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Short-term financial goals during COVID-19

by Rob Bertman, CFA, CFP® in Budgeting, Debt, Goals
August 10, 2020
Short-term financial goals

Short-term financial goals during COVID-19

You don’t need to put all of your financial goals on hold even when times are tough. There are some key short-term financial goals you can achieve today with no cost.

Sure some of the long-term financial goals might have to take a seat, but there are short-term goals you can achieve in the next few months even on a tight budget. Some of them don’t even require you to have any extra money available right now.

The purpose of this post is to show you the most important short-term financial goals you can and should work on right now even if COVID-19 has you in a tough financial spot.

What is a financial goal example?

Examples of financial goals include:

  • Save for retirement 
  • Putting money away for kids’ college 
  • Getting out of credit card debt 
  • Paying off student loans 
  • Reaching financial independence (FI)

These are the most common goals I hear from clients and they are certainly worthwhile, but…

They are also incredibly boring financial goals.

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The problem? They are too far off and don’t compel most 20, 30 and 40-somethings to make trade-offs today.  

How does ordering this extra $8 drink right now impact my overall financial independence in 20-30 years? It’s hard to have our long-term financial freedom at the forefront of our minds in the moment.

Plus, during COVID-19, many of us are just trying to make it hour-to-hour, day-to-day, month-to-month. Let’s just make it through the pandemic, then we’ll focus on the future again.

But there is a way to keep our long-term goals in mind even if we have challenges today. Short-term goals.

Short-term goals: Why are they important?

Short-term goals are important, because they bring our focus to what we should be doing today in order to accomplish our long-term goals. They are the next steps on the path to success over the long run.

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

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One of the biggest goal-setting mistakes I’ve seen (and done personally) is having absolutely no short-term goals related to my long-term goals. We procrastinate and lose momentum. In the end, we make 0 progress or try to cram it all in at the last minute.

Let’s say I want to read 24 books in a year. Seems pretty ambitious right? Let’s break it down to shorter and shorter goals until we get to something attainable.  

That’s 2 books per month.  Ok, still seems like a lot.

What about reading 1 book in 2 weeks?

What about reading 15 pages a day? That seems doable. I mean, heck, how much Facebook, IG, and news scrolling do we do per day? Much more than that.

That’s effective short-term goal setting.

Once we understand our long-term goals, breaking it down into intermediate-term goals then into more bite-sized, short-term goals will help us end up where we want to be. 

Here’s a great blog post from The ONE Thing blog on how starting small and setting goals with the end in mind is a very effective way to achieve our long-term goals.

What are short-term financial goals?

Short-term financial goals are the next steps we need to take on the path to our long-term financial dreams. The goal doesn’t always need a dollar amount attached to it (save $1,000 this month). It can be a financial habit (track your expenses once a week).

short term goals

Breaking down a long-term goal into a short-term goal is also a way to sanity check it.

In other words, what are we willing to do today and can we actually do it?

We are optimistic when looking at the long run (aka New Year’s Resolutions) but not so much in the day to day (get up at 5am to run).

It’s kind of like setting the short-term financial goal of saving for a down payment on a house in a year. Let’s just say we need $50,000 more to save up for it. Seems large, but optimistically doable.

Let’s break it down to a shorter goal and see if it works.

It basically means saving $4,000 per month or $1,000 a week. That seems like a much bigger stretch than $50,000 for the year.

Not many people are disciplined enough to do that and may not even have that kind of money in the first place.

What ends up happening is we get part way there, get antsy, and explore riskier options like 10% down or even 0% down and go with a monthly payment that is a huge stretch. This could put us in a tough financial situation.

To reach your financial goals, they must be broken down into bite-sized, doable action steps and understand the habits to get there.

5 Short-Term Financial Goals to Achieve during COVID-19

These short-term goals are meant to be done in order, and the first two don’t even require any money to accomplish.

Move to the next goal ONLY if you can “check the box”.

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By the end you will gain the clarity you need to feel in control of your financial situation, one less thing to worry about as we continue to manage our physical and emotional well-being during the coronavirus pandemic.

Goal 1: Track your spending – Forget the budget

Yes, the Family Budget Expert is telling you to forget the budget.

THE MOST IMPORTANT THING you can do for financial success is to track your spending, and it should take 5 minutes a week tops.

Budgeting comes later. Here’s why:

Ever work with a trainer?

What do good personal trainers have you do first? The assessment. They need to know your general level or fitness before prescribing the workout plan. Without it, the workout plan could be too hard, too easy or get you injured.

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

So how do you track your spending? Let’s make it as easy as possible.

Sign up for a budgeting app that will aggregate all of your information into one place. I personally like Mint because it’s free and very robust, but others like YNAB or EveryDollar.

Next, add every account where money comes in and out from income and spending (bank accounts & credit cards). There’s no need to link any retirement plans or mortgage info here.

Don’t worry about budget categories for now. The goal is to track your spending. Mint pulls in the last 90 days of info, so you should be able to see how things have been going over the last 3 months. 

Review your spending weekly. The app should have an easy place to find all of this information. You only need to review 3 areas:

  • Scan through the transactions over the last week just to gain awareness of where your money is going.
  • Look at your total expenses month-to-date.
  • Look at your net income (income minus expenses)

Set up a recurring weekly calendar spot for your 5 minute review.

The proverbial buck stops here. Everything else below will be made much easier if you’re doing this.

This is the #1 financial habit to reach financial success.

*Personal budget categories: If you just can’t help yourself, keep them very general for now and only do it if you can commit to it every week during the process.

Step completed! Done!

Goal 2: Personal Balance Sheet – Compile the information

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.

Whether you think the situation is going to be pretty or not, it’s really important to get this done.

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First, get the list together.  Here’s what you’re looking for:

Assets (what you own) – List the company it is with and the value of each individual account:

  • Bank account balances
  • Accounts for kids – Bank/Investment/College savings 
  • Non-retirement Investment accounts (brokerage, Robin Hood, Acorns)
  • Retirement accounts (401ks, IRAs, etc)
  • House/condo/investment properties

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.

If the number is negative, you’re certainly not alone.

If it’s a positive number but you feel like you’re behind, we’ll get there.

The goal is just to put your personal balance sheet together. Once completed that task, check off the box! Done!

Now all of your financial information is organized and in one place.

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

Goal 3: Past due bills: Prioritize housing, utilities, food, and car payments

If you are behind on any of these critical payments, these are your top priorities for any extra dollars you can scrape together.

Dave Ramsey calls these the 4 Walls. Whether you agree with his overall message or not, he’s absolutely right here. The most important things to cover when times are tight is shelter, heat/air conditioning, water, basic food, and transportation.

These bills will still have to be paid at some point even if the companies are working with you to figure it out right now so let’s prioritize and plan to catch up on these before doing anything else. We don’t want your life to get uprooted.

If you have some work to do here, add up how much money you need to get current on these bills. (Oh wait, you did that in the last step!)

Now that you’re tracking your spending, you can see how money you’re bringing in and spending each month. Based upon those numbers, figure out how long it might take to get caught up.

If you’re not satisfied with the time frame, you can do either or both of trying to make more money (if it’s possible for you right now) or cutting your expenses (wherever you can) to get there. 

Once you get your past due bill plan in place, check the box as complete even if you haven’t paid an extra dime yet.

If you’re all good here, check the box as complete too. 

Goal 4: Figure out how much emergency fund you need

It used to be that 3-6 months of expenses was thought of as a sufficient emergency fund. Most people weren’t even close to that before the pandemic. Even so, a 3 month emergency fund may not be nearly enough.

Sure there are hardship withdrawals from retirement plans and credit card debt we can go into right now, but that is not at all a good long-term plan and should be an absolute last resort unless things are really dire with your 4 walls.

The goal here is to calculate how much you need, not to necessarily fund it.

Let’s start with an updated mindset that everyone should aspire to have at least 6 months of expenses in a bank account, easily accessible.

As we talked about before, building a 6 month emergency fund is NOT a short-term goal because it can be intimidating to think about how we’ll ever get to that point.

Let’s break it down into smaller more achievable goals starting with figuring out how much we should have in there.

Step 1: How many months of expenses should your emergency fund be?

At minimum, it should be 6 months. If you have a dual income household and are both employed, this should be good.

If you’re self-employed, own a small business or have a single income household, then you might want to go more than that. Maybe 9-12 months. Yes, this is fairly conservative advice, but we now know that financial security is paramount right now.

Step 2: Multiply your monthly expenses by the number of months you need.

Remember how you’re tracking your spending now? Take a look at your monthly average spending and multiply it by the number of months you calculated.

For example: $8,000 monthly expenses x 6 months = $48,000.

STOP! I could feel that you were getting anxious because you might not be anywhere close to this amount. That’s ok. Remember how we’re going to break this short-term financial goal down further?

Step 3: How big is your emergency fund right now?

Take a look at all the money you have in cash and any other money you have outside of retirement and property including brokerage accounts, etc.

This is all on your personal balance sheet from Goal 2.

Step 4: How much more savings do you need for a fully funded emergency fund?

Take how much you need from Step 2 and subtract the amount from Step 3. Easy-peasy!

Step 5: How much will you save each month to get there?

Go back to tracking your spending.

Take a look at how much you have left over after your expenses. From there you can extrapolate how long it will take.

(If you need $20,000 more and you have an extra $1,000 per month, it will take you 20 months.)

Notice I said how much WILL you save, not how much CAN you save. Do what seems doable for you and set a savings goal. If it’s looking like it will take 3 years, so be it.

Remember to prioritize any and all funds going to past due bills of the 4 walls. After that, divert it to your savings account.

If you have it all there now, nice work!

Goal 5: Credit card debt pay off plan

Let me say something that shouldn’t be controversial.  Absolutely no one should carry credit card debt if they can help it.

I’ve heard people say things like, “But it helps my credit score,” or “It’s a 0% balance transfer.”

Don’t do it.

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Credit card debt is the “toe over the line”, the gateway drug of financial ruin and should be planned to eliminate for good.

So, thanks to putting together your balance sheet, you now know each credit card balance, what your monthly payment is, and the interest rate. (Seriously, go back to Goal #2 and do it if you haven’t already.)

Now, choose from the 3 ways to prioritize your debt

  • Interest rate – highest to lowest 
  • Debt amount – smallest to largest (debt snowball)
  • Stress level – Is one debt in particular stressing you out? Start with that.

Honestly, it doesn’t matter which way you choose. The most important thing is that you choose the one that feels best and stare down the top one at the list, your first priority, and commit to being credit card debt free.

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Got your credit card repayment order? Done!

No credit card debt? Done!

Achieve your short-term financial goals faster using the 50/50 Rule

Yes, income might be down right now and things could be tight, but as your income comes back, The 50/50 Rule will turbocharge your way toward your financial goals while also allowing you to bring back some of the spending you’ve been missing out on.

Lifestyle creep

It is by far the best way to make sure you can enjoy life again (when things hopefully return to normal soon) while also setting your set up for your long-term financial goals.

If you’re wondering how you can find the money to build your emergency fund and pay off credit card debt, this is the answer.

Coronavirus & Family Finances Webinar Coming Soon

I’m working on a free webinar called 5 Steps to Financial Success Post-Coronavirus to provide even more help in September 2020.

Registration isn’t ready quite yet, but if you want to get on the list now, email me at rob@familybudgetexpert.com

Get Budget Help & Save More Money Today

The Family Budget Transformation System is the fastest way to go from feeling stuck and stressed about money to dramatically improving your financial future and relationship.

You’ve done some of the planning, now it’s time to find the money to get it done.

*This works even if you’ve already cut your spending due to the pandemic. In fact, two couples started working with me recently because income is down and they know there’s more they can do to spend less.

Not only will we figure out how to find that extra money, but we’ll cover what you should do with it (save, pay off debt, or invest) to have success today and in the longer term

Let’s start with a conversation to talk through your biggest challenge and if I can help you figure it out.

Not ready to talk, but want budget help?

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