Learn the secrets of managing your money by setting short, medium, and long-term financial goals. Achieving your dreams and securing your future becomes simple with this step-by-step guide to smart money planning and goal-setting.
Financial goals and planning: short, medium, and long term
You have learned how to set SMART goals for your money, but how do you plan for different types of goals? Depending on your needs and wants, you may have short, medium, and long term financial goals. These goals have different time horizons and risk levels, and require different strategies to achieve them.
Short, medium, and long term financial goals
Short term financial goals are goals you want to achieve in less than a year, such as buying a new phone, saving for a trip, or paying off a small amount of debt. These goals are usually low risk, meaning you are unlikely to lose money or face unexpected costs. To reach these goals, you need to budget your income and expenses, and save a portion of your money in a safe and accessible place, such as a bank account or a money jar.
Medium term financial goals are the ones you want to achieve in one to five years, such as buying a car, saving for college, or starting a business. These goals are usually moderate risk, meaning you may face some uncertainty or fluctuations in your income, expenses, or returns. To reach these goals, you need to plan your income and expenses, and invest a portion of your money in a diversified and flexible way, such as a mutual fund or a certificate of deposit.
Long term financial goals are the ones you want to achieve in more than five years, such as buying a house, saving for retirement, or leaving a legacy. These goals are usually high risk, meaning you may face significant changes or challenges in your income, expenses, or returns. To reach these goals, you need to project your income and expenses, and invest a portion of your money in a growth-oriented and long-lasting way, such as a stock or a bond.
Goal Type
Time Frame
Example
Risk Level
Strategy
Short term
Less than a year
Buying a new phone, saving for a trip, paying off a small debt
Low
Budget and save in a bank account or a money jar
Medium term
One to five years
Buying a car, saving for college, starting a business
Moderate
Plan and invest in a mutual fund or a certificate of deposit
Long term
More than five years
Buying a house, saving for retirement, leaving a legacy
High
Project and invest in a stock or a bond
Check your understanding
What type of goal?
You want to save money for your mom's birthday gift.
Identify the goal as a short, medium, or long term goal.
Short-term goals can be achieved in fewer than two months.Medium-term goals may take from two months to three years to achieve.Long-term goals require three or more years to achieve. Long-term goals may be built upon short-term goals.
Short-term financial goals are things you want to achieve soon, like saving for a new phone or a fun trip. Medium-term goals might take a few years, like saving for a car or college. Long-term goals are for the far future, like saving for retirement or buying a house.
You'll usually see financial goals categorized into three timeframes: Short-term goals: One year or less. Midterm goals: One to five years. Long-term goals: More than five years.
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Broadly speaking, these terms can be defined thus: • the long-term plan is the scheme of work • the medium-term plan is the unit of work • the short-term plan is the planning for lessons. It is probably better to think in terms of 'planning'. The term 'plans' may imply set, unchanging formats and diagrams.
For example, a short-term goal might be to pay off debt or build a six-month emergency fund. While your medium-term goals will be to buy or remodel a home, plan a wedding or fund your 12-year-olds college expenses. The long-term goal usually revolves around retirement, travel or buying a vacation home.
Key short-term goals include setting a budget, reducing debt, and starting an emergency fund. Medium-term goals should include key insurance policies, while long-term goals need to be focused on retirement.
Short-term usually involves processes that show results within a year. Companies aim medium-term plans at results that take several years to achieve. Long-term plans include the overall goals of the company set four or five years in the future and usually are based on reaching the medium-term targets.
Definition: Medium term refers to the time period of more than 12 months but less than five years. Examples: Examples of external medium-term finance include hire purchase, leasing and sale-and-leaseback. Amount: Medium-term finance deals with fairly larger amounts of money.
Some examples of long-term financial goals may include: Saving for a down payment on a house. Funding your retirement. Paying off large debts (e.g., credit cards, student loans, mortgage, etc.)
A short-term goal is something you want to do in the near future. The near future can mean today, this week, this month, or even this year. A short-term goal is something you want to accomplish soon. Something that will take you a long time to accomplish is called a long-term goal.
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Short Term: Usually set from periods of one day to one month. Medium Term Goals: Set between one month and to six months, one month and three month goals are the most common. Long Term Goals: Range between six months to several years.
For example, a short-term goal might be to pay off debt or build a six-month emergency fund. While your medium-term goals will be to buy or remodel a home, plan a wedding or fund your 12-year-olds college expenses. The long-term goal usually revolves around retirement, travel or buying a vacation home.
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