Setting Financial Short-Term Goals
These short-term financial goals can fuel your long-term financial success.
Contributing Writer at Tally
November 11, 2021
You can break financial goals into two main categories: short-term and long-term. Long-term goals may include retiring early, paying off your home and paying off your student loan debt. These goals can take years to complete.
Financial short-term goals are more immediate, but they can help push you toward your long-term goals. The key is choosing short-term financial goals that align with your longer-term plans.
Let’s explore a financial short-term goal and outline some of the ones that can help you achieve your long-term financial goals.
Defining a financial short-term goal
Everyone has a different idea of what’s short-term and long-term when it comes to financial goals.
Short-term financial goals are generally anything you can complete in a few months to a few years. They can include paying off a percentage or all of your credit card debt, starting a high-yield savings account (HYSA) and building an emergency fund.
In general, these are money moves that will impact your life quickly, but they also can lead to longer-term financial success.
Financial short-term goals that set up long-term success
With the right collection of financial short-term goals, you can position yourself for long-term success. These short-term financial goals are just a few that can put you on that path.
Creating a monthly budget
Few financial success stories start without building a budget. This important tool ensures you’re not spending more than you’re earning. Without a budget, you’re driving through the world of finances without a map.
Start financial planning
It’s never too early to sit down with a financial advisor or financial planner and start outlining your future. Speak with them about all your goals in life, including buying a home or car, having children and retirement plans.
A financial planner or advisor will help you with financial literacy, goal setting, getting your head around the overall plan and putting the wheels in motion. They can even bring you back down to Earth if your plans are a touch too ambitious.
Building an emergency fund
When an emergency strikes and you don’t have savings to cover it, you’ll likely turn toward a credit card or loan to manage it. You can skip these high-interest options by building an emergency fund covering three to six months of expenses.
With these emergency savings, you can pay for unexpected expenses like home or car repairs — or keep paying your bills if you lose your job.
Starting a debt repayment plan
Excessive high-interest debt, such as credit card debt, can put a constant drain on your income stream. It can drag down your credit score, and it can seem like it’s never going away.
Starting a debt repayment plan is an important short-term financial goal.
There are many ways to become debt-free, but two common ways are the debt avalanche and debt snowball methods:
The debt avalanche method channels all your extra cash toward the debt with the highest interest rate while continuing to make the minimum monthly payments on your other debts. Continue this process until you pay off that debt, then channel all your extra money toward the debt with the next-highest interest rate while making minimum payments on your other debts. Repeat this process until you’ve paid off all your high-interest debt.
The debt snowball method applies all your extra funds to the debt with the lowest balance while making your minimum monthly payments on all other debts. Once you pay off the lowest balance debt, you move to the debt with the next-lowest balance while making minimum payments on the other debts. Repeat this process until you’ve paid off all your debts.
Creating savings goals
While there are common long-term savings goals, like saving for retirement, there are several short-term savings goals, such as saving for a down payment on a new home or a car.
When calculating how much you should save for a down payment on a home, the rule of thumb for mortgage lenders is to put 20% down. However, this may not be necessary for all scenarios and financial situations. The amount you put down depends on your finances and goals. The median down payment is 7% to 16%.
For a vehicle, there are more clear-cut guidelines. When buying a new car, consider putting down at least 20% to cover the car’s depreciation within the first few years. If you’re buying a used car, the depreciation curve is flattened slightly, so a 10% down payment might be enough.
Opening a high-yield savings account
High-yield savings accounts (HYSAs) can be worthwhile because they pay significantly more interest than typical savings or checking accounts without the risk of investing in the stock market. Think about tucking your savings into these accounts.
It’s a good idea to keep your emergency fund — and any other funds you’re putting toward specific savings goals — in an HYSA.
Opening a retirement account
Retirement age can sneak up on you. One day, you’re 22 years old and thinking you’ll never retire; next thing you know, you’re 40 years old and looking at a $0 balance in your retirement accounts.
Start your retirement savings early by enrolling in your employer’s 401(k) plan. If your employer offers a contribution match, such as matching 100% of your contributions up to 4% of your salary, attempt to maximize this match initially.
If you can’t afford to meet this employer match, contribute what you can now and increase your contribution rate each time you get a raise. Eventually, you can try to save at least 15% of your pre-tax salary for retirement, but it may take time to reach that point.
If your employer doesn’t offer a 401(k), you can also opt for a Roth individual retirement account (IRA). A Roth IRA is a retirement account you own and fund with post-tax dollars.
Getting term life insurance
Our own mortality is nothing fun to consider, but you want to think about those you’d leave behind. To protect your loved ones from financial burden, you should consider a term life insurance policy.
You can use the various online calculators to determine how much insurance you need, but you generally want to carry enough to pay off all debts and cover at least 10 years of your salary. So, if you have $250,000 in debt and a $50,000-per-year salary, your insurance policy should be at least $750,000.
Financial short-term goals make long-term success achievable
These quick-hit goals include setting a budget, visiting a financial planner, building an emergency fund and paying off debt. Reach these goals now, and you’re primed to meet your long-term goals, such as retiring comfortably, being debt-free or owning your home outright.
If one of your goals is to start paying off high-interest debt, the Tally† credit card debt repayment app can help. Our app helps you manage your credit card payments — and Tally offers a lower-interest personal line of credit, allowing you to pay off higher-interest credit cards efficiently.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 to $300.