Being financially stable in life can open up opportunities and allow you to live your life free of stress. Although many people find it easy to plan for short-term financial goals, such as saving up to buy a new TV, it can be a lot more difficult to think about goals and plans for the long-term.
Typically, long-term goals are seen as achievements anywhere between 5-10 years from the present moment. An example of these types of goals would be saving up for a college education or buying a new home.
Basically, think of long-term goals as more expensive and more serious purchases (or investments).
By having long-term financial goals you will also find that how you view money in the now changes.
The best place to start is by thinking about where you want to be in five years’ time. Where do you see yourself? Will you still be working? Retired? Buying a house? Raising children? Knowing the answer to this question will help you to better understand your situation.
Work Out Your Living Expenses
Once you know what your financial situation will be in the long term, you should start to think about how much you are going to need.
If you are going to need a large sum of money, then you are going to have to put a lot of money aside now. If you plan to retire and live cheaply then you can save less. You should set realistic goals that are personal to you and your lifestyle.
For example, the average amount that people are recommended to save for retirement is 10%-15% of their income. This should give you a ballpark figure to know how you compare to the average person.
If you have any debts that need to be paid off then you should consider them, too. They are essential expenses and you should think of them as such.
How Do I Achieve My Long-Term Financial Goals?
One of the best ways to make sure that you keep on track for achieving your long-term financial goals is to have motivation behind reaching them. It is all well and good to say “I want to pay off my debt”, but if that is the only motivation, your progress will decrease quickly and dramatically.
Instead, think about what else this can achieve for you. For example, if you pay off your debt you can stop paying interest. This means that you can have more money to spend on clothes, furniture, days out, etc. You can start saving up for a holiday or a wedding.
One of the easiest ways to do this is to enlist the help of a visual tool, such as a graphic organizer.
Essentially, they work the same way as a mind map. You write your major long-term goal in the middle (e.g. I want to pay off my debt) and then you sit and think about all the other ways that this goal will have an impact on your life.
We can become unmotivated when things are too far in the future—that is why a lot of people struggle to save money in the long run. We find it easier to think of things we can buy if we save up a few hundred dollars, but saving up to buy a house in 10 years seems impossible, or not important enough right now at this moment.
Create Smaller Goals to Get You There
By creating smaller and more manageable steps, you can connect the here and now to the future.
By creating a series of smaller goals you will find that you are led to your long-term goals without getting distracted or sidetracked.
Learn to Prioritize Your Goals
It is unlikely that most of us will have just one long-term financial goal to work toward. Often, we will want to buy a house, have children, send those children to college, and then retire. All of these desires can be costly and expensive endeavors. That means that you can easily become confused or misled when trying to reach these goals.
The best way to stay focused as life becomes chaotic is to know which ones are the most important. For example, if home prices in your area are not ideal, prioritize saving for the kid’s college fund.
Consider Your Other Savings
Not only should you consider what are the big goals that you need to save for, but you should also always allocate a little extra money to an emergency fund. This way if there are any unexpected problems in life, even as minor as the boiler breaking down or as major as a pandemic making you redundant, you will not need to touch your savings for your goal.
Depending on how major or minor the unexpected occurrence, your hard work could be wiped out. For example, if you have spent years saving for a house deposit and then become seriously ill, you could find yourself needing to dip into your house deposit savings to cover your medical expenses.
However, if you already have a money pot of savings set aside for emergencies then this means that you are more likely not to ruin your hard work.
You can still reach your long-term financial goals without having to worry about the unexpected.
The best way to do this is to visually see everything. Many people find spreadsheets incredibly helpful. They can write down what the goal is, e.g. wiping out their debt, and then write down the amount of money that they have left after general expenses each month.
They can then allocate a proportion of this money to the “wiping out debt” account. This gives you a clearer picture of the exact time frame that you are looking at and exactly how much money you will need to do so.
Whatever your long-term financial goals, you should always consider how realistic they are. Once you have an idea of how much money you will need and how much time it will take, you can start to budget accordingly.
Writing down a priority list to focus on the most efficient goal is also an easy way to avoid distractions as you save.
This reinforces the idea that what you do now matters in the future. If you need to write down all of the positives that achieving your long-term goals will give you. This way you can ensure that they seem more real and achievable.
Image credit: [KAROLINA GRABOWSKA]