Short-Term vs. Long-Term
While “short” and “long” may seem self-explanatory, it’s not always so black and white. Is saving for a new car a short or long term goal? What about paying off that department store card? There are several things to consider when determining whether a goal is short term or long term. Short-term goals are you immediate wants or needs that affect your expenses and can be achieved in typically in 1-6 months. Long-term expenses are your big-ticket items, or those that will typically take one or more years to achieve.
Generally, short-term goals do not require as much planning or saving as long-term goals. Long-term goals typically require more money and regular review to stay on track. Additionally, long-term goals may consist of smaller goals throughout the timeline in order to achieve the goal. For example, when saving for a child’s college tuition, you will be much more likely to stay on track if the total amount needed to be saved is divided into chunks and saved on a monthly or quarterly basis. It’s much easier to visualize where you are and how well you are staying on target if you take a series of consistent, smaller steps to reach the bigger goal.
Then there are those goals that don’t exactly fit the short- or long-term category, but rather have characteristics of both. These are mid-term goals, and are often those needs or purchases that take longer than three months to achieve, but not years.
Typically, mid-term goals take three months to one year to achieve. These usually do require more planning like long-term goals, but can be achieved on a smaller time scale. Depending on your income and the expense for your situation, examples could include:
- Buying a car
- Extended travel
- Planned medical expense
- Paying off a credit card
- Saving for a house down payment
How to Get Started: Evaluate your current situation.
- Determine your monthly income and expenses, then decide how much of your disposable income (the difference between your income and expenses) you can afford to put towards your goal. This will help you determine if your goal is short, mid, or long-term.
- Set a timeline based on your savings goal. Include periodic benchmarks for goals lasting more than three months.
- Write down your goal. The best system for visualizing and prioritizing a goal is one that is written down. Whether you write it down in a journal, or track it on your computer or through an app, having dates, amounts, and actions written down helps you plan ahead.
- Track your progress. Set reminders to check in on your progress regularly.
- Consider offsetting your new expense. Look for ways to cut back in other expense categories to help offset the added expense your new goal is creating. It’ll be easier on your wallet and help you be more successful in reaching your goal on time.
- Reward yourself. When you reach a milestone or checkpoint, reward yourself with something small – such as indulging in your favorite dessert or giving yourself a mental pat on the back. We are quick to beat ourselves up if we miss a deadline, but not as quick to tell ourselves we’ve done well.