How to Set Short-Term Financial Goals

Antoine de Saint-Exupéry once said, “A goal without a plan is just a wish.” While this French writer lived nearly 100 years ago, the sentiment still applies, especially in personal finance. 

With an abundance of ways to use your money to increase your wealth, it is critical to place yourself in the best financial situation possible by making wise financial decisions. While planning, you should set SMART financial goals to achieve financial success. Creating a financial plan will keep you motivated and on track to reach each specific goal you set.  

Whether you want to save for a summer vacation, upgrade your car, or pay off your student loan debt once and for all, creating a plan for your goals will increase your chances of achieving them.  

In this article, we’ll discuss some common short-term financial goals you may be interested in pursuing this year. We’ll also explain how to use the SMART framework to ensure you reach your financial goals on schedule. 

What are short-term financial goals?

Short-term financial goals are financial goals you hope to reach within the next few months to three years. Some common short term financial goal examples include:

• Creating an emergency fund
• Paying off all of your credit card debt
• Saving up enough money for a down payment 
• Saving for a vacation, wedding, or big purchase
• Paying off an unexpected medical bill

Long-term financial goals, on the other hand, may take you several decades to achieve. Some common long-term financial goals include paying off a mortgage or saving enough money to retire.

Short-term and long-term financial goals can help you manage your money better and enhance your financial security over time. While both types of financial goals are worthwhile, we’ll focus on short-term goals in this article.

How to set short-term financial goals

If any of the short-term financial goals we listed above sound enticing to you, you may be wondering how you can reach them in the next few months or years. The SMART goal-setting framework can help you do just that. 

SMART stands for specific, measurable, attainable, relevant, and time-bound. Let’s take a closer look at what each of these components means in terms of personal finance:

Specific 

The first step to achieving a goal is defining it clearly. In other words, you want to make your goal specific. For example, maybe your initial desire is to save more money. But why? What do you want to use the money for? Do you want to have emergency savings to pay off a possible unexpected expense?

After some reflection, you may realize that you want to save more money so you can finally pay off your debt and enjoy the freedom that comes with it. Or maybe you want to be able to afford to take a memorable vacation with your family each year.

Clarifying your goal will not only help you develop an action plan, but it can also enhance your motivation to achieve it. 

Measurable

Next, you want to become clear on the metrics involved in your goal. After all, if your goal isn’t measurable, you won’t have any way of knowing when you’ve achieved it.

You can determine how to measure your goal by figuring out the amounts you’ll need to save (or pay off) to reach it. For instance, continuing the previous examples:

• You may review your credit card balances and discover that you owe a total outstanding balance of $7,984. 

• Or maybe you do some research online and figure out that your dream vacation will cost around $4,000. 

With these measurable metrics in mind, you can start developing a plan to reach your goals over time.

Attainable

The next step in crafting a SMART goal is to give yourself a bit of a reality check. If your goal isn’t attainable, you’re setting yourself up for failure before you even start.

For example, it’s unlikely that you’ll be able to save up enough money to cover your credit card debt in the next week. However, after doing the math, you may find that you can reasonably pay it off within the next year.

When you make sure that your goal is achievable, you can confidently pursue it, knowing that your hard work will pay off if you just stick to your plan.

Relevant

Not all short-term financial goals are worth pursuing or relevant to your current place in life. It ultimately comes down to your timing, values, and priorities. Thus, after checking in with reality, you’ll want to check in with yourself. 

For instance, if you want to eventually become debt free, saving up for a new car may not be the most relevant goal to pursue right now. Instead, it may be more worthwhile to pay down your high-interest credit cards first.

Ensuring that your goals align with your top priorities will help you focus your efforts where they matter most.

Time-restricted

Lastly, each of your goals should have deadlines. By restricting the amount of time you have to achieve a goal, you give yourself that much more motivation to stay accountable to it day to day. 

Let’s walk through an example:

• Say you want to save $20,000 for a down payment on a home in two years. 

• With this deadline in mind, you do some calculations and discover that you must save around $833 a month to achieve this goal. 

• After that, you make the necessary changes to your monthly budget and set up automatic deposits to a dedicated “Down Payment” savings account.

If you didn't set this deadline, you might not know how to track spending habits or contribute to your savings accounts each month. Instead, you may simply stash away a few hundred dollars every once in a while and fail to reach your goal in a timely manner. 

By using the SMART framework to set your small-term financial goals, you can pursue your objectives with more clarity and motivation.

6 tips for short term goal setting

In addition to using the SMART framework, you can also increase your chances of reaching short-term financial goals by:

1. Writing down your goals on paper – After constructing your SMART goal, it’s a good idea to write it down. According to a Michigan State University study, simply writing down your goals can considerably increase your chances of reaching them. In this study, 76% of study participants who wrote down their goals achieved them, compared to just 43% who didn’t.
   
   
2. Taking advantage of the right tools – These days, there are many helpful personal financial tools at your disposal, from budgeting apps to automatic payments. These tools can help you track your transactions, automate savings contributions and monthly credit payments, and alert you when your account balances become low. In turn, they can streamline many of the logistical aspects of reaching financial goals.
   
   
3. Scheduling regular progress check-ins – Next, you may want to select one day of the week or month to review your progress. This way, you can ensure that your spending habits and savings contributions align with your short-term goals.
   
   
4. Asking others to keep you accountable – Sharing your short-term financial goals with a family member or close friend is another way to help you stay accountable. Simply knowing that someone else is aware of your goals may increase your motivation to pursue them persistently. If your goal is something others in your family will benefit from—such as saving for a vacation—you may even want to include them in the process.
   
   
5. Celebrating little wins – As with any type of goal, reaching your short-term financial goals will likely require some sacrifice, dedication, and a willingness to delay gratification. However, you don’t have to hold off from all the fun until the very end. Celebrating important milestones along your journey can help maintain your motivation to keep going.
    
6. Thinking outside the box - Finally, you may want to do some research and see if there are more efficient ways to reach your financial goals. For example, maybe you’re retired and you want to pay off your credit cards and prepare for an upcoming medical procedure. However, you don’t want to have to move out of your cherished family home or go back to work.
   
   In this situation, a faster way to reach your financial goals may be to participate in a sell and stay transaction. This allows you to sell your home without having to move out of it. Instead, you can keep living in your home as a renter. Meanwhile, you can use the money you receive from your home’s equity to pay off your credit cards and finance whatever you'd like in one fell swoop. 

Reach your short-term financial goals with Truehold

If you want to enjoy greater financial freedom, Truehold’s sell and stay transaction may be the perfect solution. This enables homeowners to unlock their wealth and continue living in their homes as renters. 

By freeing up money, you can finally achieve many of your short-term financial goals—whether that’s building your dream home, regaining stability, or simply enjoying a little more spending flexibility throughout the month. What’s more, you can offload property tax, property insurance, and essential repairs to us at Truehold. 

Want more personal finance tips and tricks from Truehold? Check out our helpful family financial planning resources today.

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Sources:

1. Forbes. The Ultimate Guide To S.M.A.R.T. Goals. https://www.forbes.com/advisor/business/smart-goals/

2. MSU. Achieving your goals: An evidence-based approach. https://www.canr.msu.edu/news/achieving_your_goals_an_evidence_based_approach