Setting financial goals is a good habit as it steers you in the right direction and helps you achieve your life goals like buying a house or going on a world tour. However, these are long-term goals and could take years to fulfil, which might make you procrastinate or sway from the target. This is why setting short-term financial goals is important. Such goals help you visualize what financial success looks like for you and the small wins keep you motivated.
Short-term goals usually fall within the 5-year window; however, you can set your own targets as per your financial situation. For example, you can set a savings goal for the end of the year and make efforts towards achieving that goal by cutting down your unnecessary expenses and adopting frugal living for some time.
Why are Short-term Financial Goals Better?
Here are some of the reasons why you should start with a short-term financial goal instead of eyeing long-term achievements:
- It is easier to accomplish smaller goals and the wins keep you motivated and committed.
- Short-term goals act as stepping-stones to achieve bigger targets.
- Checking-off smaller goals from your list make way for more goals to be achieved in a short span.
How to Set Short-term Goals?
While the goal itself will be different for everyone, the process of setting those goals is similar in most cases. Given below are some of the important steps to take:
Have a Vision
Knowing what you wish to achieve is the first step. When setting your short-term goals, be specific, instead of planning to improve your financial health in a general sense. Make those goals quantifiable. For example, if you have a poor credit score of 600, you can set a goal to improve the score and bring it to 750 within, say, a year. Similarly, if you have multiple credit card debts, you can consolidate them by taking a personal loan. Financial marketplaces such as Paisabazaar.com can help you achieve your short-term goals effectively by providing loans and the facility to track your credit score for free.
Set a Realistic Target
If you are setting a short-term goal for the first time, it is better not to choose a lofty target. It might be inspiring but reaching the goal could be difficult. This is why you must always set realistic goals about your financial capability. Even if you are eyeing a larger objective, you can break it into smaller, more manageable goals and work towards them. For example, if your goal is to buy a house within the next 3 years, you can set a short-term goal of saving for its down payment.
Define the Timeline
Do not leave your short-term goals open ended. Defining a timeline to achieve the goal will help you stay committed. Again, you must be realistic while setting a period. For example, if you plan to save Rs. 1,20,000 in a year, you will have to set aside Rs. 10,000 per month for the next 12 months. If you think setting aside this amount is too much for your cash flow, you can increase the timeline to 1.5 years.
Make Room for Unforeseen Expenses
Your goals are important but sometimes unexpected expenses can find their way into your budget. You should make room in your short-term goal to accommodate such unforeseen expenses like medical bills, sudden travel or vehicle repair. When life throws such unexpected expenses at you, you can modify your goal either by extending the timeline or adding more than usual amount to your savings in the coming months.
Start a Side Hustle
For reaching your financial goals, you need either to cut down on your extra expenses or increase your income. You can give yourself a no-spend challenge for a month, where you do not make any unnecessary spend during that period. Alternatively, you can start a side hustle to earn some extra income. As the gap between your income and expenses reduces, you can dedicate more funds towards your goal to achieve it faster.
Related Read: How to Start a Side Hustle
Short-term goals can go a long way in helping you hit bigger targets like buying a house. You can set multiple short-term goals at the same time, as per your financial capability. Do not compare your accomplishments with others. Set easier goals in the beginning, achieve them and celebrate the wins.
While reaching financial goals is important, you should not compromise on important things in your life. At the same time, you should also contribute towards your emergency fund. Ideally, you should have at least 6 months of your monthly income in an emergency savings account to deal with unexpected expenses.
What are Some Examples of Short-term Financial Goals?
Financial goals would be different for different people, based on their needs, preferences and financial situation. For some, saving up for a new phone could be a short-term goal while for others, saving up for a world tour could be the goal. Nevertheless, here are a few examples of short-term goals that you can consider:
- Saving for a trip
- Saving for a mobile phone, appliance, etc.
- Saving for home refurbishing or renovation
- Improving your credit score
- Getting rid of credit card debts
- Saving for college
Understand your finances, visualize and start with a goal you can easily achieve.
