Everyone has hopes, dreams and wishes when it comes to their lives. But dreams and wishes don’t just happen – you need to work to make them happen. How? By setting goals and developing action plans. Goals apply for all areas in your life – including your financial goals.
In a previous blog post, I talked about why it was so important to set financial goals and gave you 11 examples of short-term financial goals. But those aren’t the only goals you should have or be focused on. It’s also important to plan for the future – be it 2, 5, 10 or even 30 years away. So, here’s another 11 examples of financial goals – with a focus on a longer time line – that I’ve broken down into mid-term and long-term goals.
What are Mid-Term Financial Goals?
Mid-term financial goals can take 1-5 years to achieve, depending on your situation. Five years can seem like a long time away, but when you look back, you may be surprised by how quick that time flew by! Which of these goals will make your list?
Save For a Car
When it comes to cars, you have two options: buy or lease. Well, the third option is to take transit instead of buying a car. But for now, we’ll focus on the first two options. Leases are convenient, in that you don’t have to save up a large amount. However, car lease payments are one of the largest components of most budgets, after mortgage or rent payments. When deciding on whether to buy or lease, look at the total cost of both options over the long term (8-10 years) – and calculate which option will be the cheapest for you and your family.
Increase Your Emergency Fund
As a general rule, you should have 3-6 months of expenses saved in your emergency fund. This fund will cover emergencies, such as a job loss, a medical emergency or unexpected repairs. For more information, here’s a blog post I wrote about how to calculate how much money should be in your emergency fund.
Become Debt Free
Becoming debt free includes paying off all your debts. That means paying off not only your credit cards, car loans, small loans – but also paying money owed to friends and family. Debt does allow people to purchase things before they have saved money, but there is a cost – and it comes in the form of interest. Consider this: when you have to pay interest, especially high interest rates, that is money lost that you could have chosen to allocate somewhere else.
Save For Your Wedding
Whether you have spent your life thinking about your dream wedding or not, a wedding is a big expense. There are two ways to determine your wedding budget. One way is to set an amount, say $10,000 and then make your wedding fit into that budget. The second way is to list out the major items, (such as venue, photographer, food, flowers, dress, etc.) and then get estimates for these amounts – before you book them. Either way, your dream of a beautiful wedding – in whatever form that takes – will be your motivation for saving.
Improve Your Financial Literacy
What is financial literacy? At it’s basic meaning, financial literacy means understanding the concepts of how to manage your money. These concepts include saving, investing, budgeting, earning money and borrowing. To improve your financial literacy, you can read books or blogs (like this one!), listen to podcasts or search out financial advisors. Your money will thank you!
Save for Home Appliances and Repairs
Do you ever feel like you’re just starting to catch up on your bills, or put a little extra money aside, only to have an unexpected bill come along and wipe it all out? Well, some bills should actually be expected. For this exercise, make a list of any future home expenses, including new appliances and repairs. The list should detail each item, the expected date it will need to be repaired or replaced, the number of months until the repair is needed, the total cost and the monthly amount needed to save for each item. Once you have completed this worksheet, include the total amount in your budget. Don’t forget to update your list once a year for any changes that need to be incorporated.
For example, you can estimate that you will need new kitchen appliances (stove and fridge) every eight years. That means it will be 96 months (8 years * 12 months/year) before you will need new appliances. Next, look online to see what the current prices are for these appliances and write that on your list – let’s estimate this cost as $2,000. Then, take that amount and figure out the monthly amount you need to save. In this case it will be about $21/month ($2,000/96 months).
What are Long-Term Financial Goals?
Long-term financial goals are goals that will take 5 years or more to achieve. These goals require patience and determination in order to reach them.
When it comes to finances, it’s important to keep a long-term perspective. The future will come along eventually, but if you start planning now, you’ll be in a much better position. With that in mind, here are some examples of long-term financial goals you can start planning for.
Saving For a Down Payment
Before you can buy a house or a condo, you will need a down payment. Down payments will be between 5%-20% of the purchase price. Obviously, you can put more money down, if you are able to and you want a lower mortgage. Either way, you will need to do some research to determine exactly how much you will need. The amount and rules around down payments will vary, depending on where you live. For example, in Canada, if your down payment is less than 20% of the home price, you will need to purchase mortgage loan insurance (sometimes it is also called mortgage default insurance). Click the link to find out more about down payments in Canada.
Save for Retirement
Government pensions are very small and won’t cover all of your expenses in retirement. That’s why you need to have your own retirement fund. The earlier you can start saving for retirement, the more time your money has to grow.
Here are some easy and practical tips about how you can save more for retirement:
- Start as soon as possible,
- Make saving automatic by having money deposited to your retirement savings account every month,
- Take advantage of employer matching contributions,
- Reduce your spending,
- Understand investing basics, such as diversification, risk tolerance, etc.
Pay Off Your Mortgage Early
Paying off your mortgage is one of the most talked about financial goals – mostly because no one can agree on whether it should be your goal or not. People who support having this as your goal (that includes me, by the way), argue that paying off your mortgage early brings you financial freedom. People who are against this goal argue that you could use that money instead to invest and receive a higher rate of return than the interest rate you are being charged on your mortgage.
Ultimately, it’s your decision. Understand why it’s important to you AND what the alternatives are – then make your decision. Both decisions are correct – as long as it works for you. Oh – and leave a comment below to let me know what you decided and why.
Save for Kids’ Education
Saving for your kids’ education is a financial goal of lower priority. Even if you don’t save any money, your kids do have other options, such as working part-time, scholarships or student loans. Therefore, make sure your finances are in order before you make this a goal. Remember, in an airplane crash the flight attendants tell you to put your own air mask on first, because if you pass out from lack of oxygen, then you can’t help anyone else!
Support Aging Parents
In the past, it was very common for children to support their aging parents. It may have meant that the parents moved in permanently with one of their kids or perhaps the kids took turns having the parents stay with them. But as parents age, they may need more help – medically and financially. If that’s the case for you, talk to your parents. What kind of help do they need? Finally, if there’s a financial cost to supporting your parents, remember to factor that in to your budget.
Which is the Best Way to Achieve Long-Term Financial Goals?
For any financial goal, short or long term, the best way to achieve your goal is by having a plan. Review your plan to ensure that your goals are SMART:
- Specific – Include lots of details, including costs.
- Measurable – Create a system, so you can track your progress.
- Achievable – List the different steps and tools you will use.
- Relevant – Why is your goal important to you?
- Time Bound – Include a deadline for each goal.
Now it’s your turn to create your financial goals, using the list above as inspiration. Be clear about what you want, why and how you will achieve it. Leave a comment below to let me know what long-term goals you are working towards. Congratulations! You are on your way to financial success!
Until my next blog post, here’s wishing you lots of joy and happiness!