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Financial planning for the short and long-term

Master short and long-term financial planning. Explore how to balance immediate needs with future goals for lasting financial success.

Anna Baluch
February 2, 2024

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With sound financial planning, you can make the most out of your money and live the life you want. A financial plan generally involves two types of goal-setting: short-term and long-term financial goals. 

With the right balance, you can create a roadmap to your desired financial future. Below, we’ll dive deeper into how financial planning works for both short- and long-term goals. 

What are financial goals?

Financial goals are specific objectives you set to fulfill your aspirations. Your goals should guide your planning and your actions. 

While there are financial milestones everyone should strive for, goals should be tailored to an individual's unique circumstances, wants, and priorities. Financial goals can be categorized into short-term and long-term objectives. 

How do short-term financial goals differ from long-term financial goals?

Short-term goals address immediate needs — such as building an emergency fund or saving for a down payment on a house. They typically take a few months or a couple of years to achieve and require strict planning to ensure you can meet the objective as quickly as you desire. 

Not only can short-term financial goals — and wins — give you more motivation to work towards long-term objectives, they can have a significant impact on your quality of life. For example, if you plan to get out of debt, achieving this goal can reduce your stress levels and make it easier to pursue other dreams. Short-term goals help reshape and improve your near future. 

Alternatively, long-term goals expand into the future — five years or more — and include objectives like saving for retirement or funding a child’s education. Since long-term goals can extend for decades, they often require a less aggressive approach to planning than short-term goals. Not to say they’re not as important, but they do require much more flexibility. Long-term planning empowers you to build a better future for yourself. 

How to create and balance your financial goals

Setting goals is great — but without a roadmap, it's easy to miss the target. Creating a well-thought-out plan can help you stay your course and find success. Form your goals and plan by:    

  • Honing in on what inspires you: Consider what you're working towards — objectively and emotionally. For example, building an emergency fund can protect you from the unexpected — but it also gives you security and control. Understand what you need and want, then determine what you must strive to get there.
  • Evaluating your situation: Take a close look at where you stand financially. Ensure you understand your budget, income, and what can be allocated towards your goals. Doing so will show you what is achievable. 
  • Following the SMART framework: SMART goals are specific, measurable, achievable, relevant, and time-bound. The framework helps turn lofty aspirations into a feasible action plan. When evaluating your financial situation, you can determine if the goal is realistic. Then, specify precisely what you want to accomplish, tie it to quantifiable metrics, and create a timeline.

Depending on your situation, you may make one-off goals to improve a particular aspect of your life. However, if you want to find true financial security, it’s best to create a 5-year plan — which encompasses short and long-term goals. 

Doing so allows you to tend to your immediate needs while safeguarding your financial future. By taking inventory of your current and future wants, you can build a plan that accounts for both. Balance can be as simple as dedicating 80% of your extra income to short-term goals and 20% to future objectives — it all comes down to what you choose to prioritize.  

Tips for achieving short-term financial goals

With a bit of planning and dedication, you can achieve your short-term financial goals. These tips can help you overcome the various challenges that may arise, such as unexpected expenses or job loss.

Reduce your expenses

Short-term goals are about near-term change, which creates a bit of urgency. Trimming expenses and living below your means is an effective strategy to save money and accelerate progress toward your goals. Consider:

Create a strict budget

Through a realistic budget, you’ll have greater control of your money. While you can choose from many types of budgets, the zero-sum budget, 50/30/20 budget, and pay-yourself-first budget are a few of the most popular options you might want to explore. 

Build an emergency fund

An emergency fund can be a real lifesaver when facing unexpected expenses like a car repair or medical bill. Without one, any sudden expense can interfere with your goals and delay progress. The general rule of thumb is to save at least three to six months of living expenses, which can help you mitigate financial volatility. You may want to save even more if your income fluctuates or you have a larger family.

Manage your debt

Debt can be expensive and get in the way of short-term financial goals, especially if you have a lot of it. The less money you spend on debt and the interest that comes with it, the more you’ll have to put toward your objectives. Fortunately, many debt relief options exist - such as budgeting for debt repayment or debt consolidation.


Tips for achieving long-term financial goals

Long-term goals are susceptible to various roadblocks that can hinder progress - such as market downturns, inflation, income fluctuations, and even loss of motivation. Equip yourself with a proactive strategy — which is the best way to achieve long-term financial goals. 

Schedule regular check-ins

Regular check-ins ensure your plans stay on track and adapt to evolving circumstances. Reviewing your progress can also foster motivation for a goal that feels far away. 

Set aside dedicated time intervals, whether monthly, quarterly, or annually, to review your progress and reassess your objectives. Analyze any changes in your income, expenses, or life circumstances that might impact your long-term goals. Adjust your plans accordingly, taking into consideration unexpected challenges or windfalls. Routine check-ins are proactive, helping you maintain control over your journey and ensuring that your long-term goals remain realistic, achievable, and aligned with your evolving priorities.

Avoid lifestyle inflation

Be mindful of lifestyle inflation, which can creep up as you progress in your career and earn more money. While it may be tempting to spend more, it’s in your best interest to live within or below your means. This way, you can continue to focus on what you hope to accomplish in 10, 20, or 30 years from now.

When deciding on big purchases or lifestyle changes, review how they may impact your long-term goals. Also, consider whether you would be protected should you lose your source of income. 

Take advantage of investing 

By investing, you can put your money to work for you. Thanks to the power of compound interest, investing is a major strategy in building wealth. The most common investment options include:

  • Stocks: Stocks represent shares of ownership in a company. While they usually offer larger potential returns than other types of investments, they’re very volatile, meaning they frequently go up and down. 
  •  Bonds: Bonds, such as corporate and government bonds, are less volatile than stocks and are therefore considered “safer” investments. However, you’ll see lower returns with them. 
  • Mutual funds: Mutual funds pool money from several investors to purchase securities like stocks and bonds. They can allow you to diversify your portfolio without choosing individual stocks and bonds. 
  • Real estate: As with mutual funds, real estate investing offers an opportunity to diversify your investments. You can go the traditional route and buy a property and sell it later for a profit or collect rent from tenants. Another option is to invest in real estate investment trusts (REITs) or use a real estate crowdfunding platform to invest in real estate projects with multiple investors.

You’ve probably heard the saying, “Don’t put all your eggs in one basket.” It reinforces the importance of diversifying your investments. If you spread your investments over different assets, like stocks, bonds, mutual funds, and real estate, you’ll increase the chances of some of your investments doing well when others are struggling. Diversification can allow you to reduce your risk and weather the ups and downs of the market. 

Automate retirement savings

Whether saving for retirement is a top priority or not, failing to save can harm your financial future. Even if you achieve all you set out to do, you’ll be back in a financially vulnerable position without a good cash cushion for retirement. Consider automating your savings into one of the following accounts: 

  • 401(k) plans: These are tax-advantaged accounts that are usually sponsored by your employer. You can contribute a certain dollar amount or percentage of your paycheck. Your employer may even match your contributions. 
  • IRAs: An Individual Retirement Account or IRA is a tax-advantaged account that an employer does not sponsor. As long as you earn income, you can open an IRA. It offers a great way to save for retirement if you’re an entrepreneur or self-employed. There are many types of IRAs, like Traditional IRAs, SIMPLE IRAs, SEP IRAs, and Roth IRAs. 

Balancing short-term wins and long-term success

It can be tempting to put aside future aspirations or needs for short-term wins. However, the more you wait to begin working toward your long-term goals, the harder it can be to achieve them. 

Instead, craft a financial plan that integrates both short-term and long-term goals seamlessly. Allocate resources thoughtfully, dedicating a portion to address immediate objectives while channeling funds toward investments and savings that contribute to sustained financial growth. Acknowledging and celebrating short-term wins can provide motivation but shouldn’t mean you ditch your check-ins or budgeting. Be as committed to the future as you are to transforming your current situation. 

Final thoughts

A mix of short-term and long-term goals can allow you to live the life you want today and prepare yourself for your ideal future. With a strategic, balanced plan as well as some hard work and sacrifice, you can achieve financial security and freedom.  

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