You may be familiar with the concept of short-term financial goals. A short-term financial goal is a desired financial achievement that can be accomplished within one year. But you may still wonder, “Why is it important to set financial goals?”
Short term financial goals offer various benefits for consumers. A short-term goal can motivate you to develop better money management skills. Goal setting can also help you monitor your finances better, as you need to keep track of your goal progress. If you want to set short-term financial goals, this helpful guide will explain the process and the benefits you can expect to receive.
Identifying Short Term Financial Goals: Examples
A short-term financial goal can be achieved within a few months or less than a year. These are some short-term financial objectives that people generally work towards:
| Goal | Purpose | Time Frame |
| Save for a vacation | To fund a holiday without using credit | 6 months |
| Build an emergency fund | To cover unexpected expenses without going into debt | 1 year |
| Debt repayment | To reduce loans and credit card debt. | 1 year |
| Save for a large purchase | To buy a new appliance or gadget without financing | 3-6 months |
| Increase monthly savings | To enhance financial security and investment opportunities | 1 year |
| Create a budget | To manage finances more effectively | 1 month |
| Improve credit score | To qualify for better terms on loans and insurance | 6-12 months |
Almost every financial expert will tell you that having an emergency fund is a short term goal that every consumer should work towards completing. A savings plan can provide you with quick cash for unexpected emergencies so you don’t have to incur unnecessary debt. Learning how to start budgeting can free up more of your income so you can put money towards an emergency fund.
Many people also work towards achieving debt repayment. Debt repayment can help you obtain financial freedom, which means you can comfortably afford your bills without financial stress. Repaying your debt early can also save you a lot of money on interest fees.
How do long-term financial goals differ from short-term financial goals?
Unlike a short-term financial goal, a long-term goal takes longer to achieve. Long-term financial goals typically take more than five years to accomplish. These are a few examples of long-term financial goals that consumers set:
- Pay off student loans
- Saving for retirement
- Save up for a down payment on a property
- Become financially independent
- Save for a child’s college education
Setting Realistic Financial Goals
Lofty financial goals are great to have, but you may only achieve financial success if they are realistic. While it’s understandable to want a luxury vehicle, you may not have the financial means to purchase and maintain one right now. One key way to ensure your short term financial goals are doable is to use the SMART goals method. SMART stands for Specific, Measurable, Achievable, Realistic, and Time-bound.
Here’s an in-depth explanation of these five criteria for setting financial goals:
- Specific – It’s critical to be able to specify your short-term goal. For example, if you want to save money, you can aim to start an emergency fund.
- Measurable – SMART goals must have a measurable quantity. If your goal is to start an emergency fund, you can set a desired amount, such as $1,000.
- Achievable – You must ensure your goal is achievable. How will you accomplish saving $1,000? You can do this by saving a certain amount per paycheck, such as $100.
- Realistic – Make sure you are setting realistic targets as financial goals. While you may want to save 50% of your paycheck, your monthly bills may take up more than 50% of your income. A more realistic goal may be to set aside $100 per paycheck into your emergency fund.
- Time-bound – SMART goals should have a definite time frame. Setting a deadline can create a sense of urgency and motivate you toward financial success. If you can realistically save $100 per biweekly paycheck, then you should have $2,600 saved by the end of one year (26 pay periods)!
Budgeting for Short Term Financial Goals
Learning to budget is essential to accomplish short-term goals. Budgeting gives you increased control over your finances, which makes it easier to track your spending, save money, and prevent overspending.
Here’s a 5 step process for budgeting, as well as some helpful budgeting tips:
- Calculate Income – In order to start a monthly budget plan, you must calculate your gross monthly income. This is the amount of money you earn before taxes and other deductions are taken out.
- Calculate Expenses – Determine your total monthly expenses and categorize them into fixed and variable categories. Fixed expenses, such as rent or car payments, do not change. However, variable expenses can fluctuate and/or be cut from your budget.
- Budget Plan – Once you know exactly how much you earn and spend within one month, you can start financial planning with a budgeting strategy. There are various budget plans to choose from, such as the 50/30/20 rule or envelope system.
- Expense Tracking – Tracking your expenses is necessary to ensure you stick to your budget. You can use pen and paper to jot down your expenses, but most budgeters find it easier to use an app. Financial apps are great tools for expense tracking because some offer account linking, goal tracking, and expense categorization.
- Review Regularly – Make it a habit to review your budget regularly and adjust your financial planning strategy as necessary. Your needs and income may change over time, so your budget should evolve too.
Effective Saving Strategies
One of the best money saving tips is to implement a savings strategy. An effective savings strategy can make it easier for you to practice financial discipline and achieve financial goals.
These are some strategies for accomplishing short-term financial goals:
1. Automate Your Savings
Automation transfers ensure that you stay on track to meet your financial goals and do not accidentally spend extra money. Sign into your online bank account and look for the transfer function. You will have to determine how much money you want to transfer and the frequency. For example, you may set up $50 automatic transfers every time you get a direct deposit from your employer.
2. Develop a Personalized Savings Plan
A personalized savings plan can help you gain financial security, peace of mind, and goal achievement. To start, define a specific goal you want to achieve. Once you know what you want to work towards, you can adjust your existing budgeting plan to achieve your financial goals.
3. High-Interest Savings Accounts
A high yield savings account, or high-interest savings account, offers a higher interest rate than a typical savings account. By switching to high yield savings accounts, individuals could greatly increase their financial returns. But before you switch savings accounts, make sure to inquire with multiple financial institutions to compare interest rates.
4. Cut Unnecessary Expenses
Reducing or eliminating unnecessary living expenses through cost-cutting strategies can free up more of your income. A thorough budget review will help you identify ways to cut expenses. If you already use expense tracking tools, go over your recent transactions to see what living expenses you can avoid in the future.
5. Use Savings Apps
Money management apps use up-to-date financial technology to provide users with a clear understanding of their finances. The best financial apps provide features that allow you to track spending, set budgets, achieve financial goals, and much more.
These are some of the best budget apps on the market:
- YNAB (You Need A Budget)
- Acorns
- Chime
- Digit
- Qapital
6. Implement the 50/30/20 Budgeting Rule
The 50/30/20 rule is a budget strategy with flexible spending rules and an easy-to-follow savings allocation. Borrowers use 50% of their income for fixed expenses, 30% for discretionary spending, and 20% for savings or credit card debt repayment.
Budgeting methods such as this can be easily adjusted if you need more or less money for a specific financial category. Suppose your financial planning needs adjustment after your rent unexpectedly increases. In that case, you could allocate 60% of your income toward fixed expenses, 20% towards your wants, and 20% towards your savings.
7. Save on Everyday Expenses
You can save money on everyday expenses by finding deals, clipping coupons, and taking advantage of cashback programs. If you want to increase your daily savings, consider downloading a few apps. Many grocery and retail stores have mobile apps that offer exclusive deals, digital coupons, and rewards programs. If you make purchases with a rewards credit card, you can earn cashback for future shopping trips.
8. Build an Emergency Fund
An emergency fund is a financial safety net set aside for unexpected emergencies. It’s essential for everyone to have an emergency fund since it provides financial security. Ideally, your emergency fund should equal three to six months of living expenses. You can start an emergency fund by opening a savings account and committing to a regular deposit schedule.
Reviewing and Adjusting Savings Goals
It’s important to follow savings goals, but it’s even more crucial to review and adjust those goals. A savings review helps you track your progress and identify any issues that may be hindering your ability to meet financial goals. Adjusting your savings goals is also necessary when your life changes, such as from a new job or unexpected expenses. Regular reviews and adjustments can ensure you meet short and long term financial goals.
Overcoming Common Financial Obstacles
Financial setbacks are bound to happen, so it’s critical to plan how you will go about overcoming obstacles. Start by getting a clear understanding of your financial standing. Consider which short-term financial goals are most important, such as saving for a down payment. Adjusting your existing budget, cutting unnecessary expenses, and increasing your income are a few problem solving solutions to financial challenges.
Importance of Financial Education and Resources
Taking advantage of educational resources can help you increase your financial literacy and money management skills. Seek out financial blogs, books, and online courses that promote financial independence and stress the importance of securing your financial future.
These are some online websites that can help you enhance your financial knowledge:
- Coursera
- Khan Academy
- MyMoney.gov
- Consumer Financial Protection Bureau (CFPB)
- edX
Even if you feel like you already have financial stability, continuing your financial education can help you find new ways to reach your financial goals.
Developing Financial Discipline and Habits
Financial discipline is the consistent practice of managing your money wisely. You can build financial discipline by establishing better habits, automating savings, investing in mutual funds, avoiding new credit card debt, and setting up short-term financial goals. For example, investing in mutual funds can be a practical way to grow your savings and manage risk through diversification. Remember that habit formation takes time, but consistent practices will eventually become second nature.
Tracking Progress
Tracking the progress you are making toward financial goals can keep you motivated and help you stay on track. Financial tracking apps are easy to use and offer useful features, such as goal tracking, monthly progress reports, and more. Suppose you are working towards saving a sizable down payment. In that case, a financial app can make progress tracking much easier.
Start Achieving Your Financial Goals with CreditNinja
Achieving financial goals is completely possible with the use of effective saving strategies. No matter what short-term goals you may have, such as eliminating credit card debt or saving money for a down payment, remember that consistency is the key to financial success.
If you don’t already have a savings account, make it a priority to open one. Putting money into a separate savings or investment account can prevent you from using funds for unnecessary expenses. And if a financial obstacle unexpectedly shows up, you have a financial safety net to fall back on.
But even with an emergency fund, you may still not be completely prepared for costly car repairs or hospital bills. If you need quick emergency cash, consider applying for a personal loan. Personal loans offer small or large loans for all types of unexpected expenses. CreditNinja personal loans provide competitive rates, flexible repayment plans, and quality customer service. If you need financial assistance, check out our website for more information about our easy application process!
