There’s nothing quite like a global pandemic to throw one’s financial security (or lack thereof) into the focus. If the last few months have exposed how unstable your financial state is, it may be time to make some changes.
Setting long-term goals is one of the best ways to do this. It introduces a sense of purpose to your fiscal activities. It also gives you a reason to stay focused and build toward a brighter future — even when things are tough.
The problem is figuring out how to set and keep long-term goals effectively. If you’ve struggled with this in the past or even never tried to set a goal of this nature before, here are a few suggestions to help you get started.
Start by Setting the Stage
The first step in setting long-term goals is, well, creating short- and mid-term goals. By doing this, you create a stable infrastructure that can serve as a springboard to help you effectively reach your long-term goals.
Here are a few questions to ask yourself to help you step back and gain some perspective on the current state of your short- and mid-term goals.
Do You Have a Budget in Place?
Creating and sticking to a budget is ground zero for good money management. If you don’t have a budget yet, make one. If you already have one, review it to see if it’s up to date.
As you do this, make sure to add all income and expenses. Don’t leave any stone unturned. In addition, separate wants from needs and ensure that you can cover all of your recurring expenses, pay down debt, and understand how much money you have for appropriate discretionary spending.
Do You Have an Emergency Fund Set Up?
This is one of the most important mid-term goals that you can possibly set. It consists of setting aside a decent amount of cash. Often three to six months of income is recommended, although this is very difficult for many to save. Even a single month of income is helpful, though.
Do You Have All of Your Insurances in Order?
Insurance can be a major headache. However, that doesn’t change the fact that some insurances are wise and at times even essential to have. Things like car and health insurance are good examples. If you’re a parent, getting life insurance is another great idea. If you’re self-employed, you may want to insure your business activity to avoid anyone coming after your personal assets. Have you addressed the insurances that you need?
If you want to effectively save for the future, it’s essential that you start with a firm foundation. This requires setting both short- and mid-term financial goals right from the get-go. This includes everything from setting up a solid budget to paying your bills, sorting out insurance, and saving up for unexpected emergencies.
Once all of this is in place, you can begin to think further into the future.
Gauge Your Options
Once you have short- and mid-term goals in place, you can start to think about the big picture. Long-term goals vary from shorter financial objectives in the sense that they typically take into account costs that will both be saved for and be incurred over years of time.
This includes things like retirement, paying off your house, launching your own business, or even paying for your children’s education or wedding. Here are a few important questions to ask yourself in order to gauge your long-term goal options and focus on the ones that are the most important for you to set as soon as possible.
Do You Have Significant Debt?
Sometimes a long-term goal isn’t about saving so much as paying off debt. This could include a larger car loan, student loans, and especially a mortgage. If you have or will have debts like these in the future, you want to have a plan in place to pay them off.
Have You Considered Retirement?
Have you considered how much you’ll be able to count on Social Security by the time you’re retirement age? Do you have a 401(k) option with your employer — and if not, are you pursuing other options? Do you need to set up your own IRA? The more you can plan and save for retirement at a younger age, the more you can take advantage of things like compound interest to set yourself up for a more comfortable time out of the workforce.
Can You Handle Your Own Investing?
Investing in the stock market can be a great way to make some money. If you’re feeling risky, you can purchase company-specific stocks. If you’re more cautious, you can lean on ETFs and mutual funds to slowly get you to your long-term goals. if you’re confident, able to do your research, and willing to keep the big picture in mind, this can be a great way to invest in your future.
Are You Entrepreneurial?
If you want to start your own company, it’s important that you consider the financial implications. You’ll likely need an infusion of your own cash, and that may take time to save up. Once that money is invested, you may not see a return for a long time.
As you ask yourself these and other long-term financial questions, consider what matters to you the most. What items should you address as soon as possible? This will help you cobble together a good idea of what you need to work on first.
Be Patient
Finally, once you have your short-, mid-, and long-term goals in place, you must learn to stay the course. The good news is this will be much easier if you go about the process systematically.
By starting with your essential needs and expenses you empower yourself to stick to your long-term goals. You also gain a clear picture of how you need to budget and where you need to save over years and even decades of time in order to achieve your long-term objectives.
As you do this, you may also find that you need professional help from an accountant or a financial analyst from time to time. This may sound like a cliché recommendation, however, it’s important to at least consider, as it may help you increase the effectiveness of your financial planning over the coming years.
Conquering Long-Term Goals
Long-term goals may feel impossible to achieve. However, that doesn’t have to be the case.
Start by setting the stage with short- and mid-term goals that create a solid financial foundation. Then consider all of your long-term options and prioritize them. From there, practice patience and discipline as you keep your financial present and future clearly in sight each and every day.
