When you stop to think about it, saving for short-term financial goals and medium-term financial goals isn’t that hard. All you need to do is regularly set money aside until you have enough saved up for your goal. You can even make your goal SMART to figure out how much you can put aside, when you’ll have the money saved up and if the goal is even attainable.
Long-term financial goals, though, are slightly different. You’re trying to save up tens of thousands of dollars, and potentially even hundreds of thousands. Some examples of financial goals that are long-term include:
- A down payment on a house
- Putting your children through college
- Saving for your retirement
So What’s the Best way to Achieve Long-Term Financial Goals?
Prioritize Your Goals
Setting financial goals that are long-term requires a different mindset than you need if you're setting short-term goals. You not only need to think several years into your future, you also need to figure out the best balance between your short-term goals and your long-term ones. Ask yourself:
- How important is this goal to my overall financial fitness?
- How important is this goal compared to my short-term goals?
- Which goals are the most important to me at this point in my life?
For instance, if you’re saving up for your retirement, you’ll probably want to make that an important long-term goal. Under normal circumstances, this probably outweighs most of the short-term goals you have. If, however, you have a financial emergency, like a serious injury or an emergency home repair, you may want to temporarily use the money you were putting toward your retirement to achieve the short-term goal of dealing with the emergency.
Need help prioritizing your goals? Take this quiz1
Make Your Long-Term Goals SMART
Any financial goal can benefit from becoming a SMART goal, but making long-term goals SMART is practically a requirement. In order to make a goal a SMART goal, make sure it’s:
- Speciifc—What is your specific goal?
- Measurable—How much will you save for the goal?
- Attainable—How much will you set aside each month?
- Realistic—Is reaching this goal actually possible?
- Time-Bound—When will I complete this goal?
When you make a goal SMART, you’re giving yourself concrete objectives. You’re also setting up a framework that will ensure you reach your goal, provided you stick with it. Speaking of which…
Automate Saving for Your Long-Term Goals
Saving regularly is the only way to achieve any financial goal, but it’s especially true for long-term goals. However, trying to manually save money might mean that you forget to set it aside, or worse, are tempted to spend it on something else. The best way to ensure you save regularly is to automate the savings process.
Some long-term goals have automated saving methods built into them, like being able to channel money to your 401(k) plan. Other times, you might have to automate your savings yourself, such as by having Direct Deposit put a percentage of your paycheck into a separate savings account. If you can’t do either of those, though, you can also just set a reminder to yourself every payday to set money aside.
Invest Your Savings
Most long-term financial goals will take over five years to achieve. That means you have time to invest the money you’re saving.
You have several options for investing the money you’ve saved for your long-term goals, such as:
- Money market accounts
- Mutual funds
- Individual Retirement Accounts (IRAs)
All of these come with different advantages and disadvantages, so you’ll want to consider which accounts are best for your personal situation. If you’re more comfortable with risk, you might want to invest in the stock market, for instance, while people who want to play it safe might prefer to open a multi-year CD.
Got questions about how to invest your money? Ask us!
Review Your Long-Term Goals Regularly
Finally, set aside some time to review your long-term goals each year. First, look at the progress you’ve made. This will show you the results of the saving plan you’ve set up, and it’s also a great way to give yourself some positive reinforcement about your financial decisions.
Next, take a look at your savings plan. See if you’re still on track for hitting your financial goal. You may even want to increase the money you’re putting towards that goal, especially if you’ve gotten a raise or a windfall.
Above all, though, make sure your financial goal is still relevant. Sometimes your life can change, and you might want to modify your goal, or even abandon it. This doesn’t have be due to negative events—if your child is starting college, for instance, you might not need to put as much money in their college fund.
Reach Your Long-Term Financial Goals with First Alliance Credit Union
If you’re saving for any long-term financial goals, you’ll want to take some steps to make sure you reach them. You’ll want to think about how to prioritize your long-term goal when compared to your short-term goals, automate saving for your long-term goals and invest the money you have saved up to take advantage of high interest rates and compound interest. You should also regularly review your goals to see the progress you’ve made and to figure out if you can increase the money you’re putting toward your goal.
If you’d like help achieving your long-term financial goals, become a First Alliance Credit Union member today. You can place the money you’re saving for your goal in a money market account, a CD or an IRA, and you can track your progress through our online banking platform or mobile app.