Put All Three Types Of Financial Goals Into Your Money Plan
When setting goals for success with money. Be sure to include a mix of these 3 types of financial goals in your plan.
3 Types Of Financial Goals
Here are the three types of goals we are going to discuss today:
- Short-term financial goals
- Medium-term financial goals
- Long-term financial goals
We will review each of these goal types in a moment.
But first, let’s set our foundation with an important definition…
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
What Are Financial Goals?
First of all, a goal is the desired outcome that a person envisions, plans, and commits to achieve.
Furthermore, a financial goal is an outcome that you want to accomplish in an area of your finances.
Finally, good financial goals are person-specific. Because we are all different. Operating in different stages of our lives.
So, we all should have different goals to some extent.
That is why I have provided a menu of goals to choose from. So you can find 1 or more examples of financial goals. That fit your unique situation.
Now, on to the 3 types of financial goals. Including examples…
Short-Term Financial Goals
A short-term financial goal is something you want to complete soon.
Most noteworthy, I define this as up to 1 year from the date you set the goal. These goals are great for your finances in your 20s and 30s.
And there are several aspects to short-term goals that we want to understand.
First of all, completing short-term financial goals becomes your foundation for long-term success.
Furthermore, achieving short-term financial goals provides the motivation to keep moving forward. They give us inspiration from “quick-wins”.
For example, financial goals for college students should first focus on the short-term. To set a good foundation for longer-term financial success.
Finally, think about short-term goals often. Because they make us mindful of our money every day.
It’s all about intentional living. Spending money on what you value. And, living in the moment.
After all, today is all we have. Tomorrow isn’t promised. But it must be planned for.
Short-Term Financial Goals Examples
There are lots of examples of short-term financial goals to select from. Here is a sample:
- Assess your current money state
- Put the right insurance in place
- Improve your credit score
- Establish an emergency fund
- Make a monthly budget
- Reduce expenses and save money
- Refinance your debt
- Payoff credit card debt
- Contribute to your employer’s 401(k) plan
- Open an Individual Retirement Account (IRA)
Next, let’s discuss and define medium-term financial goals.
Medium-Term Financial Goals
Medium-term financial goals require us to stretch out our thinking. And allow us to plan for important life events in the not too distant future.
They are far enough out to make for big accomplishments with your money. But not too far where they seem like a distant dream.
They are sometimes referred to as intermediate-term financial goals.
So, what is the time frame for a medium-term financial goal?
Look to accomplish intermediate financial goals in more than 1 year, but less than 5 years.
Medium-Term Financial Goals Examples
Here is a list of potential medium-term financial goals for your consideration:
- Develop of vision of your financial future
- Negotiate a pay increase
- Get a higher paying job
- Pay off student loans
- Add to your savings
- Start a business
- Buy a rental property
- Save for something you value
- Save for a down payment on a home
- Buy a home
- Invest money every month
- Open and fund a health savings account
And last but not least. Our final type of financial goal is…
Long-Term Financial Goals
I’m talking about long-term financial goals. The goals we want to accomplish in more than 5 years.
Achieving long-term financial goals examples leads to a big-time compounding effect on your wealth.
Now, let’s think about the 3 types of financial goals holistically. Most noteworthy, we want to think of our short, medium, and long-term goals together.
Why is that?
Because longer-term goals should influence your medium-term and short-term financial goals. I think of this as the “big picture” in overall financial goal planning.
Sometimes I recommend setting your long-term financial goals first. Then suggest working backward to make short and medium-term goals that support them.
Doing so will ensure all of your goals are aligned.
Long-Term Financial Goals Examples
- Eliminate all debt
- Finance your children’s education
- Become financially independent
- Retire by age 50
- Make a million dollars
- Build a lasting relationship with a money mentor
- Travel the world
- Leave a financial legacy for your children
Okay. Now that you know about the 3 types of financial goals. It’s time for a brief Q&A session…
Frequently Asked Questions About The Types Of Financial Goals
Then after addressing these common questions about financial goals. I will wrap up. I promise!
What’s The Difference Between A Financial Goal And A Money Habit?
I find that many people confuse good money habits with personal finance goals.
Let’s clarify this. So you won’t make the same mistake.
First of all, a money habit is a behavior related to your finances that is performed regularly. And, repeated over an extended period.
Furthermore, money habits are a way of thinking, feeling, or doing something. That is acquired through previous experience.
I would like to use an example to better explain…
Let’s say my friend Maria wants a 10% raise from her boss. And she feels by getting up early and starting work every day by 7 am, a 10% raise will follow. Specifically when she comes up for a salary review next year.
One of many good daily habits is getting up early and starting work at 7 am. By our definition, it is a behavior performed regularly over an extended period.
On the other hand, Maria’s short-term financial goal is to get a 10% raise. It is the desired outcome. The result she wants to accomplish for her finances.
So, think of it this way. Practicing good money management habits will help you achieve your financial goals. But please, don’t confuse your money habits with those goals.
Habits are repeated behaviors. While goals are specific outcomes.
Why Are Financial Goals Important?
Goals are a critical element to improve your odds of success with money.
Why is that? Let me explain.
First of all, setting financial goals will prompt you to establish new money-related behaviors.
Think about Maria again. She wants a 10% raise.
So she established a new behavior. Getting up early and starting work at 7 am.
Furthermore, goals guide your focus.
Let’s face it. Life can get cluttered and full of roadblocks along our journeys.
Because we are pulled in many directions by many different people. And there are so many distractions.
Therefore, smart financial goals provide a framework for making everyday decisions. Once again let’s go back to our example using Maria.
Maria has lots of friends. And they love to go out and party it up every night. Of course, they want Maria to join them.
But given her goal to get a 10% raise. And, her newly established habit of starting work at 7 am. It’s easy for Maria to say no.
Since going out late every night with her friends doesn’t fit with her financial goal.
So, she decides to only go out with her friends on Saturday night. Her goal has kept her from making bad financial decisions.
To sum it up, I want to emphasize the importance of setting financial goals.
Because goals break down your money aspirations into attainable chunks. Also, get you on a path to achievement.
I like the saying “How Do You Eat an Elephant?” And the answer is “One Bite at a Time.”
And so it is the same with goal-setting. You will improve your success with money by pursuing that success one goal at a time.
Should I Compare My Financial Goals To Other People’s Goals?
Yes. It can be helpful to compare yourself to others when choosing from a large number of financial goals examples.
That’s one reason having a money mentor can be a good idea.
But be careful. Because financial goals are specific to each individual. And so are the different types of goals.
For example, a 20-year-old may set a long-term financial goal to save for a down payment on a house. But for a 30-year-old, that may be a medium-term financial goal.
I think you get the idea. Everyone is different. When it comes to choosing financial goals.
So, just use other people’s financial goals as a guide. And for inspiration.
How Many Financial Goals Should I Have?
Pick a few goals to achieve in the short term. Also, a couple of medium-term and long-term financial goals from the options I have provided today.
Think of it like this…
Just like when you go to a restaurant. You don’t order everything off the menu.
No, you pick what suits your taste and your appetite at the time. Perhaps an appetizer, entrée, and dessert.
Do the same for your financial goals. Keep the number manageable. And keep your goals balanced across the categories we discussed. Specifically, the 3 types of financial goals.
But there’s more. Because once you have made your goal selections. You need to set your goals effectively.
How Do I Set My Financial Goals?
I suggest using SMART financial goal setting.
SMART is an acronym. So when you are setting financial goals you want them to be:
Also, be sure to put your goals in writing. Doing so clarifies your thoughts. And builds your commitment.
How Do I Achieve My Financial Goals?
There are good ways to go about achieving goals. Those ways include:
First of all, create a written action plan.
On one hand, a detailed step-by-step plan may not be necessary. It depends on the type of financial goal. And the complexity of the financial goal.
On the other hand, a challenging long-term financial goal probably requires a step-by-step plan.
Where an action plan is nothing more than the detailed steps required to achieve your goal. Once again, just like creating a SMART financial goal.
Put your action plan in writing.
Next, it’s time to act. And work on your plan.
Also, think about what new habits you need to create in your life. Then set the right daily, weekly, and monthly actions to attain the goals you have set for yourself.
Make the required actions into new habits.
Finally, monitor your progress.
Since you used the SMART financial goal-setting process. Your goal is measurable. And it is time-bound. So, measure your progress as often as necessary.
And one final tip. Be sure to check out all the resources you need to hit your financial goals.
You can do so at the Goalry financial goal mall.
Okay. That’s all for today.
Allow me to wrap up with a few parting thoughts…
Wrap Up: 3 Types Of Financial Goals
First of all, there are 3 types of financial goals. Short, medium, and long-term.
Furthermore, effective financial goal setting brings together some goals of each type. That work well together as part of a comprehensive financial plan.
Finally, always remember if you can envision it. You can set a goal for it. And you can achieve it.
Whatever your “it” is relating to your money.
More Reading About Goals And Goal Setting
- A lesser-known but effective way to set goals
- How to create a vision of your financial future
- Using a goal tree to ensure success
Author Bio: Tom Scott founded the consulting and coaching firm Dividends Diversify, LLC. He leverages his expertise and decades of experience in goal setting, relocation assistance, and investing for long-term wealth to help clients reach their full potential.