When it comes to personal finance and setting financial goals, everyone’s situation is different. Whether you’re comparing bills, rent, debts or lifestyle, you need a plan that will answer your specific problems, regardless of your neighbour’s, family or friends’ situation.
NB: A financial goal, simply put, is a target to aim for when managing your money, and can involve anything from saving, spending, earning or even investing.
Financial goals are often considered when creating a budget, as these goals will play an essential role in keeping you on track when it comes to monitoring your incomes and expenditures.
It’s advised to spend some time visualising what you’re aiming for so that working towards your financial target is easy. This means that your financial goals should be specific, measurable and time orientated so that you are focused on, and devoted to completing specific tasks that can provide you with future financial success.
There are several types of financial goals to consider, and we’ll look at some examples of short term, mid term and long term goals to help you get started. It’s important to learn the difference between these, as well as how to budget and save for them.
Short Term Goals
Usually, short term goals take less than three months to achieve and are often more attainable than mid and long term goals. These types of plans can also be classed as your more immediate expenses, as they tend to cover more general things you’re likely to spend money on – such as paying off a $500 credit card balance in full.
Other short term goals include paying into an emergency fund, covering your rent and insurance, personal goods, travel costs and any repairs and home improvements you may be looking to make.
Mid Term Goals
Before you get to your long term goals, there’s sometimes a grey area in between, and these goals can take anywhere from 3-12 months to achieve. Mid term goals will vary from person to person, and the timeframe may change depending on what the goal is.
For example, you may not need an emergency fund at the moment and might want to set one up in a few years instead. Other people may have a goal in mind to save $4000 to start investing.
Other mid term goals might include buying a car, saving for a down payment on a property, or paying off larger debt such as loans and credit cards with higher limits. You have to keep in mind some caveats, as there’s no way of knowing when you might have to repair an appliance or the length of time it might take to reduce your debts. The amount you can contribute now could change in the future.
Long Term Goals
Typically, long term goals take more than a year, perhaps even a decade to achieve, as these cover costs that paint a much larger picture overall. For example, you may want to earn enough from a side hustle to pay for all your current and future expenses.
Long term goals usually involve more money and lots of attention compared to other short and mid term goals. Other examples might include your retirement fund, paying off your mortgage, setting up a business, investing in property or saving for your children’s education.
Saving for Your Goals
When it comes to putting money away to reach financial goals, you need to consider the best places or ways to save. You could achieve your long term goals much faster by using a savings account with a reasonable interest rate, or by investing in an asset such as property that can provide you with huge returns on investment over a long period of time – as suggested by RWinvest. This method might be used if you don’t plan on using the money for at least ten years – perfect when saving for children’s tuition fees or a retirement pot.
On the other hand, finding a place to save for your short or mid term goals will be much different as you may need quick access to funds. Be sure to look for savings accounts without penalty fees if you need to withdraw money from your ‘rainy day fund’ for example.
What type of goals do you have?