it’s that making financial goals can be overwhelming. Especially when it feels like you have no money to work with. (Trust me, I understand that feeling well!).
But the only way to get past that feeling, and start making financial goals that you can reach… is to just jump right in and get started!
So first off…
What’s the difference between a short term goal and a long term one?
At the most basic level, a long term goal is something that will take approximately a few years to complete. Whereas a short term goal can usually be achieved in under a year.
But, all goals are also on a spectrum of sorts. So some long term goals might take longer than others, and the same can be said for short term ones.
At the end of the day, both types of goals are important in their own way. And I plan to cover long term financial goals in another post! But for now, let’s stay on track…
Why should you make short term financial goals?
The biggest reason why you should make short term financial goals, is because they’ll actually help you reach your long term ones!
So essentially, you’ll want to look at them almost like stepping stones. They’re helpful ways to break down a large goal into more achievable portions.
You want to earn $1,000? First you’ll need to earn $250… then $500… etc! Every smaller amount you meet in that scenario will bring you closer to the bigger one; while giving you a sense of accomplishment along the way.
What are SMART goals, and why do you need them?
When you’re making goals of any kind (but especially if they’re financial ones), it’s important that they meet certain criteria. And this criteria is often summed up by the acronym “SMART”, which is used a lot in the business world but can applicable for you too!
What does SMART mean?
S – The “S” represents the word “specific”. Which is something you always want your short term financial goals to be. Because if you make too broad of a goal then it’s probably going to be harder to reach.
M – “M” stands for “measurable”, and this just means that you want your financial goals to be stated with exact numbers. For example, don’t say “I want to make a lot of money!” Instead say… “I want to make $1,000”.
A – The “A” in this formula means “achievable”. And it’s arguably one of the most important parts of the whole equation. Because if a goal isn’t achievable, then it doesn’t really serve a purpose.
R – The “R” stands for “realistic”, and even though it’s similar to making your goal achievable, there is a slight difference. Because while something might technically be achievable… it may not be realistic. And you want your goal to be both things!
T – Finally, we have “T”. Which stands for “time-based”, and simply means that your goal needs to have a timeline of some kind.
Why are SMART goals important?
The reason I wanted to mention SMART goals in this post, is because I think the concept is great for giving you some guidelines to work with as you’re creating your short term financial goals. Especially when you’re new to making them, as many people in their twenties are.
And although I’ve summarized the idea, you can learn more about SMART goals in this article by Fin Masters if you’re interested.
5 Short Term Financial Goals You Need To Make In Your Twenties…
Now that we’ve covered a lot of the relevant questions for this topic, let’s get into the five goals that this article is all about…
1. Creating A Budget For Yourself
One of the first steps you can take to get your finances in order, is to create a budget. And since there’s so much to go into when it comes to this topic, I’ll be writing a separate article on it at some point.
But for now, just know that a budget will help you reach all of your other short term financial goals. By aiding you in being able to save, and also by letting you know which goals you should be making in the first place.
Which type of budget you should make will depend on your personal situation and variables like your income, expenses, and current life goals.
But popular structures include formats like the 50/30/20 budget, the envelope system, and zero-based budgeting.
And remember, that you can always adjust your budget as time goes on and as your needs change. You’re just making short terms goals right now, and one of the main benefits of that is the ability to stay flexible with them.
2. Starting And Building Up An Emergency Fund (In Increments)
Starting an emergency fund might seem like a large task, but it’s not as intimidating as it seems. As long as you start small.
For instance, a long term goal with your emergency fund might be to reach enough money to cover three months of your living expenses. As this is a goal that a lot of financial experts suggest.
But although that’s way more money than most of us could put back anytime soon (myself included), we can all start to create some “stepping stones” towards that goal. And depending on your current situation, these short term goals could be as small as you need.
For some people, the first goal might be to reach one week of living expenses; while for others, the goal could be to save up enough for two weeks. Just choose one that works for you, and make sure it’s SMART.
3. Slowly Cutting Down On Debts
Things like student loans and credit card debt are quite common among our generation, and can often make reaching our financial goals really difficult due to interest. So another series of short term goals that experts recommend making, are ones to target getting rid of the debt in question.
Popular methods for doing this include the “snowball method”, and the “avalanche method”. Both of which are capable of inspiring some short term goals.
With the snowball method, you’d start by paying off the lowest amount of debt you have and then slowly working your way up to the larger debts.
And with the avalanche method, you’d be prioritizing whichever debt has the highest interest rate. Then, after paying that off, you’d move down to the next highest interest rate and so on.
Each of these methods have their own downsides and upsides, so I encourage you to pick the one that seems optimal for your own situation. And if you’d like to learn more about them and their differences, then this article by Investopedia has a lot of information!
4. Beginning To Save For Upcoming Expenses
As important as it is to have more generalized short term financial goals, like the ones we’ve been discussing thus far… it’s equally as important to keep your individual situation in mind.
Do you want to buy a house any time soon? What about a car?
Are you planning on having children in the next few years?
Would you like to start a business?
How do you feel about travel?
All of these examples (and many more situations that I didn’t mention) require at least some amount of money. So if you have one of those expenses coming up, try to make some short term goals in regards to it.
It could even be something smaller than I mentioned earlier. For instance, I’m moving to a new apartment in a few weeks. So one of my short term financial goals is to get the money for the utility deposits ready!
And remember that if you need to, you could even prioritize these customized goals above others that you’ve made. As you may need the funds for these expenses faster.
5. Start Thinking About Long Term Investments
I know that thinking too far into the future, especially in terms of finances, can get overwhelming really quickly. But even if you’re only in your twenties, it’s never too soon to start planning for your retirement. In fact, most experts seem to agree that the earlier you get started… the better!
Because even if you can only put $10 back every week, that’s $520 a year. And if you do the same thing over the next five years, you’ll have saved $2,600 for your retirement.
I know that might not seem like a lot in the big picture, but it’s still better than $0. And it goes to show that even a small goal can grow into something bigger.
Plus, there are things you can do to make your money multiply even faster; since you probably won’t need to use these particular funds any time soon.
Examples include placing it in high-yield savings accounts, or safely investing it into bonds or low-risk stocks.
Summary
Short term financial goals can be efficient building blocks for your future, particularly if they’re created in the right way. So whenever you’re making your goals… double check that they’re specific, measurable, achievable, realistic, and time-based.
And remember the main five goals that we talked about today: create a budget, start an emergency fund, cut down on your debts as fast as you can, plan ahead for potential expenses in your future, and start your retirement fund early!
