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4 Key Long-Term Financial Goals — and How to Set Them

Short-term goals might deliver quick wins, but long-term goals set you up for sustained financial freedom.

October 1, 2022

Goals give you a set of directions for your finances. Trying to get by without them is like deciding you’ll drive “somewhere interesting” without choosing a specific destination.  You don’t know if you’re getting closer or further away, and you might end up going in circles. 

Short-term objectives give you milestones you can hit along the way, like pit stops on a journey, but it’s your long-term financial goals that will ultimately get you where you want to be.

Although everyone has different visions and ambitions that determine their goals, a few objectives are common among (almost) everyone. We’ll go through why long-term goals matter and some of the most common, along with other considerations for your financial journey.

What are long-term financial goals?

The phrase “long term” means something slightly different to everyone. To some, it might involve setting a plan for a year in advance; to others, it may be about planning for retirement

For the sake of clarity and consistency, we’ll stick to these definitions for the rest of the article:

  • Short-term financial goals: Goals for less than two years in the future 

  • Mid-term financial goals: Goals for the next two to five years 

  • Long-term financial goals: Goals more than five years in the future

However, this is by no means an objective truth, so feel free to use whatever definition makes sense for you.

Why long-term financial goals matter

Most people have a vague idea of where they’d like to be in life. They might like the idea of having a net worth high enough to buy whatever they want without having to worry about price tags, for instance. But without setting a specific amount of money to target as a savings goal or giving yourself a time frame to achieve that outcome, you’re unlikely to reach that point (unless you’re very lucky). You need to make specific goals.

Yet many of the most important goals can’t be achieved in a matter of months or years. Unless you win the lottery or become an overnight celebrity, achieving significant wealth is likely to take decades. This is why we have to think long term.

However, this doesn’t mean that short-term goals don’t matter; good financial planning should involve both. For instance, if your long-term financial goal is to pay off $100,000 in student loans, you may create a short-term goal to build a monthly budget that allows you to pay extra toward that loan every month.

4 common long-term financial goals

All our lives look a little different. For instance, some people may have just started a family, while others have children who have left home already.

However, we’ve outlined some of the most common examples of long-term goals below. Whatever stage of life you’re at and whatever your values are, at least one of them should be applicable to you.

1. Build an emergency fund

An emergency fund is the keystone of all other long-term financial goals because it holds everything else together if something unexpected happens. Without an emergency fund, one expense — like a broken water heater, medical bill, car repair or job loss — can throw all your other financial goals off track. 

Most experts recommend an emergency fund that covers at least three months of living expenses. If you work on commission or rely on variable income, you may want to save more. 

Since saving this much money will take some time, it often requires a long-term savings plan — especially when you consider that you may need to use some of the money while saving and start from the beginning again.

Create a budget and try to reduce your expenses so you can afford to put at least a portion of your income away in the bank each month.

If you also have debt to pay off, you can create a smaller emergency fund (often called a rainy day fund) of about $1,000 first. After this, you can shift over to paying off debt and return to building the rest of your emergency fund.

Where you save your money for an emergency fund is also worth considering. The average checking account pays just 0.03%, yet the average interest rates for savings accounts and money market accounts are 0.13% and 0.14% respectively. While these are relatively low-yield accounts, they can help your fund to grow somewhat while remaining accessible. 

It's possible to earn even higher interest yields from some banks, particularly those without brick-and-mortar branches. For example, some online savings accounts pay between 3% and 5%.

2. Pay off debt

Whether it's credit cards, student loans or personal loans, interest charges on your debt add up over time, so becoming debt-free should be a top priority. Not only will this improve your financial health by reducing your monthly expenses, it can also boost your credit score since you’ll be using a lower percentage of your available credit.

If your debt is relatively small, paying it off may be more of a short-term goal. However, with the average American having $5,221 in credit card debt, many people will need five or more years to completely clear their balances.

For instance, if you have $5,000 of credit card debt with an APR of 20% and only make your minimum payment each month, it would take around 59 payments (almost five years) to pay off your debt. Over that time, you’d accumulate almost $3,000 in interest.

To help you manage your repayments, you could consider a balance transfer card (moving your credit card debt to another card with a lower interest rate) or debt consolidation (combining loans together to have one line of credit with a lower interest rate).

If you have multiple loans, you could also consider a strategy like the debt avalanche method, which involves targeting the debt with the highest interest rate first and working your way toward the lowest. This keeps your motivation high as you can meet medium-term goals on the path to achieving longer-term objectives.


3. Save for a down payment on a home

Home ownership is one of the most common personal financial goals. Although it comes with risks, like having to pay for expensive repairs, being a homeowner gives you more security. There’s no landlord that can ask you to leave at a moment’s notice, and you’ll have a roof over your head for as long as you need it (at least, after paying off your mortgage).

The average down payment for a first home is just 7%, and some home loans allow a payment worth 3% or less. However, making a sizable down payment helps you get the best loan terms — and a payment of 20% or more may mean you avoid private mortgage insurance (PMI), which protects the lender if you default and can be costly.

This might sound like a lot to save, but it’s achievable for most when setting financial goals for the long term and following a strict budget.

4. Plan for retirement

Retirement is usually the ultimate long-term financial goal. Whether you plan to retire early or stick it out until you reach your late 60s, retirement is no longer about shutting down all work. 

In some cases, it can be more about financial independence and freeing yourself from the obligation to work while pursuing interests, whether that means becoming a travel blogger or starting a business. Or maybe you’re all about traditional sandy-beach retirement.

Regardless, retirement planning requires you to save enough to cover expenses for the rest of your life. It’s quite an undertaking. The amount you’ll need will vary for each individual, but some experts suggest saving 15% of your annual salary starting from age 25, with the aim of having the equivalent of your yearly wage tucked away by age 30. 

You can use 401(k)s and/or IRAs for your retirement savings. If you have a workplace-sponsored 401(k), you may even receive an employer match on your contributions.

Get ready for a stable financial future

Building a secure financial future begins with setting short-term and long-term financial goals. The types of financial goals you choose may be different from those of your colleagues or relatives, as everyone has their own trail to blaze. But some objectives to consider are building an emergency fund, paying off debt, purchasing a home and preparing for retirement.

With these goals in place, you can take control of your financial future and prepare to make any necessary adjustments if your life has an unexpected change.

If one of your main goals is to pay off credit card debt, you may be interested in the Tally†credit card repayment app. It takes your higher-interest credit card debt and turns it into a lower-interest line of credit, which can help you to clear debt and free you up to focus on other goals sooner.

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 - $300.