Financial New Year’s Resolutions are great, but we believe that financial goals need to be revisited more than just once a year. A three month period, or 90 days, always seems like the perfect amount of time to reevaluate our short term goals – not too long of a period where financial habits fall by the wayside and not too short where we become consumed by our end goals. Early long-term goal setting, saving, investing, education, training, budgeting, and wise spending decisions are factors that will help make your ideal financial scenario possible.
While we may know someone who seems to have lady luck on their side, the reality is that the rest of us need to have an action plan in order to achieve our aspirations. Because financial goals demand regular investments of money and effort over a long span of time, establishing a plan of action is required to bring them to fruition. Regardless of what you hope to accomplish, start by setting short term financial goals. Deciding what you want to focus on and establishing a routine may well be one of the most difficult parts of the process. Here are 5 short term goals for you to consider as you embark upon your financial journey.
Before we address the important financial goals of creating emergency or early retirement funds, there is something that arguably takes precedence. High-interest debt is crippling to anyone’s financial future and will perpetually hinder you from the goals you hope to accomplish. The great thing about implementing a plan to get rid of debt is that everyone has the ability to do so, regardless of income or wealth level. At the end of the day, it will remove the asterisk from your income – I make $X,XXX per month, but $XXX has to go to pay my debts.
Make a habit out of paying down credit card debt. Credit cards have high interest rates and the debt has a way of overstaying its welcome if you don’t choose to address it. Other debt such as student loans, car loans, and mortgage typically have lower interest rates and can be paid down while you invest in the markets.
Once your credit card debt is payed off, your next short term goal should be to create an emergency fund. Extra money set aside for a rainy day makes it so that you do not need to dip into your other funds, which would set you back from your financial goals. Financial advisors recommend that you set aside 90 days of daily expenses for this account. These funds will be invaluable for when unforeseen issues inevitably come up. It pays to plan ahead.
Plan for Early Retirement
Planning for retirement is different than planning for early retirement. Planning for early retirement requires that your retirement savings are met years prior to when you actually will need to leave the workforce. Speeding up your retirement timeline will provide you with extra time to ensure that your financials are all in line. Reaching your retirement goals may take longer than you think: if you plan to retire at 50 you’ll have plenty of time to make it by 65 in the even that you hit a few snags along the way. Aging is no easy matter, and poor health might come sooner than expected. Plan for the worst by make early retirement a necessity. If you’ve planned and prepared to retire early, then you will be ready for anything life throws at you. There may be a time at a later age that you decide that you don’t want to work as hard. Again planning ahead will allow your needs to be met.
There’s another advantage to planning to retire early. By preparing for retirement at an earlier age, you will be front-loading your retirement investment portfolio. This will give you a larger portfolio earlier, which will mean that you won’t have to work so hard saving for retirement later in life when doing so may be more difficult.
Multiple Sources of Income
If one of your short term goals is to make more money, one way of doing so is to expand your income streams. Even if you love your job and don’t mind putting in the extra hours to get that much desired raise, creating multiple income streams is a form of income insurance. One of those income streams could be a part-time cash flow which would enable you to semi-retire at an earlier age. Consider looking into starting a new business on the side which wouldn’t require you to quit your current job. There are many benefits of having multiple sources of income such as a means to pay off debts, a means to help fund retirement, and you would not be dependent on one single income source. Give this goal some serious consideration. Jumping into a new project or business could be a way to open up numerous opportunities in the future.