Setting short-term, midterm, and long-term financial goals is essential for personal finance.
If you aren’t set specific goals, your money is just gone so quickly… To avoid stressing about money, visualize where you want to be in the future and set a financial goal.
In this post, you’ll learn how to set financial goals and examples of financial goals by term. I hope this article would help your creating budget!How to Set Financial Goals for Future Click To Tweet
First, what are Financial Goals?
In general, financial goals are short-term, midterm, and long-term money plans. These money plans are helpful to create a budget and reduce expenses. Good financial goals are detailed and realistic.
Short-term goals are a 12 to 24 months plan. Mid-term goals are 2 to 5 years. Long-term goals are 6 to 10 years.
Why should you break down goals? Breaking down your goals will ensure that you’re consistently taking steps toward achieving the goal. You can also review and adjust your goal easily.
When we said “setting goals,” it sounds like “we must achieve.” No, it’s totally wrong! Of course, if you can stick to your plan, that would be great. However, you don’t have to stress out about your goals. It’s just a plan. The plan always changes. I highly recommend reviewing your financial goal and budget every month, every year. If it’s necessary, change the plan.
By reviewing your financial goal and budget, you’ll find a realistic financial plan that fits your lifestyle.
Setting Financial Goals
The most effective way to build your financial goal is to create a long-term goal first. And then, set a mid-term goal next. Finally, set a short-term goal.
Here is an example:
Michelle wants to save $10,000 in 10 years. (long-term goal) To do that, she needs to save $5,000 in 5 years (mid-term goal), save $1,000 every year (short-term goal), and save around $84 a month.
Based on the amount of money you want to save each month, create a budget. When you create your budget, define wants and needs. Wants are desires for goods and services we would like to have but do not need. Needs are goods and services we must have to survive. Cut expenses from wants, not needs.
How to cut your spending without cutting into your life?
Here is Ways to Reduce Your Spending Without Making Your Life Miserable
Here, you need a plan! Despite “setting a goal” start with the long-term, “planning” starts with the short-term.
At first, let’s focus on cutting expenses. You don’t have to do all of them, the list below is just some ideas you can try. Find what works for you.
- Income minus target saving is your living cost.
- Make a budget and live by it.
- If you can’t live with your budget, change the target saving.
- Spend less than income.
- Don’t buy inexpensive goods, buy affordable goods that last long
- Get rid of stuff you don’t use.
- Do some basic energy efficiency around your living quarters, like using LED light bulbs.
- Pay off credit card debt.
- Use coupon and cashback app when you shop.
- Buy secondhand.
- Review insurance plan.
- Quit bad habits.
- Eat out less, build healthy eating habits.
- Unless you’re a heavy cell phone user, switch to a prepaid phone.
- Setting the same goal with your partner.
- Shop for holiday supplies after holiday.
- Cancel your subscriptions.
- Save money on groceries.
- Avoid impulse spending.
- Stick to the shopping list.
- Digital detox.
- Cut cable.
- Shop at discount store.
- Make coffee at home.
You may cut the expenses successfully, and have some extra cash to save now. Let’s consider growing your income in this phase! Again, you don’t have to do everything on the list. Find what works for you.
- Maintain minimalist lifestyle.
- Spend wisely and cut back where you can.
- Learn how to make money online.
- Build an emergency fund if you can, these emergency fund will reduce your financial stress a lot.
- Try gig economy jobs in your free time.
- Increase your credit score to decrease your interest rate.
- Create an extra income stream based on your goal.
- Only borrow what you truly need. (house/car/college education)
- Start dropshipping business to make extra money at home.
- Stick to the plan, don’t increase your spending because you have extra money.
- Pay off loans, like mortgage.
- Start freelancing to make extra money from home.
At this stage, you would have supplemental income in addition to your full-time job. If you already have an emergency fund and extra money to save more, now is the time for investing. Grow your money.
- Stop comparing yourself to others.
- Focus on what you can control.
- Live frugally.
- Save regularly.
- Save for retirement besides 401(k). This could make your financial freedom faster.
- Make your vacation luxury for less.
- Learn investing.
- Also, learn investment strategies for lazy people.
- Generate passive income.
- Track your progress.
You probably can’t stick to the plan 100% and it’s ok. The important thing is to be consistent. Always remember that you can manage your finances. Take control of your money, have a financially healthy life (: