Personal finance is long-term effort, so hard, short-term decisions are better for good, long-term goals. However, when the end goal is so far into our future, it can be hard to stay on track. We’ve all been there, finishing a twelve-week diet and exercise plan in only two weeks. But to reach long-term goals, you have to keep making the right choices all day, every day. You need a plan for the short-term that helps you to achieve long-term financial goals.
In life there are so many financial goals we want to achieve simultaneously. Goals such as:
- Getting a mortgage.
- House projects.
- Retirement contributions.
- Emergency savings.
- Student loan repayments.
- Credit card repayments.
- Other loans.
- Travel savings.
These are just some of the financial goals a person can have. But having so many goals that compete for your limited income and your attention can certainly leave you with your head in your hands while you rock back and forth.
To achieve long-term financial goals you need to set priorities because knowing what is most important to you will help you work out your short-term decisions to meet your long-term goals. Likewise, working out which of your goals must be achieved in the short-term will help with prioritizing but also with strategizing. One method may be to focus on only one or two goals at a time because you can then achieve those goals sooner, e.g. getting rid of your student loan or other loans while also putting aside money for a down payment of a house so that when it is time to get a mortgage you have a lot less debt. This method is great because by achieving one or two goals sooner it will motivate you to stick to your plan and keep moving from goal to goal.
Goals And Mini-Goals
So while the method outlined about can work for short to mid-term goals some goals will always stay far off in the future. This can make it hard to stay motivated for those goals that may be top priority but which have no short-term payoffs. This is where the best strategy to achieve long-term financial goals is to break down your goals so that each mini-goal can be reached sooner.
If you have a large loan to pay off e.g. $85,000, it can seem very daunting. That’s a lot of money you still owe. However, if you break it down and say your goal each year is to pay off between $5,000 and $10,000, then each year you will see those numbers drop and as you do you will be more motivated to continue to watch those numbers drop.
Get A Personal Finance Buddy
Whether it’s through support or a little friendly competition, or even a bit of both, having a financial goal buddy can be a motivator and help to keep each other accountable to achieve long-term financial goals. Say you both have student loans but one of you has a slightly better income. The person with the lower income may decide that they’re going to pay off the minimum amount of the other, higher income, person’s student loan repayment amount. This is a great goal for the person with the lower income, but it is also then a great motivator for the person who is earning more to also try and pay more than just their minimum. Because if someone with less money can repay their minimum amount, why can’t the higher earner pay off even more? It’s a classic win-win scenario.
Although rivalry can be a great motivator, if the disparity between the two individuals is too great, it can frustrate the person who has no way of ever catching up and possibly make them give up. So it is important if you choose to find a personal finance buddy that you choose someone who is in a similar situation with a similar income to keep the competition fair.
Also be wary of people that are prone to bragging and gloating of their success, this will not help you to achieve long-term financial goals. Some people can just get excited in the moment and not realize it but you want someone that is going to empathize with your difficulties and encourage you to keep going and possibly even catch up.
This is where accountability comes in. A person can be empathetic and encouraging but if they’re not going to call you out when you both know you’re not trying hard enough they’re probably not the best buddies to have when trying to achieve long-term financial goals. You don’t want someone who enables bad financial habits or helps you make excuses for them either. Likewise you may not notice when you start falling into bad spending habits, such as that once a month night out with friends for dinner and drinks that somehow turns into a weekly ritual, or if weekly planned grocery shops become unplanned ‘oh I just need one thing’ and then there are all the impulse buys for the other twenty meals you plan on making this weekend, and this is where having someone to hold you accountable and call you out when you’re falling away from goals can be helpful.
Reaching both short-term goals and long-term goals, small goals and big goals depends on how well you stick to a plan. And in order to stick to a plan you must stay motivated. So the best plan is one that will keep your motivation high while you work towards each goal and in turn, each goal reached will motivate you a bit more. Therefore, its best to start now before you can get into a de-motivational slump. Remember to have short-term goals as well as mini-goals that lead to long-term goals and you will have plenty of success to celebrate along the way.