Learn the secrets of managing your money by setting short, medium, and long-term financial goals. Achieving your dreams and securing your future becomes simple with this step-by-step guide to smart money planning and goal-setting.
Financial goals and planning: short, medium, and long term
You have learned how to set SMART goals for your money, but how do you plan for different types of goals? Depending on your needs and wants, you may have short, medium, and long term financial goals. These goals have different time horizons and risk levels, and require different strategies to achieve them.
Short, medium, and long term financial goals
Short term financial goals are goals you want to achieve in less than a year, such as buying a new phone, saving for a trip, or paying off a small amount of debt. These goals are usually low risk, meaning you are unlikely to lose money or face unexpected costs. To reach these goals, you need to budget your income and expenses, and save a portion of your money in a safe and accessible place, such as a bank account or a money jar.
Medium term financial goals are the ones you want to achieve in one to five years, such as buying a car, saving for college, or starting a business. These goals are usually moderate risk, meaning you may face some uncertainty or fluctuations in your income, expenses, or returns. To reach these goals, you need to plan your income and expenses, and invest a portion of your money in a diversified and flexible way, such as a mutual fund or a certificate of deposit.
Long term financial goals are the ones you want to achieve in more than five years, such as buying a house, saving for retirement, or leaving a legacy. These goals are usually high risk, meaning you may face significant changes or challenges in your income, expenses, or returns. To reach these goals, you need to project your income and expenses, and invest a portion of your money in a growth-oriented and long-lasting way, such as a stock or a bond.
Goal Type
Time Frame
Example
Risk Level
Strategy
Short term
Less than a year
Buying a new phone, saving for a trip, paying off a small debt
Low
Budget and save in a bank account or a money jar
Medium term
One to five years
Buying a car, saving for college, starting a business
Moderate
Plan and invest in a mutual fund or a certificate of deposit
Long term
More than five years
Buying a house, saving for retirement, leaving a legacy
High
Project and invest in a stock or a bond
Check your understanding
What type of goal?
You want to save money for your mom's birthday gift.
Identify the goal as a short, medium, or long term goal.
Short-term goals can be achieved in fewer than two months.Medium-term goals may take from two months to three years to achieve.Long-term goals require three or more years to achieve. Long-term goals may be built upon short-term goals.
Short-term financial goals are things you want to achieve soon, like saving for a new phone or a fun trip. Medium-term goals might take a few years, like saving for a car or college. Long-term goals are for the far future, like saving for retirement or buying a house.
Mid-term goals are what ties your short-term and long-term goals together and are things you want to achieve within 1-5 years. Some mid-term goals may be to finish paying off your student debt, saving for your wedding, saving for your first home, or even doing renovations to your current home.
However, a general rule for long-term goals could be anything that typically takes you five years or longer to accomplish. Some examples of long-term financial goals may include: Saving for a down payment on a house. Funding your retirement. Paying off large debts (e.g., credit cards, student loans, mortgage, etc.)
Medium term financial goals are the ones you want to achieve in one to five years, such as buying a car, saving for college, or starting a business. These goals are usually moderate risk, meaning you may face some uncertainty or fluctuations in your income, expenses, or returns.
For example, a short-term goal might be to pay off debt or build a six-month emergency fund. While your medium-term goals will be to buy or remodel a home, plan a wedding or fund your 12-year-olds college expenses. The long-term goal usually revolves around retirement, travel or buying a vacation home.
Key short-term goals include setting a budget, reducing debt, and starting an emergency fund. Medium-term goals should include key insurance policies, while long-term goals need to be focused on retirement.
A short-term goal is achievable within a few months, a medium-term goal however is designed to take several months to up to five years to reach fulfilment.
Definition: Medium term refers to the time period of more than 12 months but less than five years. Examples: Examples of external medium-term finance include hire purchase, leasing and sale-and-leaseback. Amount: Medium-term finance deals with fairly larger amounts of money.
Long-term financial goals can take five or more years to achieve and generally apply to major life plans, like homebuying and retirement. Eliminating your debt can also be considered a long-term financial goal.
A long-term goal is something you want to do further in the future. Long-term goals require time and planning. They are not something you can do this week or even this year. Long-term goals usually take 12 months or more to achieve.
An example of a short term goal is to go for a run today or to read a page of my biology book. Medium term goals - A medium term goal is one that takes a bit longer. It could be a goal to be achieved in the next 2 weeks, a month or perhaps 6 months. A medium term goal might be to run 10km.
For example, you can set a career goal like completing a skill enhancement course or a short-term savings goal like setting aside money for an emergency fund. Short-term goals can also be stepping stones or actionable steps to reach a long-term goal much further down the road.
A short-term goal may be paying off a small balance on a credit card or saving $1,000 in an emergency fund, while buying a new car or paying down student loans could be examples of midterm goals. Saving for retirement, paying for your kids' education or buying a vacation home could all be examples of long-term goals.
Introduction: My name is Francesca Jacobs Ret, I am a innocent, super, beautiful, charming, lucky, gentle, clever person who loves writing and wants to share my knowledge and understanding with you.
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