Short term financial goals are an excellent way to build up to larger milestone goals such as retirement or purchasing a home. Financial goals in the short term can be weekly, monthly, or yearly goals, and they can range in complexity from cutting back on eating out to maximizing retirement accounts.
While there is no right way to create or accomplish financial goals, a great short term financial goal is one that levels up to a long term goal. And while short term financial goals may seem insignificant in the moment, they can quickly build into long term financial goals, and possibly financial independence.
Below are 12 actions to help your achieve short term financial goals.
Short Term Financial Goals To Help You Feel Financially Secure
Traditionally short term financial goals are “Save $1000 by X Date” or “Get Out of Debt”. While this is an excellent goal, it is missing the action step needed to make it happen. All of these steps below are actions you can take to start improving your finances and reaching your short term financial goals.
Automate Your Monthly Savings
Let’s face it, it is a rare individual who is dedicated enough to manually deposit into their savings each month. Automation is a key part of building financial wellness and making your short term savings goals a reality. And this can be done in under 2 minutes on your online banking platform.
I recommend you schedule automatic payments to deposit each month into a high-yield savings account. By doing this, you will set yourself up for success in the long run.
Track Your Spending for One Month
For many of us, we have seen a credit card statement and been shocked. “How did I spend this much money?” A great way to avoid this is by manually tracking your spending by writing down each expense.
Multiple studies show the effectiveness of writing goals down pen-to-paper, and it is much too easy to swipe away until it’s too late.
By tracking your spending, you will be able to understand where your money goes each month, and how you can adjust that in the future to maximize savings.
Try a No-Spend Month
While a no-spend month may sound drastic, it can give you great pause. It can help you understand what is truly important to you, while identifying areas in your spending that can be cut.
To be clear, I’m not asking you to not spend at all. You still have to pay rent, buy groceries, pay for gas, etc. This is simply an exercise to cut all spending outside of the true necessities like food and shelter. (It can be a great way to save money for your short term financial goal)
Open an IRA
Opening an IRA is a small goal, with an immense amount of potential. An IRA is a type of retirement account that isn’t employer-sponsored like a 401k. You can open an IRA today, without any formal employment requirement.
There are two types of IRA’s: Traditional and Roth.
A traditional IRA is a retirement account where you can contribute pre-tax dollars where investments grow tax-deferred until withdrawal during retirement. When you retire, the funds are taxed at the IRA owner’s current income tax rate. This strategy works best for those who make more money now than they will when they retire.
A Roth IRA is a retirement account where you can contribute post-tax dollars, and investments grow-tax free. And as long as the funds remain in the account until you are 59.5 years old, you can begin withdrawing the funds tax free. This strategy is most effective for those who make less money now than they will when they retire.
Either way, opening an IRA can unlock great potential. And once opened, you can begin contributing immediately. Each account has specific guidelines such as deposit limits, so be sure to do your research when selecting which works best for you.
Up Your Contributions to Your 401k
A 401k is another retirement account option that gives great incentives for employees. And if you work for an employer who gives an employee-match, that is free money available to you!
For example, let’s say you make $2,500 pre-tax every two weeks, and your employer matches up to 6% of pre-tax dollars. That means if you take $150 out of your paycheck, your employer will give you an additional $150 towards retirement. It may seem like nothing on a single paycheck basis, but if you did that over a 30 year span, and maintained a 6% return on investment — that $54,000 investment on your end will turn into over $300,000.
If you are unsure of your 401k options, talk to your supervisor or HR department representative.
Create a Meal Plan
A meal plan may sound tedious and annoying. But with a plan, comes achieving goals.
We all need to eat — that is inevitable. However, the cost of meals can fluctuate widely based on eating out/dining in. And while buying a cup of coffee here and there likely won’t break you financially, eating out frequently can.
With a meal plan, you can specifically purchase meals that are lower in cost, and provide leftovers. So instead of buying a $15 meal out that will only fill you for one course, buy and prepare $9 meals that will last you two or three servings. On a week to week basis, it may seem like pennies. Over the long haul, it can save you thousands.
Make a Debt Free Plan (This Means Facing Your Debt)
No one wants to face their debt head on (I didn’t either), because the first feeling many experience is hopelessness — and no one wants to feel that. But you can solve that by creating a plan to dig yourself out of the debt you are facing.
This plan doesn’t need to be anything fancy, but it must have actionable items. Maybe asking for a raise at work, cutting back on discretionary spending, moving home with your parents and selling your car (if you are able to) are a few strategies for paying off debt.
If you want an easy worksheet to create your first debt payoff plan, I made one. You can check it out here.
Track Your Net Worth
Tracking your net worth can seem like a foreign concept only meant for the super-rich. But that is not the case! Because your net worth likely changes on a weekly basis, tracking it in real-time is a great way to see your progress forward.
My favorite app to track your net worth is Personal Capital. It allows you to see the changes in your net worth in real-time, along with organizing assets and liabilities. It is free to use and available for iOS or Android.
Calculate Your Savings Rate
We all know saving money is important, but it is becoming more and more difficult with the rising costs of living. But calculating your personal savings rate can bring into clear context how much you are saving for retirement, and if you need to increase that amount.
The rule of thumb is to save 15% of your take-home pay. This is a good place to start, however, this needs to be a personal decision. If you are aiming towards FIRE, it needs to be much higher.
To calculate your savings rate, use this formula:
Long term savings / total disposable income x 100 = Total savings rate
Create a Budget or Revisit Your Own
Budgets don’t have to be a dreadful experience. In fact, they can be created to challenge you and motivate you to accomplish your financial goals.
Because personal finance is personal, I strongly recommend to not take one you find online and directly apply it to your financial situation. Be sure to curate it to your needs and financial goals.
And if you already have a budget, it may be time to revisit it. If you have had financial shifts in your life such as a raise at work or you’ve been laid off, adjusting your budget is essential to stay on track towards your financial goals.
Make Giving a Part of Your Financial Goals
If giving is a strong part of your personality, you can incorporate this into your financial goals. If you want to save year-round for a large donation around the holidays, you can build this into your larger plans.
My best suggestion is to have those funds deposited into a high-yield savings account automatically. If you don’t make this process automatic, it becomes very easy to forget or not prioritize this part of your financial goals.
Create a Will and Update Your Beneficiaries
Creating a will is not only for the rich and wealthy. Regardless of your net worth, you likely have assets that you would like to be distributed if you were to unexpectedly pass away.
Here are a few resources to get started:
As for beneficiaries, it is crucial to update these regularly. For example, if you listed someone you are no longer together with, your money can fall into the wrong hands if you were to pass. To update your beneficiaries, log into your retirement accounts and search for “update beneficiaries”, or give your provider a call.
Don’t Forget to Invest in Your Financial Literacy to Help You Achieve Financial Goals
Arguably the most important factor in financial literacy is to invest in yourself. Whether it be purchasing a book or investing in a gym membership to maintain your wellness, resources should be set aside to build yourself up.
Financial goals are difficult to set, and can seem to be even more difficult to achieve. But with the right resources, goals, mindset and worth ethic, you can achieve any goals you set for yourself.