How To Successfully Set Medium-Term Goals
When it comes to financial goals, there are three types: short-term, long-term, and mid-term options. Sometimes, mid-term goals are called intermediate.
Of course, for most people, short-term goals focus on paying off debt, though that should be taken care of in one to three years. Often, people have so much debt that this is impossible – making it a mid-term goal.
Regardless of your intermediate financial goals, I can help you set them and give you some examples of what you might include.
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What Are Intermediate or Mid-Term Financial Goals?
Intermediate financial goals should focus on what you’re doing between the present and your retirement. It can include saving for retirement, but the goal is to get your finances in order so that you can spend your later years saving and continuing to save money.
Many people do well figuring out short- and long-term goals, but they have issues identifying mid-term ones and planning. Since it takes longer to achieve them, and they can take a lot of money, it’s easier to push them off and focus on short-term goals.
This is a trap, and I don’t want you to fall into it. Instead, you can educate yourself as to what intermediate financial goals are, devote some time to them, and achieve them more easily.
Intermediate Financial Goal Examples
It’s essential to plan for your intermediate financial goals, but what are they? What is included in this step of your financial future?
Usually, mid-term goals occur once you’ve finished your education (college), gotten a job, and have begun your career. However, they happen before you’re dreaming about retirement.
Intermediate goals often take between three and 10 years to complete, and they can include:
- Buying a home
- Paying for your wedding
- Paying off student loans
- Going back to school
- Starting a family/having more children
- Starting a second career
- Going on a once-in-a-lifetime trip
- Starting a business
- Planning for your child’s education
You’re just starting your career, so these are all likely going to be goals that you have in mind. Some people decide not to have kids or don’t get married.
Others may never aspire to own their own business. Regardless, you can focus on the ones that you really want to accomplish, even though they are all expensive and lengthy.
With any goals you set for yourself, you need a clear picture of what you want and a roadmap of how to get it. What exactly do you want to do with your life? Once you know that, you can easily determine how much money is needed for that to happen.
Prioritizing Your Financial Goals
Let’s say that you desire to do everything on the list above. One way to handle them all is to put them in sequence. Learn the method I use to set financial goals and the strategy I use to achieve them.
Paying off your student loans is likely going to be first because that can help you get a mortgage later. When you’ve got loans out in your name, it makes lenders wary of letting you borrow more money.
Get that out of the way while you live in a small apartment or with your parents. Buying a house might be next, which gives you the benefit of living on your own.
Related: Here’s a mortgage money saving tip.
However, it might be hard to plan for the future here. If you purchase a two-bedroom house and end up having five children, you might need to plan a move somewhere in your mid-term goals.
Still, owning property as early as you can is a good idea. That way, you’ve stabilized the cost of most people’s largest monthly expense, housing. You don’t have to worry about annual rent increases when you own your own home.
Next, you’re likely going to be saving for a wedding and then starting a family, though sometimes, these two coincide at the same time. Therefore, you may want to open both savings accounts at the same time and put money in both.
Once you’ve got a significant other, you two might want to plan a trip together or a honeymoon. Now is the time to start saving money for that. Of course, you and your spouse may decide to share the costs, which makes it that much easier to save money.
With this method, you have to consider the timeline and importance of the goals. Sometimes, it’s hard to decide how you are going to live your life to commit to your goals. You may choose to take a trip before you get married or wait to buy a house until you find a significant other. Each individual’s situation and goal priority will be different, and that’s alright.
Create Savings Sinking Fund Accounts
The next approach I want to talk about is where you save for each of your goals, all at the same time. You open a savings account for every goal you have. Then, take all the saved money and divide it evenly between your accounts. Each specified goal account is called a sinking fund.
This can be a good thing because it means you’ve got plenty of money for everything you might like to do. However, it also means that none of the accounts grows very quickly (depending on how much money you make).
Generally, I feel that this can work for some things that are sure to be ‘in the future.’ For example, you aren’t likely to start your own business for many years, and children might be ‘far’ in the future, too.
It’s fine to focus more money towards the sinking funds that will be coming up sooner than the others. It’s better to have enough money saved rather than needing to take out debt to cover expenses.
Make Sure You Have An Emergency Fund
When saving money, you also have to consider your emergency savings account. This is where saving for intermediate financial goals gets tricky. You’ve got to save up for emergencies, such as a car breaking down, medical issues, and big out of pocket expenses you may not realize is coming.
The numbers can vary, depending on how much you make. However, I think it’s a good idea to take 20 percent of your check and put it in your emergency fund account until you have 3-6 months of expenses saved.
The 80 percent of your paycheck that’s left goes to regular bills, debt, and retirement savings. To make saving for intermediate goals faster and easier, live below your means and try to pay everything with 70 percent of your check. That way, the other 10 percent can go toward saving for your mid-term goals.
This is a stretch for many people, especially if you’re just starting your career or decide to learn a new trade. Living below your means requires you to cut out a lot of the extras, which can include eating out, going to clubs and parties, and the like.
You may live without cable for a while and not get a brand-new phone each year, but you’re saving so that you can be comfortable later. Telling 20-somethings that they should do this is easy, but having them actually do it is hard.
So, if you make $25,000 a year, that means you get about $2,000 a month (give or take). You probably bring home roughly $1,800. Therefore, $180 goes into your regular savings account, with another $180 going into the retirement fund. It doesn’t seem like much, but it does add up.
Then, if you take another $180 out for your intermediate financial goals, you are left with $1,260 (from $1,800). Most people can live comfortably on that, but it depends on how much you pay in expenses.
Set Your Budget
To work out this plan, you need a specific budget. You should include rent (utilities, water, trash, sewer included), as well as your debts, gasoline, and other monthly bills. If you don’t know how to budget, check out this guide to budgeting for beginners.
Consider renter’s insurance if applicable and car insurance here too. Make a list of every single bill that you pay each month. Here are the recommended household budgeting percentages to get you started.
If you pay something every other month or quarterly, divide that into monthly payments and include it. For example, some people pay car insurance every six months. Divide that total number by six and include it in your budget. That way, you know when the bill comes due, it’s available.
Of course, it can be hard to live like this, with every penny accounted for. However, it’s one of the best ways to go because you know you’re saving up for your future. To make tracking your money easier, use this budgeting binder with financial templates.
Many people are going to have a phone bill, rent, some debt, car insurance, and the like. Depending on where you live, that can wipe out your $1,250, which is what you have to live on after taking out the money for your savings, retirement, and intermediate goals.
The goal here is to be able to live comfortably and do some things you enjoy without dipping into the emergency fund. That might take some time if you got into debt from credit cards or loans, but it is possible.
Plus, it isn’t always going to be this hard. As you start earning more and getting promoted, you can loosen the budget strings a little. Since you’re saving for the big moments of your life, it’s a small price to pay in my opinion.
Some people find it easiest to use the cash envelope method which means only spending in cash every month. It’s easier to keep from overspending because once the cash is gone, your spendings stops. Here are some stylish cash envelope system wallets to make carrying your envelopes easier.
Where To Put Goal Savings
Now that you have a general understanding of budgets and how much to save for each account, the goal is to figure out where to put your money for your intermediate goals.
There might come a time where you’ve got to dip into the account for something unexpected where your emergency fund wasn’t enough. Therefore, you want it in an account that doesn’t penalize you for removing it early.
If the goal is 5 or more years out, you can keep some of it in an index fund because that allows it to grow from interest. Some savings accounts and money market accounts draw interest, too.
Focus on high-interest savings accounts or taxable investment accounts. That way, you can still get access to the money without any penalties. It gives you an opportunity to compound the interest and work for you.
If possible, put that interest back into the account to help you save more and faster. However, you may also have that interest given to you to spend for other needs but it’s better to leave it alone and let it grow.
Timeline and Risk
It’s important to remember that the timeline for intermediate goals is shorter than that for retirement. It is quite risky if you’re putting all of your savings into the stock market.
There must be a balance between the savings you have accumulated and time in regards to inflation and growth. This all depends on the timeline and where you decide to put your savings.
If you’ve got a two-year goal and a ten-year one, you can plan accordingly. That is why you’ve got to have a time-frame in mind and know exactly what you want.
For a shorter goal (such as two or three years away), you can use short-term CDs and high-interest savings or money market accounts.
However, if the goal has a longer timeline of 10 plus years, such as having kids or taking a dream vacation, you might consider more aggressive growth investments. It’s best to talk to your financial advisor about which avenues would work best for you since all investments carry risk.
It’s time to put everything into focus here. I know that making a plan for saving money isn’t as fun as spending money, but it is going to help you later in life. You need to know your budget and accommodate every bill you have so that everything is paid in the here and now.
Of course, you also need to focus on your emergency fund or regular savings account, as well as your retirement fund. One is for the unknown, while the other helps you live comfortably when you can no longer work (or don’t want to work anymore).
Intermediate financial goals are a little different because they can help you save for life in general. You may get married or not. You may have children or not. However, planning for these things and not needing the money means you’ve still got it for other goals you’ve set for yourself.
Remember, there is so much life to live before you retire. Planning for retirement is essential, but having the money you need to do what you want in your 30s, 40s, and 50s can ensure that you’re happy and have the financing to enjoy life more fully.
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