When considering saving up for retirement or children’s education, you think long-term. Alternatively, planning to repair that backsplash by next Sunday accounts for short-term goals. Both are important as they help define the lifestyle. Planning for short-term goals enables you to avoid panic at the last minute. Considering your long-term life goals helps you get clarity.

It allows one to understand how he wants his life to look after 10-15 years. Thus, you cannot skip one for the other. Instead, define your finances and manage them simultaneously. The blog discusses the importance of setting short—and long-term goals in life.

What is the difference between short and long-term goals?

Short term goals

Short-term goals are usually tied to your current financial and basic life situation. You can have more than one short-term life goal. Usually, the timeline to achieve these loans remains between 6 months to a year. Sometimes, you can meet the goal within weeks. It could be saving up for car repairs, basketball repairs, credit card payments, etc. It is easier to achieve these goals as the amount is comparatively less than long-term goals.

Long-term goals

Long-term loans are tied to your vision, dream lifestyle, strategic career, and life vision. The timeline for a long-term loan could be years or undefined. It could take about 10-15 years to create a dream lifestyle. Unlike short-term goals, the amount you save here is high. Thus, it takes time to achieve the goals.

Setting both short and long-term life goals is important for stability. Long-term goals provide the roadmap to the future. It helps you use the existing resources the best. It gives you a sense of purpose and direction. Accordingly, you can modify your budget and investment goals. Most individuals utilise events like income increases towards long-term goals.

For example, you would instead like to save for the car deposit rather than book a trip. Alternatively, achieving short-term goals grants you a sense of accomplishment. It helps you keep the momentum and improve your financial management. You can ensure more discipline and control over your finances then.

Could you explain a short-term goal with an example?

Short-term goals mean saving for something that you cannot delay. Otherwise, it may hamper your future financial and personal aspects. For example- you want to rent an apartment. However, it requires you to provide at least 3 months' rent as a deposit.

 Thus, you would start building the savings at least 6 months before renting. Moreover, you must save a higher amount than expected. It would help you beat the inflation heat. If you must provide £36000 as a deposit, you must save £6000/month. It is when you start saving only 6 months before. You can do so by setting direct debits for a small amount every month. Alternatively, set up a different savings account. Thus, after that timeline, you can rent the apartment without worries.

However, only a few individuals can save £6000 a month. It requires one to have limited liabilities then. You lose the deal if you cannot arrange the money by then. Thus, knowing other ways to bridge the amount is important. For example, individuals struggling to save money due to previous debt may consider other options. You can get a bad credit loan at an online marketplace. It helps you get the exact money you need to complete the deposit. Individuals with pending payments may qualify easily. The facility supports any immediate requirements.

What explains a long-term life goal better?

Unlike short-term goals, it is not tied to a fixed saving strategy. You can modify one according to your financial well-being. For example- You want to plan for the retirement savings. Thus, you calculate the best goals you want to achieve as you retire. It could be setting up a business, planning a world tour or leaving a legacy. Identify and calculate the amount you would need. Factor in the inflation as you do so. Set up an individual retirement savings account as you turn 21. 

Save a particular amount that helps you reach the goal as you turn 55. Individual retirement accounts grant flexibility to individuals. You share 100% control over the returns you get. However, you cannot withdraw money before turning 58. You can increase your investments if your income increases. It would help you achieve the goal faster. However, your investment returns largely depend on the market and economy. Thus, factor in that while saving and investing.

Why should you have short-term goals?

One of the best benefits of a short-term goal is that it is easy to achieve. It means you don't lose track of time or dedication to kick one. Moreover, it grants a higher sense of satisfaction. Here are other benefits of saving for short-term needs:

1) Helps prioritise life goals

Would you treat your ailing leg first or book a movie ticket? Right, treat the leg. Similarly, a short-term goal helps you segregate and arrange goals according to priority. It sets a timeline for each short-term loan based on possibilities. For example, you can save money for car repairs more quickly than a bathroom overhaul.

• Eliminates anxiety

Setting and saving up for short-term goals keeps one tension-free. It grants you the power to tackle the requirement without worries. For example- you can counter emergency expenses if you keep some cash safe only for that purpose. Eventually, it helps you achieve the bigger life goals and purpose.

• Helps manage time better

Short-term goals are time-specific. It encourages one to achieve the goal within a specific timeline. Thus, instead of spending money uselessly, you save. For example, you have a credit card debt repayment deadline. Set weekly saving goals to repay that quickly.

Why should you prioritise settling long-term life goals?

Unlike short-term goals, long-term life goals do not motivate you for a long time. Incidents like- unemployment and financial or business loss may affect it. However, vision keeps one going. It narrates the route to take in an entirely different situation. Not having a long-term goal vision leads to panic in such a situation. Here is why you must have long-term life goals:

1. Grants depth to short-term goals

Sometimes, small milestones lead to a higher purpose. Thus, you can split a long-term loan into small and achievable bits. It keeps you going by avoiding the boredom of the journey. The stronger the small goals, the better the results. For example, if you want to buy a property at an auction, you cannot sell the existing property immediately. Here, short-term goals like- setting up advertisements and saving money by increasing investments and income may help.

It may help you save money to an extent. However, buying a home is not a joke. It requires a good lump sum. Here, a verified bridging loan may help. You can use the loan to buy a new property at auction without selling the existing one. Later, you can repay the dues in a year or so. It thus helps you utilise the moment.

You can use the savings from short-term goals and bridge the rest. Calculate how much you should ideally borrow. It prevents you from paying extra interest later. Check a verified bridging loan calculator to know the approximate costs. It would help you define your needs without affecting your budget. Thus, you can achieve your long-term goal of owning a home with the help of bridging loans and short-term savings.

2. Give a purpose to everyday actions

Thinking about having your dream car one day keeps you going. It helps you get responsible towards your lifestyle and savings. It motivates you to save extra to get that car in your garage.

Bottom line

These are some benefits of setting long and short-term goals for life. It helps you remain motivated and get inspiration in your regular life. Identify and split your short and long-term goals. Begin first saving for the former one. Long-term goals savings require planning and strategy according to the goal. It involves considering inflation and the economy.