Looking ahead: What to consider when setting short-term financial goals

Types of short-term financial goals

Depending on an individual’s goals, someone can set many different types of short-term financial goals. Here are some common examples:

Emergency fund creation

As approximately 72% of Americans report feeling financially insecure,¹ building an emergency fund can be an important short-term financial goal.

An emergency fund may provide security when unexpected expenses arise, such as medical bills, car repairs, or a job loss. By setting up regular contributions to an emergency fund, individuals can work to avoid going into debt or tapping into long-term savings during emergencies.

While setting up an emergency fund can be a short-term goal, maintaining it and growing emergency savings can be a longer-term goal as well.

Vacation or event planning

Setting aside funds for a vacation or an event (think honeymoons or weddings) may help people enjoy memorable experiences and possibly reduce financial stress.

By treating vacation or event planning as a short-term financial goal, individuals can balance enjoying life's special moments and maintaining stability, ensuring these occasions don’t compromise their potential financial well-being.

Large purchases

Whether buying furniture, a new laptop, or a major appliance, having a financial plan in place is essential — and that may start with setting a short-term financial goal. This entails saving for the amount due and exploring ways to reduce expenses without sacrificing quality or value.

Setting a short-term financial goal to fund the cost of a large purchase can help individuals make informed decisions, avoid possible debt, and ensure that the purchase aligns with their overall financial objectives.

Potential benefits of setting short-term financial goals

Here are some potential benefits to short-term financial planning:

• Flexibility: Short-term savings goals may allow more flexibility in adapting to unexpected life changes or financial circumstances, as they can be adjusted or modified relatively quickly.

• Progress: Achieving short-term goals can provide tangible evidence of progress, which may help boost confidence, provide a sense of accomplishment, and fuel motivation to set more financial goals.

• Immediate gratification: Short-term goals offer the satisfaction of more immediate rewards, as people can see the results of their efforts sooner.

• Reduce risks: Focusing on short-term goals allows individuals to address more immediate financial needs and emergencies, potentially reducing the risk of falling into debt from an unexpected expense.

Considerations for meeting short-term financial goals

Ready to set short-term financial goals? Consider these factors before getting started:

Budgeting

Setting a personal budget can help meet short-term financial goals. Here’s an example of steps someone could take when creating a budget for a short-term goal:

• Identify short-term goals with specific timelines and costs, such as saving $500 for travel in 3 months or creating a $1,000 emergency fund in 6 months.
• Allocate a portion of income to each goal. Ensure the income fits within the person’s overall personal budget.
• Cut non-essential expenses to free up more funds to contribute to meet the goal.
• Automate savings by setting up regular transfers.
• Track expenses diligently to stay within budget.
• Periodically review and update to stay on track.

Automation and accountability

When it comes to short-term money goals, using savings apps or digital wallets to set up automatic contributions may help people stay on track. These apps typically allow individuals to schedule regular transfers from their checking account to their savings account. Some may even provide features like goal tracking and spending analysis.

Being held accountable by a friend or family member may also be valuable. Sharing financial goals with a trusted person who can check on progress and offer encouragement may help someone stay committed to their goals.

Monitoring and adjusting

It may be helpful to regularly review progress. This may help people stay on track and achieve their goals despite changing circumstances. When someone routinely assesses their short-term goals and budget, they may be able to better plan and make necessary adjustments.

Setting short-term financial goals can be a powerful tool. Whether it's building an emergency fund, planning a dream vacation, or making a significant purchase, this strategy can offer flexibility and tangible progress.

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