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Short Term Financial Goals: Top 10 Steps for Families

by Rob Bertman, CFA®, CFP® in Goals
August 14, 2021
Short term financial goals

Short Term Financial Goals: Top 10 Steps for Families

Ever dream about reaching financial independence?

You think to yourself, “I just can’t wait to have all the money I need and can live life on my terms.” 

Then you bring yourself back to today and realize that you have other pressing financial matters in the way of getting there.

That’s where setting short term financial goals comes into play. It clears away the obstacles that get in the way of achieving long term financial goals. 

But what short term financial goals should you set? Think about the financial milestones you want to achieve within the next 3 years. I’ll share my 10 must have short term goals with you shortly.

First let’s dive into why setting short term financial goals is important and go through some examples of short term financial goals.

Why are short term financial goals important?

Setting short term goals is important because they:

  • Take an ambitious goal and break it down into attainable pieces.
  • Build momentum because you can see progress quickly.
  • Bring more focus to our daily choices.

How do you climb a mountain? One step at a time.

How do you reach long term financial goals? By breaking them down into smaller, short term goals.

Let’s say you want to save an extra $12,000 this year. Seems pretty ambitious right? Let’s break it down to shorter and shorter goals until we get to something attainable.  

That’s $1,000 a month…still seems challenging.

How about $30/day? How would your spending decisions change if you thought that way? Would you get that extra drink or buy that extra thing on Amazon?

The intimidating $12,000 per year becomes just 2 easy decisions each day or maybe just 2 decisions per week if you can find the savings in your grocery shopping or order when dining out.

That’s the power of setting financial goals and focusing on the short term.

Why are financial goals important

Examples of financial goals you should set for yourself

There are two types of financial goals to set for yourself. One is a money goal which has an explicit dollar amount attached to it and the other is a process goal. 

We often think of the money goals, but the process goals are the key habits and to-dos that help us get organized.

Here are examples of financial goals:

Money goals:

  • Save for a house down payment
  • Pay off credit card debt
  • Save for a car
  • Pay off auto loan
  • Invest for kids’ college education
  • Put money away in retirement plan
  • Pay off student loans
  • Save money for a vacation

Process goals:

  • Track spending
  • Put together your balance sheet
  • Set a budget
  • Find ways to cut expenses by 10%
  • Get a plan for your student debt
  • Get term life insurance
  • Complete your estate plan
  • Refinance debt to lower your interest rate
  • Improve your credit score
  • Negotiate a higher salary
  • Start a side hustle

10 Short Term Financial Goals to Accomplish

Now let me take you through the steps to set a solid financial foundation and get on the path to a thriving financial future.

Short Term Financial Goals

Track your spending

THE MOST IMPORTANT THING you can do for financial success is to track your spending. 

Ever work with a trainer? 

They need to know your fitness level before prescribing the workout plan, so they take you through an assessment. This assessment caters the workout to your fitness ambitions and makes sure you don’t get injured along the way.

Tracking your spending is the fitness assessment.  You don’t need a budget until you track your spending. 

Track your spending weekly using your favorite budgeting app. Look at your transactions and how much you spent month-to-date.

This will help you master your cash flows and see if you have any extra money left over or if you’re overspending.

What gets measured gets improved!

Put together your personal balance sheet

A personal balance sheet is a list of everything you own (assets) and everything you owe (debt). It is by far the best way to get organized and see where you stand in this snapshot of time.

Here’s how to put the list together:

Assets (what you own):

  • Bank account balances (checking accounts and savings accounts)
  • Accounts for kids including custodial accounts and 529 Plan college savings 
  • Non-retirement Investment accounts (brokerage account, Robin Hood, Acorns)
  • Retirement accounts (401k, 403b, IRA, etc)
  • House / condo / investment properties / rental real estate

Debt (what you owe) – List the company, interest rate, and monthly payment

  • Credit cards
  • Student loans
  • Auto loans or total of future lease payments
  • Mortgage / HELOC / Home equity loan
  • Money owed to friends or family
  • Past due bills

Next, add up the value of everything you own, then subtract the value of everything you owe (assets – debt). That equals your net worth.

*Here are the steps to create your personal balance sheet in greater detail.

By the time you’re done, you’ll know exactly where you stand and it will help you identify what you need to take care to get on solid footing.

Calculate your irregular expenses

We all have expenses that seem to come out of nowhere. 

I’m not talking about a car breaking down or needing to do some home repairs. I’m talking about things that come up every year, but you just forget about them until they happen.

Here’s a list of irregular expenses:

  • Summer camp
  • School tuition
  • Family vacation
  • Back-to-school shopping
  • Holiday gifts
  • Family birthdays
  • Anniversary
  • Seasonal home maintenance

When you plan for these irregular expenses, it won’t throw you off when they come up.

Get up-to-date with past due bills and taxes owed

The first place any extra money should go would be to catch up on critical payments and bills that you’re behind on.

Make sure your housing payments, auto payments, and utilities are up-to-date first. Then you can catch up on other debt payments after your basic needs are met.

Any money owed to the IRS should be a priority as well even if you’re already on a payment plan with them.

Pay off credit card debt

Credit card debt is the gateway drug to financial ruin.

It doesn’t matter if you have a store credit card with a super high interest rate or if you did a 0% balance transfer. Pay off ALL credit cards.

This is your first priority when it comes to tackling debt. 

You can use the debt snowball (lowest balance first) or the debt avalanche (highest interest rate first). Just pick the one that resonates most with you and get going.

Build an emergency fund

save for emergency fund

An emergency fund is 3-6 months of expenses in cash held in a savings account or checking account. It’s the first savings goal we need to reach before we think about anything else.

If you have job uncertainty or irregular income, then the higher amount in cash is ideal.

Some of you might push back and say, “Why should I have that money sitting in cash earning next to nothing?”

The answer is because it acts as insurance against going into credit card debt or getting behind on bills.

When I work with clients who have credit card debt, they almost always say, “We were doing pretty well and paid it down but then something came up and we got back into credit card debt.”

The antidote to that is a solid emergency fund.

When people get to $0 credit card debt and a solid emergency fund, they have the capacity to think bigger for their long term financial goals.

Get the max employer matching from your retirement plan

It’s really important to save for retirement and take advantage of the tax benefits in retirement plans.

Many employers offer a nice incentive to get their employees to contribute to their retirement plan. They create a matching program where they will put in a certain dollar amount for every dollar you put in.

For example, some will put 3% of your salary in when you put in 6%. In other words, for every dollar the employee puts in, the employer will match $0.50 up to 3% of income.

This is free money! You get an automatic 50% return every dollar you invest.

As far as investing goals, this should be the number one short term financial goal.

If you don’t have access to a matching program, contribute to a Roth IRA if you’re eligible and if your tax professional thinks it’s good for your specific situation too..

Examine your student loan repayment strategy

Student debt can be a major burden. 45 million people have student loans, and there are over 3 million people with $100,000+ in student loan debt. 

The good news is that federal student loans have some of the most flexible repayment options including income driven repayment plans as well as loan forgiveness options.

If you owe more in student loans than what you make, definitely get a plan with Student Loan Planner.

If you owe less than what you make and don’t have any options for loan forgiveness (like Public Service Loan Forgiveness), you can explore refinancing your student loans to lower your interest rate and get better terms. You should also refinance private student loans if you can do better than what you have now.

Either way, get to know your options and get on the optimal plan for you and your situation.

Take a look at term life insurance.

If there’s anyone who is financially dependent on your income like a spouse, partner, children or even parents, then getting a term life insurance policy could make sense.

The idea of insurance is to cover you until your net worth gets to a point when you don’t need it.

Young families almost always need an insurance policy in place, because the cost of raising kids is expensive and they usually haven’t had the time to build up a net worth that could support their family if something were to happen to them.

Take a look at reputable companies like PolicyGenius or Zander Insurance.

Start working on your estate plan

Estate planning isn’t just for the wealthy. It’s a way for you to pre-plan for who will take care of your money and your kids if you die or become incapacitated.

What happens if you don’t have an estate plan? The courts and state law dictates what happens to you, your money, and your family. It’s much better to have something in place even if it’s simple.

Work with a qualified estate attorney to figure out what you need and get your core estate planning documents in place like a power of attorney, health & medical directives, will and possibly a trust.

If this sounds intimidating for you, just create it based upon the next 3 years. Then revisit it as things change with your life and financial circumstances.

Financial planning starts with setting short term financial goals

Long term financial success starts with reaching key milestones in the short run.

Here’s a recap of my top ten short term financial goals.

  • Track your spending
  • Put together your personal balance sheet
  • Calculate your irregular expenses
  • Get up to date with past due bills and taxes owed
  • Pay off credit card debt
  • Build an emergency fund
  • Get the max employer match from your retirement plan
  • Examine your student loan repayment strategy
  • Take a look at term life insurance
  • Start working on your estate plan

If you want to talk through any of these areas, I’m here to help!

Set up your free 30 minute session with me and we’ll talk through what your challenges are and how to reach a solid financial future.

Need help but don’t want to talk? Get my free guide: 5 Steps to Cut Spending and Finally Get Out of Debt