Short-Term, Mid-Term, and Long-Term Financial Goals

Key Points – Short-Term, Mid-Term, and Long-Term Financial Goals

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What Are Your Short-Term, Mid-Term and Long-Term Financial Goals?

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Everyone knows that you need to learn to crawl before you can walk and walk before you can run. With so many things in life, it’s critical to set short-term, mid-term and long-term goals. That’s certainly the case with your finances and trying to accomplish short-term, mid-term and long-term financial goals.

Even if you set similar short-term, mid-term and long-term financial goals as your best friend, your respective paths to achieving those goals will likely look a lot different from each other. That’s why our CFP® Professionals put the individual’s goals at the forefront when building financial plans. No matter what your short-term, mid-term and long-term financial goals are, we want to share some strategies that can help you accomplish them.

Short-Term Financial Goals

First, let’s clarify what we think of time frame wise as “short-term.” Short-term financial goals tend to be objectives that you set out to accomplish within a year or two. They can help you lay a foundation for your financial future so you can hopefully achieve your mid-term and long-term financial goals. Here are a few examples of short-term financial goals.

Setting Up a Spending Plan

Whether you’re in the early stages of your career or are hoping to retire soon, setting up a spending plan is pivotal. By “spending plan,” we mean budget. We just think that “spending plan” has more of a positive connotation.

When you’re setting up a spending plan, you first need to understand what your current and anticipated expenses are. How much do those things cost? Also, think about how much those things cost five to 10 years ago. It’s likely that your current expenses cost more now than they did a few years ago, and they’ll likely cost more a few years from now than they do today. That’s why it’s critical to plan for inflation within your spending plan.

Keep in mind that different expenses will also inflate at different rates. For example, if you have a 3% interest rate on a 30-year fixed mortgage, you’re probably feeling fortunate since today’s rates are much higher.₁ That 3% interest rate won’t change unless you decide to refinance.

While your mortgage won’t inflate, healthcare costs tend to inflate at an even higher rate than everyday expenses. According to the Peterson Center on Healthcare and KFF, healthcare costs (including medical services, equipment, drugs, and insurance) have increased by 119.2% since 2000 while the costs of goods and services have increased by 85%.₂ So, as you’re creating your spending plan and considering inflation’s impact, remember that healthcare costs are inflating at a faster rate than general expenses.

Don’t Forget Your Nonfinancial Goals

As you’re creating your spending plan, you need to keep your needs, wants, and wishes top of mind. Things such as your home, food, and healthcare costs are examples of needs, but what about your wants and wishes? Your spending plan won’t be accurate if you’re not incorporating the things you enjoy doing!

If you like to travel, prioritize that within your plan. If it’s a bigger trip, that could fall into the mid-term financial goal territory, that’s OK! You won’t have the clarity that you can afford to go on the trip unless you put it into your plan.

Ideally, you’ll be able to travel more in retirement and even later on in your career if that’s something you want to do. One thing you’ll likely realize is that your nonfinancial goals will change over time. As those goals change, make sure you’re updating your short-term, mid-term, and long-term financial goals.

Create an Emergency Fund

Another important short-term financial goal is to create an emergency fund. If you (or your spouse) have a medical emergency, how are you going to pay for that unexpected expense? Having a short-term financial goal of saving at least three to six months of living expenses can be immensely helpful with covering such an expense. Other examples of unexpected expenses could include significant home repairs or replacing income after being laid off.

Pay Off High-Interest Debt

Did you know that credit card debt in the U.S. eclipsed $1 trillion in the fourth quarter of 2023?₃ High interest debt isn’t something that you want to be saddled with, especially as you’re entering retirement.

However, not all debt is bad debt. Let’s circle back to the example of having a 3% interest rate on a 30-year mortgage. If you’re in that situation and will have it paid off in a few years, that’s not bad debt to carry into retirement. If you do have a lot of debt, consider paying off the high-interest debt first.

Save to Your 401(k), 403(b), or 457(b)

If you’re a recent college graduate and/or starting your career, a key short-term financial goal is to start saving. Again, your best friend’s initial savings goals might be similar to yours or they could be completely different. The power of compound interest can possibly help you save more than you realize.

Whether your company offers a 401(k), 403(b), or 457(b) plan, make sure you’re contributing to your retirement plan and take advantage of an employer-matching contribution if it’s offered. Your 401(k), 403(b), or 457(b) could potentially be one of your largest assets by the time you retire if you start saving early.

It’s also critical to understand that it’s not just about how much you’re saving, but where you’re saving. Should you save to the traditional or Roth side of your retirement savings plan? Whether you’re early in your career, middle of your career, or near retirement, learn some key 401(k) planning considerations for 2024 and beyond from Drew Jones, CFP®, AIF® in this Modern Wealth Management Educational Series webinar.

As you’re saving for retirement, remember that you’re not just trying to get to retirement—you’re trying to get through retirement. You might be thinking, how is that a short-term financial goal? When it comes to retirement, you shouldn’t take a set-it-and-forget-it approach with your 401(k) or overall financial plan. It’s important to have short-term financial goals along the way so that you can stay on track to achieve your mid-term and long-term financial goals.

Mid-Term Financial Goals

While short-term financial goals typically span for one to two years, mid-term financial goals generally span for three to 10 years. As we mentioned earlier, some short-term financial goals can turn into (or help you achieve) mid-term financial goals and even long-term financial goals.

The focus with mid-term financial goals tends to shift solidifying that financial foundation that you started with your short-term goals. And while you might not start making many long-term financial goals at this point, it’s not too early to start thinking about them. It’s just like we said with planning big trips that you one day hope to make.

Closing in on a Big Purchase

There are also some mid-term financial goals that might not be on your radar right after you begin your career but become more of a priority after a few years. For example, no one wants to live at home with their parents or in an apartment for several years after graduating college. In that case, make sure that you’re saving toward making a down payment on a house of your own.

Maybe you were fortunate enough to have your parents pay for your first vehicle. Hopefully you can get a lot of mileage out of it, but no vehicle will run forever. Whether you’re starting to save for your next vehicle—or maybe your passion is cars, and you want to have multiple vehicles—that’s something you’ll need to save for over time.

Increase Savings Contributions

Every little bit counts as you’re saving for retirement. But once you have taken the first steps toward building a financial foundation, think about what steps you can take to increase your savings. There are several ways of doing that, such as increasing your 401(k) and/or IRA contributions and contributing more to a savings account. You can also set up automatic transfers to investment and savings accounts so that you have more clarity about how much you’re saving.

Doing Away with Unnecessary Debt

We mentioned paying down high-interest debt as a short-term financial goal, but does it still feel like debt is a cloud that’s constantly over your head? That can create a lot of financial stress. As a mid-term financial goal, focus on not taking on new debt. If you do find yourself needing to take out a loan, do your research to get the lowest possible interest rate for that loan.

Student loans can also be a form of bad debt that can be a burden to young adults. And if parents are helping with student loans for their children, that can become a financial goal for them as well.

Continuing to Plan for the Unexpected

Planning for the unexpected can be a short-term, mid-term, and long-term financial goal. Hopefully, you get married and live a long and healthy life with your spouse. But what if you or your spouse passes away unexpectedly or requires a long-term care stay? The surviving/healthy spouse is the one who will be dealt an emotional blow and a potential financial blow if the couple hasn’t planned for those difficult situations.

Life Insurance

One way to plan for those kinds of events is to have life insurance. There are so many types of life insurance, so find a policy that best fits the situation for you and your family. Life insurance can definitely be thought of more as a long-term goal, especially if you plan to carry it into retirement, but either way you need to plan for the unexpected.

Review Insurance Coverage and Make Any Necessary Changes

Of course, there’s more insurance than just life insurance. Make sure that you have your bases covered when it comes to health insurance, car insurance, homeowner’s insurance, property and casualty insurance, etc. It’s important to make any necessary adjustments to hedge against potential risk.

Long-Term Financial Goals

Last, but certainly not least, we have long-term financial goals. One big long-term financial goal is to not run out of money before running out of life. But it’s also a long-term financial goal to not have too much money left over at the end of your life unless you want to leave a big legacy.

Confidence, Freedom, and Time

Our goal at Modern Wealth is to help people gain more confidence that they’re doing the right things with their money, freedom from financial stress, and time to spend doing the things they love. Those are oftentimes long-term financial goals for people as they’re planning for and trying to get through retirement.

It is possible to plan for retirement in just a year or two, but it’s advisable to begin planning for it around 10 years before you want to retire. There are so many major considerations with getting to and through retirement that focus on the financial planning pillars of taxes, estate planning, investments, and risk management.

Building Generational Wealth

If leaving a legacy is important to you, make sure that your plan prioritizes building generational wealth. We can’t stress enough that it’s not about how much you save, but how much you get to keep (and pass on to the next generation if you want to leave a legacy).

Yes, understanding how to properly construct your portfolio is a huge part of that. It’s crucial to have a diversified portfolio and to be strategic about how you invest. But having an investment plan and a financial plan are two different things. Think of your investments as the engine that makes your financial plan go. Your financial plan won’t be complete, though, without a forward-looking tax plan, estate plan, and risk management strategies.

Before you know it, your financial goals could soon overlap with your children and grandchildren’s financial goals. If you want to support them as they’re going through school, maybe setting up a 529 plan is something you want to consider.

How Do You Know If You’ll Be OK?

As you’re planning for retirement, there’s a chance that you could be helping both your children with funding their education and your parents with their healthcare costs. That can be a lot to handle while still trying to make sure that you’ll have enough to get to and through retirement. How do you know that you’ll be OK?

That’s why it’s so important to have a personalized financial plan that’s been stress tested for things such as market downturns, periods of prolonged high inflation and high interest rates, and other types of historical economic cycles. Would your financial plan have survived during events like the Dot-Com Bubble or Great Recession? Stress test your plan and find out!

If you download our Retirement Plan Checklist, you’ll notice that stress testing for those variables and several other retirement planning considerations that we’ve discussed in this article are mentioned in it. This whitepaper consists of 30 yes-or-no questions that gauge your retirement readiness and age-and date-based timelines that cover various retirement planning considerations. As you’re mapping out your short-term, mid-term, and long-term financial goals, make sure you have a copy of our Retirement Plan Checklist handy.

Retirement Plan Checklist

What Are Your Short-Term, Mid-Term, and Long-Term Financial Goals?

We’ve covered several examples of short-term, mid-term, and long-term financial goals that hopefully have you thinking about your specific financial goals. Remember that your financial goals will be different from anyone else’s. Our team is ready to build you a personalized financial plan that’s designed around those goals, so start a conversation with our team today by viewing our schedule below.

Schedule a Meeting

We can’t wait to hear about your short-term, mid-term, and long-term financial goals and do our part along the way to make sure you stay on track to accomplish them. Let’s start planning your financial future today.

Short-Term, Mid-Term, and Long-Term Financial Goals : Watch Guide

00:00 – Introduction
00:50 – Short-Term Financial Goals
09:01 – Mid-Term Financial Goals
17:41 – Long-Term Financial Goals
20:32 – What We Learned Today

Resources Mentioned in This Article

Articles and Videos

Past Episodes of America’s Wealth Management Show

Downloads

Retirement Plan Checklist

Other Sources

[1] https://www.freddiemac.com/pmms

[2] https://www.healthsystemtracker.org/brief/how-does-medical-inflation-compare-to-inflation-in-the-rest-of-the-economy/

[3] https://www.cnbc.com/2024/02/06/credit-card-balances-jump-to-new-1point13-trillion-record-at-end-of-2023.html

Investment advisory services offered through Modern Wealth Management, LLC, an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.