Are you one of the 75% of Americans who’re winging it when it comes to personal finances?
During harsh economic times, it’s understandable if you don’t want to spend too much time thinking about money. However, you aren’t doing yourself any favors.
Achieving financial freedom doesn’t come easy. As you keep your sights on the ultimate long-term financial goal — getting rich and never having to work for money — you must keep chasing short-term financial goals.
Do you have any immediate financial objectives you want to achieve, though? If not, this article is for you. Read on to learn about some of the top short-term money goals you should pursue.
1. Saving for a Rainy Day
Three things are certain in life: death, taxes, and… financial emergencies.
Yet about 50 percent of American adults don’t have any emergency savings. Among those who do, a sizeable number don’t have enough money saved up to cover a $1,000 emergency.
Living without an emergency fund is akin to walking a very thin line. Even a slight emergency can quickly sink you into a debt hole that will take you several years to climb.
This is why saving for a rainy day is one of the smartest short-term financial goals anyone can have. You’ll have better peace of mind knowing you’re in a position to settle most financial emergencies that come your way. And that you won’t need to turn to relatives and lenders to bail you out.
But how much money is enough for an emergency fund? There’s no one-size-fits-all as everyone has a unique lifestyle. As a general rule of thumb, you should have about six months’ worth of your living expenses in your emergency fund.
Once you’ve done the calculations, look at your disposable income and determine how much you can afford to save every month until you reach the emergency fund goal. Give yourself anywhere from 12 to 24 months to reach the goal.
2. Paying Off High-Interest Debt
Excluding mortgages, the average American has about $21,000 in debt.
This might not look or sound like a mountain of debt, but factor in the fact that most borrowers would rather stay in a debt cycle than pay off what they owe and you can see how debt can become a big problem.
It’s hardly possible to pay off all your debt within a short time unless a windfall comes your way. With proper debt management, being debt-free within 5-10 years is a smart long-term financial goal to have.
In the short-term, though, focus on paying off high-interest debt. As of 2023, the average interest rate on a personal loan is 11 percent per annum, so if you have some loans that are charging you a higher rate, get them off your books.
If you’re not in a position to afford a one-off payment, a good strategy is to increase your payments on these high-interest loans. Doubling the monthly payment, for instance, will enable you to clear the loan sooner, saving you some money in interest payments.
If you have multiple high-interest loans, an ideal move is to go in for a debt consolidation loan. As long as the interest rate on this loan is lower than the average interest rate of your high-interest loans, you’ll save some money.
Paying off expensive debt is one half of the job. The other half is beating the temptation to go back and get another high-interest loan. You must develop the discipline to keep off expensive debt after working so hard to pay it off; otherwise, your efforts will go to waste.
3. Building Credit
Most consumers don’t realize the importance of their credit scores until it’s time to get a loan from their bank. If your credit doesn’t meet the lender’s requirements, they can outright reject your application. If it’s not so bad but still unsatisfactory, they might approve your application but charge you a higher rate.
The price of poor or bad credit is steep, but you don’t have to pay it forever. Although you can find an installment loan for bad credit if you need to borrow, it’s important to make building credit one of your short-term financial goals.
To build credit, start by getting a copy of your credit report and knowing what your exact score is. Comb through it and see if there are any errors. If you find any, file a dispute and get it fixed.
The most impactful steps you can take to build credit include settling debt accounts that have gone into collection. Building a positive payment history and maintaining a low credit-to-debt ratio also goes a long way.
4. Supercharge Your Retirement Plan
Retirement planning is a long-term financial goal, but don’t be fooled. What you do in the short term will determine whether you meet your retirement goals or not.
The sooner you start saving and investing in retirement, the better your chances of raising the funds you need for your ideal financial legacy. As such, make immediate moves to supercharge your retirement plans.
For example, you can find ways to increase your income so that you have more disposable funds to put into your retirement accounts. You can also start exploring investment opportunities, especially in the stock market.
Pursue the Right Short-Term Financial Goals
Setting financial goals is key to achieving financial success. Although long-term goals matter the most, short-term financial goals are just as important. With this guide, you now know which short-term goals to prioritize.
There’s more personal finance advice and tips on our blog, so keep reading!