Short-term goals (within one year) generally take one year or less to achieve, based on the date the task is needed, the total estimated cost, and the required savings.
Medium-term goals (1-5 years) are the type of goals that can’t be executed overnight but might not take many years to accomplish.
Examples might include purchasing/replacing a car, getting an education or certification, or paying off your debts like credit cards etc. (depending on the amount).
Long-term goals (over 5 years) are those things that won’t happen overnight, no matter how hard you work to achieve them.
Examples of long-term goals might include college education for a child, retirement plan or purchasing a home.
Whatever the case, these goals generally require longer commitments and often more money in the end.
Julie Vetter, SVP Retail Banking
Community Bank Mankato
|“Manage finances wisely” is a popular New Year’s resolution. But it can be tough to stick to a goal this vague. Often, people will also be general by trying to “spend less” or “save more”. While these are both good places to start – they aren’t a magic bullet.
Before deciding on a New Year’s resolution, take these two steps:
Identify and write down your financial goals. Whether it’s saving to send your kids to college, buy a new car, or save a down payment for a new home - write down everything you would like to do.
Prioritize your list. Break your goals down into three separate time categories. By placing a time frame on your goals you are motivating yourself to get started and helping to allow you the chance to succeed. Just remember that you can adjust the time frame whenever you want to. Suggested categories are short-term goals (less than 1 year), medium-term goals (1 to 3 years) and long-term goals (5 years or more). This will make the process easier. After you have your list prioritized, here are some specific ways to help you be money-smart in 2017.
If saving more is your priority - many financial experts recommend having three to six months’ worth of living expenses in a liquid savings account. Set up an automatic transfer from your checking to your savings account to help make saving easy and automatic. By paying yourself first – when something unexpected happens, you’ll be better positioned to use your emergency savings instead of a high rate credit card. Begin by taking 5%-10% out of each pay check and put it in a savings account.
If your resolution is to save for retirement - consider making regular contributions to an employer-sponsored retirement plan or an individual retirement account (IRA). This can make a big difference when you reach your retirement years. Automatic paycheck transfers, if available, can help you stick to this resolution. A Financial Industry Regulatory Authority (FINRA) retirement calculator allows you to plug in various assumptions to determine whether you’ll meet your goal. Visit www.finra.org/ investor and search for “retirement calculator.
If you want to pay off debt - focus on whittling down debt by paying more than the required minimum amount. If you have various credit cards, pay the extra payments on the card with the highest rate. Once that card is paid off, re-direct that monthly payment in full to the next credit card. Keep at it month after month and over time, you’ll find yourself with less debt. Also, consider refinancing to a lower interest rate on your home or car loan to help you pay down debt faster.
If your goal is to build great credit - make it a priority to pay your bills on time. Handling credit responsibly will raise your credit score. Your credit score plays a big factor on everything from mortgage loans and insurance rates. In some cases, credit scores can impact getting a job or renting that new apartment.
Thinking about updating your estate plan? It’s not the most fun topic to think about, but it is important for your family’s future. If this is on your list, make it a goal to talk with aging parents and/or your spouse to help you make decisions and form a plan.
Review your progress monthly, quarterly, or at any other interval you feel comfortable with to determine if your program is working. Remember that most behavioral changes can involve a few setbacks. If you anticipate setbacks and view them as temporary, you’ll increase your chances of success. If you’re not making a satisfactory amount of progress on a particular goal, re-evaluate your approach and make changes as necessary.
Looking for some help to get started? It can be hard to get started. Remember – as with physical health, the road to strong and sound finances is more like a marathon than a sprint. Review your finances regularly and don’t hesitate to ask for help when needed.