It is often very simple for us to think about our long-term goals. In fact, many of us have lots of long-term goals that we consider each and every day. For example, some people might want to own their own house by the time we turn 30, save money for a new car within the next 5 years, or even set our long-term sights on retiring by age 65. As humans, it is only natural to envision ourselves in the place we want to be. It is much more difficult, though, to envision ourselves getting there.
So, how can we be sure we reach these ultimate long-term financial goals within our desired time frames? For many people, the best answer is to also set short-term financial goals. As the logic holds, you can’t get to your destination without taking your first few steps.
When applied to your financial future, this logic is extremely simple but can be very effective. For maximum effectiveness, your short-term goals should meet three primary qualifications: they should be attainable, measurable, and precise. For example, if you want to save money to buy a car five years down the road, you might first begin by making sure that this goal is attainable. To do this, you will likely first want to draft a budget, taking into account your current income and any foreseeable expenditures in the near future. To be safe, you may also want to consider setting aside a “rainy day fund” – for any unexpected costs you might incur. From this budget sheet, determine how much money you will be able to set aside for a car each month (or within whatever shorter-term time-frame that works for you). Now ask yourself: will you feasibly be able to set aside enough money to buy a car within the long-term period that you are hoping to meet? If not, you may have to either extend your deadline or try to cut down on your monthly costs in order to make a more attainable goal.
Next, you want to make your short-term goals both measurable and precise. In this case, making your goals measurable means that you will know exactly how much you plan to save and you will be able to measure where you are with relation to your ultimate goal, at all times. For example, if you incur an unexpected cost one month that sets you back, you will be able to know exactly how much money you have been set back and will be better able to plan for the future to get yourself back on track.
Next, when we say precise, we mean that you should develop an exact plan for how you plan to save your money to reach this goal. For example, many younger investors are partial to the idea of having a portion of their paychecks taken out biweekly before the rest of their cash gets deposited to their regular checking accounts. By creating a separate financial account for your long-term goals, then, you can avoid spending the money that you have budgeted to meet these goals.
Ultimately, with this kind of short-term planning, you can attack just about any long-term goal – from buying a car, to expanding your investment portfolio – in a small way periodically, instead of setting your goals aside for the long-term. This can help to ensure that you will be more financially secure when your deadlines eventually come around!