Steps to Achieve Your Short and Long-Term Financial Goals
Financial success doesn’t happen overnight. Just because you dream about it, it doesn’t mean it will magically happen. That’s why establishing goals is crucial to turn those dreams into reality.
Most experts recommend that we set short and long-term goals when planning our financial future. Short-term goals are easier to accomplish and take less commitment. Long-term goals may take decades to achieve, and tend to be necessary for most of us.
Here are some examples of short and long-term goals you should set:
Build an emergency fund: Unfortunately, bad things happen to everyone. Today you may find yourself perfectly happy with your job, but tomorrow you may be laid off. In the same way, your house may be hit by a hurricane or you may be involved in a car accident that ends up costing you thousands of dollars. Hopefully, none of these things will happen to you, but it’s better to be ready for the worst. Aim at saving three to six months of living expenses so you don’t have to rack up credit card debt or rely on payday loans when an emergency comes up.
Increase your income: If you feel your job doesn’t allow you to save enough money, maybe it’s time to consider a part-time or freelance job. Think about how your talents and skills could fit into different industries. For example, if you are a good writer, you could freelance for your local newspaper. The additional income earned can be used toward your credit card payment or to build an emergency fund.
Saving for retirement: The easiest way to save for retirement is through a 401(k) plan, where you get automatic deductions from your paycheck. If you don’t have that option at your job, you may consider an individual retirement account (IRA). Through this retirement plan, you can make tax-deductible contributions, but you may have to pay taxes on the earnings once you retire. Whether you choose a 401 (k) or IRA plan, try to save 10 percent of your income each month for retirement.
Pay off your mortgage: Owning a comfortable house is essential for many of us, but sometimes paying off your mortgage can become a nightmare. A great way to reduce your payments is by paying $50 or $100 extra each month during the first five years. Look at the extra payments as a way to eliminate the interest rate—once it’s eliminated, your total mortgage will be considerably less!