Putting together a personal financial plan is like piecing together a puzzle. Over the past few weeks we’ve looked at several “pieces” that should be part of your puzzle, and here a couple of more to consider – short-term and long-term financial goals.
Such goals fit in nicely with a personal budget, since they serve both as guideposts and milestones. Plus, short- and long-term objectives give you incentive.
Short-term goals would be ones that you want to accomplish over the next six months to a year. They will vary depending on each person’s situation, but here are some examples:
- Establishing a savings account for holiday gift purchases.
- Creating an emergency fund for unexpected expenses such as repairing a leaky roof.
- Saving for a summer vacation.
- Paying off a credit card balance of a few hundred dollars.
- Buying a new dining room table and chairs.
- Purchasing a new set of tires for your car.
Long-term goals, meanwhile, call for saving a significant amount of funds over a period of two or more years. Here are objectives that typically fall into this category:
- Financing a child’s college education.
- Purchasing a new home.
- Buying a boat or a car.
- Setting up a 401k or similar retirement account.
- Building an addition to your house or making major home renovations.
- Investing in a beachfront vacation property.
After you create a list of long- and short-term financial objectives, arrange them by priority and determine how much you will need to save each month to achieve each one of them. Even if you don’t have an exact amount in mind, at least come up with a ballpark figure for each goal.
It’s likely there will be a shift in goals over time, but that’s to be expected as you move forward with your life. With that in mind, it’s a good idea to review your financial objectives at least once or twice a year to see which ones are still achievable or desirable.
Adding these “puzzle pieces” will give you a clearer understanding of what a sound personal financial plan should look like.