Determining your personal finance goals is a critical first step to good personal finance management. We all have financial goals we would like to achieve some day and identifying them is half the battle.
Short-term versus long-term financial goals
It’s important to distinguish between short term and long term goals. I try to keep it simple by having a current focus goal, some 1-3 year short – term goals and long term goals. It’s helpful to spend most of your time and attention on your focus goal and 1-3 year goals, but keep the long term goals in mind and make sure your plan always aligns with them. Spending decisions today , may impact your ability to achieve long term goals later. A good example is buying too much house today.
Plan together
When you create goals, make sure you do this as a couple, if you’re married. Each year, you try to renew them and see if they are still valid based on your stage in life.
Examples of financial goals
Consider the below examples as starting points in creating your goals.
- Focus goal: this year I will save $1000 towards emergency savings.
- Short-term goal: In 2 years, I will pay off all of my credit card debt.
- Long-term goal: In 15 years, I will pay for both of my children to attend school (you would know how much you have to save each month to reach your total savings goal)
Questions to ask when goal planning
In determining your goals you might try asking yourself the below questions.
- Do I need to establish or grow emergency savings?
- Do I have debt which I would like to pay off?
- Do I have children and plan to fund their college education?
- Do I have retirement savings?
- Do I desire to save for family vacations?
- Do I need to financially support other family members?
- Do I want to own or operate my own business?
Where to focus first
Decide what you should focus on first. I am a supporter of Dave Ramsey’s baby steps in order to have a general framework for the priority in which you should tackle goals of savings, paying off debt, funding education, retirement, etc. Crown Financial Ministries also has a good plan to use called The Money Map.
How do you define short term versus long term goals? How do you avoid making decisions now that may impact your ability to achieve long term goals later?
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