Without a short-term savings target, it will be difficult to move the needle toward a brighter financial future. That said, short-term savings goals can help you plan your money and help you avoid procrastination. Let’s take a closer look at what these goals are, why you should set them, and how to achieve them.
What is a short-term savings goal?
Short-term goals help you visualize what your financial success looks like. He can set financial goals of all shapes and sizes, but short-term savings goals tend to come within five years for him.
Five years may seem like a long time, but setting a savings goal now can help you make the most of the rest of your life.
Why set a short-term savings goal?
Setting a savings goal can put you on the path to long-term financial success. It may not be exciting, but it’s worth it. There are other reasons why goals are important.
motivation and achievement
It is difficult to move toward your dream financial future without setting goals.
Short-term goals that connect money actions to dreams can help tap into much-needed motivation.
For example, let’s say you have a short-term goal of saving a down payment for your first home. If you love a place you can call home forever, you may be more motivated to stick with your savings strategy.
Committing to and achieving short-term goals also gives you a sense of accomplishment. Once you start ticking off your goals from your list, you’ll be proud of your decision.
move forward towards a bigger goal
Many people use short-term savings goals as stepping stones to larger financial goals. After all, setting milestones along the way often makes it easier to move forward.
For example, let’s say you have a long-term goal to pay off your mortgage early. Short-term goals you can set along the way include paying off high-interest debt, building up funds for housing and repairs, and paying a certain amount for your home each year.
all progress is good progress
In the pursuit of flashy goals, it’s easy to downplay the importance of short-term goals.
but they celebrate your progress in the middle. Achieving all kinds of short-term goals means you’re making progress towards your bigger goals. And all progress is good progress.
How to create and achieve short-term financial goals
You have decided to pursue short-term financial goals. This is a great first step. Below you will find a helpful step-by-step guide.
1. Know what you want to achieve
Setting short-term savings goals without being specific is like running without an end goal in mind. Setting specific goals makes it more likely that you will reach your goals.
Instead of setting a goal of improving your overall financial situation, add relevant details.
For example, you can set a goal to build an emergency fund worth six months of living expenses. As another example, he can save $25,000 for a vehicle purchase.
Whatever your dream is, be specific about what you want to achieve.
2. Be realistic
Aiming high is exciting. But it’s important to be realistic about your ability to meet your short-term goals. set unrealistic goals You can take the road to failure.
The reality is that most people have big money goals. While it may be tempting to just focus on the big goal, it’s often more practical to break the big goal down into more manageable short-term goals.
For example, let’s say you have a goal to pay off your mortgage early. Instead of focusing on your entire mortgage balance, you can set a short-term goal to pay off the remaining $10,000 on your mortgage. principal balance Within 5 years.
Be honest with yourself when choosing your goals. It’s good to have big dreams. But setting unattainable goals can undermine your commitment to yourself.
Be kind to yourself by choosing to set realistic short-term savings goals.
3. Set your timeline
Most short-term goals are completed within five years. However, you need to discern the ideal time to reach your goals.
For example, if you want to become a homeowner in two years due to a big move, you can use that as a timeline for your down payment savings goal. Or, if you want to go on your dream vacation within a year, that might be the natural timeline for your goals.
How to keep the set timeline
Start with your ideal timeframe and ask yourself if that timeline is realistic.
In one of the most fun short-term savings examples, let’s say you want to save $6,000 for a year’s vacation. To reach that goal, you need to save $500 each month. Be honest with yourself about the reality of your goals. Please select a timeline for delivery.
No matter what life throws at you, consider giving yourself some extra room in your budget.
For example, you can add months to your goal. Even if you have an unexpected medical bill or need to fix your car, you may still be able to meet your goals.
4. Keep your budget in check
Once you have the amount you need to save and a timeline in place, decide how much you need to save each month.
For example, say you want to save $12,000 in one year. You need to save $1,000 every month to reach your goal. If possible, make room in your budget for this new savings goal.
Depreciation funds are a great way to incorporate savings goals into your budget. A depreciation fund saves a fixed amount each month for a fixed period of time.
For example, if you are saving $100 each month for holiday shopping, this could be a budget item. Within a year, depreciation will reach $1,200 for him.
5. Get creative
Of course, setting a short-term savings goal is very different from reaching it. After all, you may need to earn more or spend less to achieve them.
Luckily, with a little creativity, you can completely change your financial situation.
don’t spend money
If you want to spend less, consider starting with a no-spend challenge. Other ways to save money include cutting takeout costs, planning meals, and avoiding online shopping.
try to make more money
There is a limit to how much you can save, but there is no upper limit to your earning potential. If you’re serious about increasing your income, you can start by asking for a raise at work or finding a better paying job.
For those looking to push their limits even further, consider starting a side business, selling things around the house, or building a passive income stream.
As the gap between income and expenses grows, pour that money into short-term savings goals.
When setting a savings goal, it’s important to be clear about what you want to achieve and set a realistic timeline. With this clarity, it’s easier to set goals and plan your budget accordingly.
When setting a savings goal, it’s important to be clear about what you want to achieve and set a realistic timeline. This clarity makes it easier to set goals and plan your budget accordingly.
Examples of short-term savings
Short-term savings examples vary from person to person. Future dreams and current financial realities can help you choose a goal that fits your situation.
Some examples of these goals are:
savings for housing down payment
Setting short-term goals to save for your new home might include:
- Determine the price of a home in the location you want to buy
- Decide how much you need to save for your down payment (e.g. 20%)
- Determining other costs (e.g. closing costs, moving and furniture costs)
- Create a savings timeline by incorporating savings goals into your monthly budget
Building an emergency fund
Setting short-term goals to build your emergency savings includes:
- Clarify how much your emergency savings will be over the next 3-6 months.For example, how much do major necessities cost: food, housing, transportation, core utilities, pharmaceuticals, etc.
- Opening an emergency savings account
- Incorporate a savings goal into your budget
- Set up a direct deposit from your employer so your funds are deposited every time you come back
savings for debt repayment
Debt repayment depends on the amount of debt and income. To pay off your debt:
- Know exactly how much you owe
- Determine how much money you can afford each month beyond the minimum payment required
- Set a timeline for paying off your debt in full.
Other ideas include saving for vacations, starting a business, and saving for expensive purchases.
How many short-term savings goals should I set?
The number of savings goals is entirely up to you, but too many can be overwhelming.
Where should I store my short-term savings?
Ideally, you want to keep your short-term savings somewhere fluid and easily accessible. For example, high-yield savings accounts, certificates, and deposits. We don’t want short-term savings tied to investment volatility.
A short-term savings goal can be a great move for your finances!
A short-term savings goal can help guide your spending choices. With a specific goal in mind, you can choose to focus on it instead of giving in to impulse purchases.
As you decide how much to save from each paycheck toward your goals, remember that it’s also important to enjoy life along the way. Think about the future and enjoy the present.