Short Term and Long Term Goals, Not everybody has them but Everybody Needs Them.
Before you ride an airplane, you would like to know where it is going. This is common sense but this is something we do not consider when we are talking about our money. As a result we go through our daily lives without any idea what we are saving our money for.
Financial Planning – Crucial Step
Goals give you that much needed direction. By setting these goals early you are able to know what you are working for and why you should work as hard as you do. After all, we want to have motivation. Not everybody can work just for the purpose of working.
Goals can be further separated in to two kinds. The first kind of goal is the short term goal. Short term goals are your wants and needs for the immediate future. Usually these kinds of goals have a deadline that range between a few months up to five years.
Some of the most common short term goals include vacations, parties and other events that are expected to happen in the immediate future. Aside from these common events, some have goals financially that does not require immediate spending. For example, some people just want to have extra available and want it as soon as possible.
The other kind of goal goes past the five years commonly set in short term goals. Goals like this are usually achieved in five years or more. Retirement is the key goal that most people want but there are other plans for saving that is past the five year mark. Some of the other savings that is used to fulfill our long term goals include college tuition, down payments for a house, and house renovations just to name a few.
It is important that people understand what their goals are so that they can prepare accordingly. Short term goals require smaller total amount but there is not enough time to accomplish this. Hence, you need to put in more money each payment because time is not on your side.
Longer term savings need smaller payments but since there will be a longer term of payment, you will end up paying a higher total. Fortunately, you will have time on your side, so you can ride out the risk and balance it with a well diversified account.
This is just some of the differences between financial short term and long term goals. Understanding it is the first step before one can make the most of your financial situation. Hopefully, in the end we will reach those goals and live happily ever after.