Smart Short-Term Financial Goals to Set for Yourself

By Julia Califano · November 21, 2023 · 12 minute read

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Smart Short-Term Financial Goals to Set for Yourself

Setting financial goals is an important step toward becoming financially secure.

If there is something you hope to achieve in the not-too distant future — say, to buy a car or make a downpayment on a home — it may not be enough to simply hope you get there. Making a plan can significantly increase the likelihood of you meeting the goal.

Going day to day without any financial goals in place can cause you to spend too much, then come up short when you need money for unexpected bills and have to rely on high interest credit cards.

Short-term financial goals are generally things you want to achieve within roughly one to three years. They can be singular goals, and once reached you are done. Or, they might be incremental steps to much larger financial goals (such as funding your retirement, paying off a mortgage, or paying for a child’s college tuition).

Setting and reaching short-term money goals can also give you the confidence boost and foundational knowledge you need to achieve larger goals that will take more time.

While everyone’s goals are different, here are some short-term financial goals you may want to start working towards.

Key Points

•   Short-term financial goals are things you want to achieve within the next couple of years, such as paying off credit card debt or saving for a vacation or wedding.

•   Building an emergency fund is an important short-term financial goal to cover unexpected expenses and avoid relying on high-interest credit cards.

•   Tracking your spending helps prioritize your expenses and create a realistic budget to work towards short-term financial goals.

•   Paying down credit card debt is crucial as high-interest rates can hinder progress towards other financial goals.

•   Contributing to your retirement fund, even in the short term, can have long-term benefits due to the power of compounding interest or dividends.

What Are Short-Term Financial Goals?

Short-term financial goals are typically achievements you want to attain within the next couple of years. Unlike long-term financial goals (retirement, paying off a mortgage), they represent things you want to check off your money management list in the near term. Of course, everyone’s short-term aspirations will differ, but some financial goal examples include:

•   Paying off credit card debt

•   Saving for a vacation

•   Saving for a wedding

•   Stashing away money in an emergency fund.

Read on to learn more about some of the most common of these short-term financial goals.

Building an Emergency Fund

Often, a short-term financial goal might include saving for an emergency fund. This is often considered to be a smart financial goal example.

An emergency fund is cash savings that can cover three to six months’ (or more in some cases) worth of living expenses. The idea is that, just in case something unexpected comes up, such as a medical bill, job loss, or a major car or home repair, you can afford it without resorting to high-interest forms of funding.

Knowing that you have money in the bank in case of an emergency can bring peace of mind and also make it easier to work toward your other financial goals.

An emergency fund can also act as a buffer to keep you out of debt, since you’ll be less likely to have to rely on credit cards should something unexpected happen.

You can build an emergency fund by putting some money towards it every month, or you make it happen more quickly by funneling a large payment, such as tax refund or bonus, right into this fund.

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Tracking Your Spending

Getting a sense of how much you are actually spending each month is a critical step in working towards both short-term and long-term financial goals.

You can do this by tracking your expenses for a month or so, then setting up a realistic budget to help you prioritize your spending, rather than spending haphazardly (which can lead to trouble when it comes time to pay bills and/or having any money leftover for savings).

You can track your spending by using a budgeting app. SoFi Relay, for example, allows you to connect all of your accounts on one dashboard and then categorizes your credit card and debit card transactions by budgeting categories.

You can also create a budget the old-fashioned way by going through your bank statements, bills, and receipts from the last few months and categorizing each expense with a spreadsheet or on paper.

Once you see where your money is actually going, you may discover some surprises (such as $200 a month on lunches out) and also find places where you can easily cut back. You might decide to bring lunch from home a few more days per week, for example. Or you might want to get rid of rarely used subscriptions or streaming services or ditch the gym membership and work out at home.

This money you free up can then be redirected towards your savings goals, like creating an emergency fund, buying a house, or funding your retirement

Paying Down Credit Card Debt

Another important financial goal example is paying down credit card debt. If you carry a balance, you may want to make paying it off one of your top short-term financial goals. The reason is that the interest on credit card debt can be so costly, it can make achieving any other financial goals much more difficult.

One strategy for paying off credit card debt is what’s known as the avalanche method, which involves paying the minimum on all but your highest-rate debt. You then put extra money toward the card with the highest interest debt. When that one is paid off, you would roll the extra payment to the card with the next-highest interest rate, and so on.

Another option is the snowball method, in which you pay the minimum on all cards, but use extra money to pay off the debt with the smallest balance. When that’s paid off, you move to the next smallest debt and so on. This can give you a sense of accomplishment that helps keep you motivated.

Or you might consider consolidating your debt by taking out a personal loan to pay off all of your cards. Personal loans usually offer lower interest rates than credit cards, and having only one payment each month can help simplify the payoff process.

Paying Off Student Loans

Student loans can be a drag on your monthly budget. Paying down student loans, and eventually getting rid of these loans, can free up cash that will make it easier to save for retirement and other goals.

One strategy that might help is refinancing into a new loan with a lower interest rate. You can check your balances and interest rates across your federal and private loans, and then plug them into a student loan refinancing calculator to see if refinancing offers an advantage.

It’s important to keep in mind, however, that not all refinancing options are created equal. There are scores of bad actors on the internet who might promise to get rid of all your debt but will only damage your credit score. If you do refinance your student loans, you’ll want to make sure you’re working with a reputable lender.

You may also want to keep in mind that refinancing federal student loans with a private lender could mean losing some of the benefits associated with federal student loans, such as income-based repayment or deferment if you fall on hard times.

If you have multiple student loans and won’t benefit from consolidating, consider using the avalanche or snowball method of repayment (described above) to pay them off faster.

Contributing to Your Retirement Fund

If you’re not yet saving for retirement, a great short-term financial goal may be to start doing so. Or, if you’re putting in very little each month, you may want to work on upping the amount.

If your employer offers a 401(k) and gives matching funds, for example, it’s normally wise to contribute at least up to your employer’s match. You can then start increasing your contributions bit by bit each year.

If you don’t have access to a 401(k), you may be able to set up an IRA online and start funding your retirement there. (Keep in mind that there are limits to how much you can contribute to a retirement per year that will depend on your age.)

While retirement is a long-term vs. short-term, financial goal, taking advantage of this savings vehicle can reduce your taxes starting this year. Here’s why: Money you put into a retirement fund is taken out of your income before taxes are calculated.

Even more importantly, starting early can pay off dramatically down the line. Thanks to the power of compounding interest (when the money you invest earns interest, and that interest then gets reinvested and earns interest as well), monthly contributions to a retirement fund can net significant gains over time.

Saving More Money

If you already have an emergency fund, you may want to start thinking about what you are hoping to buy or achieve within the next several years, and also beyond.

This could be anything, including buying a new high-tech toy, going on a great vacation, making a downpayment on a home, or doing a major renovation.

Saving up for this goal, rather than paying for it with a credit card, helps you avoid paying more for those things in the form of high-interest payments.

For financial goals you want to reach in the next few months or years, consider putting this money in a bank account online that earns more than a traditional savings account, but allows you access when you need it. Options may include a money market account or an online savings account.

For longer-term savings, you may want to look into opening a brokerage account.

This is an investment account that allows you to buy and sell investments like stocks, bonds, and mutual funds. A taxable brokerage account does not offer the same tax incentives as a 401(k) or an IRA (individual retirement account), but is much more flexible in terms of when the money can be accessed.

What are S.M.A.R.T. Financial Goals?

In addition to the short-term financial goals examples and guidance you’ve just learned, there’s another way to think about this topic: using the acronym S.M.A.R.T. This system can help you both with identifying and achieving your goals. Here’s what this stands for and how considering your financial aspirations through this lens can be helpful:

•   Specific: A goal should identify exactly what you are saving for, whether that’s paying off credit-card debt or buying a used car.

•   Measurable: How much is your goal? How much do you need to save? Perhaps your credit card balance is $5,673. That would be your measurable goal.

•   Attainable: Make sure your goal is realistic (you don’t want to attempt to pay off that credit card debt next month) and develop strategies to achieve it, such as working on alternate Saturdays to bring in more money (a benefit of a side hustle).

•   Relevant: Check that your goal really matters to you and isn’t just something you’re doing to, say, keep up with your friend group. Do you really need to save towards a potentially budget-busting vacation?

•   Time-bound: Set “by when” dates for your goals. This helps to keep you accountable. If you want to save $3,600 for an emergency fund within a year, figure out how you will come up with the $300 per month to put aside.

Using the S.M.A.R.T. method can help you crystallize and achieve your short-term financial goals.

The Takeaway

While day-to-day spending tends to grab most of our most attention, it is important to also focus on bigger goals.

Short-term financial goals are the things you want to do with your money within the next few months or years. Some key short-term goals include setting a budget, starting an emergency fund, and paying off debt.

From there, you may want to start saving for things you want to buy or do in the relatively near future, and also start thinking about investing your money to help you build wealth over time.

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What are the 7 key components of financial planning?

Financial planning for your personal goals can be thought of as involving seven key components: Creating and following a budget, making sure you have access to cash (such as an emergency fund), saving and paying for large purchases (a car or home), managing your risk (avoiding high-interest debt, perhaps), investing your money to grow it, building a retirement fund and doing estate planning, and keeping track of your financial life and communicating about it with those closest to you.

How do you write a 5 year financial plan?

If you are creating a personal 5 year financial plan, it’s wise to include these elements: Save for goals like an emergency fund, a down payment on a house and retirement while paying off high-interest debt. You’ll likely want to create a budget that allows you to understand your cash flow and put a chunk of money towards savings (many experts recommend between 10% and 20%) every month.

How do you create a short-term financial goal?

To create a short-term financial goal, identify what you want and how much money you need. Then, looking at your budget and seeing what cash you have available, see how long it will take to save up enough money. For instance, if you want to have $2,400 in a travel fund from now, you will need to put $200 a month aside. Check your cash flow and see where you can free up funds (maybe less takeout food and fancy coffees, for starters) to meet this goal.

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