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Course: Financial Literacy > Unit 4
Lesson 4: Short, medium, and long term goalsShort, medium, and long term goals
Learn the secrets of managing your money by setting short, medium, and long-term financial goals. Achieving your dreams and securing your future becomes simple with this step-by-step guide to smart money planning and goal-setting.
Financial goals and planning: short, medium, and long term
You have learned how to set SMART goals for your money, but how do you plan for different types of goals? Depending on your needs and wants, you may have short, medium, and long term financial goals. These goals have different time horizons and risk levels, and require different strategies to achieve them.
Short, medium, and long term financial goals
Short term financial goals are goals you want to achieve in less than a year, such as buying a new phone, saving for a trip, or paying off a small amount of debt. These goals are usually low risk, meaning you are unlikely to lose money or face unexpected costs. To reach these goals, you need to budget your income and expenses, and save a portion of your money in a safe and accessible place, such as a bank account or a money jar.
Medium term financial goals are the ones you want to achieve in one to five years, such as buying a car, saving for college, or starting a business. These goals are usually moderate risk, meaning you may face some uncertainty or fluctuations in your income, expenses, or returns. To reach these goals, you need to plan your income and expenses, and invest a portion of your money in a diversified and flexible way, such as a mutual fund or a certificate of deposit.
Long term financial goals are the ones you want to achieve in more than five years, such as buying a house, saving for retirement, or leaving a legacy. These goals are usually high risk, meaning you may face significant changes or challenges in your income, expenses, or returns. To reach these goals, you need to project your income and expenses, and invest a portion of your money in a growth-oriented and long-lasting way, such as a stock or a bond.
| Goal Type | Time Frame | Example | Risk Level | Strategy |
|---|---|---|---|---|
| Short term | Less than a year | Buying a new phone, saving for a trip, paying off a small debt | Low | Budget and save in a bank account or a money jar |
| Medium term | One to five years | Buying a car, saving for college, starting a business | Moderate | Plan and invest in a mutual fund or a certificate of deposit |
| Long term | More than five years | Buying a house, saving for retirement, leaving a legacy | High | Project and invest in a stock or a bond |
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Want to join the conversation?
If I were to invest, say, $100 into the stock market, typically how long would I keep the $100 in there for?(1 vote)
The longer you leave it alone, the longer it has a chance to grow. Of course, if you invest as a day-trader (which is another way to gamble), you could lose it all in a trice.(4 votes)
What are mutual funds and certificates of deposit?
Also, I am somewhat familiar with stocks, but I don't understand bonds. What are bonds?(0 votes)
These are basically savings accounts. The first two are non risk-based while the second two have some level of risk associated. For more detailed information go back to the article : What are different types of savings accounts? found in unit 2 and lesson 3 of this course.(5 votes)
It seems like mutual funds should not be mentioned as a medium term strategy unless the fund were specifically a short term government bond fund (or similar.) Mutual funds are just a means to invest in other securities and can be either very safe or very risky depending on the specific fund. Should this strategy be made more specific?(2 votes)
when he brought his hands into the frame, I got real scared.(1 vote)- what are some medium term goals?(0 votes)
- Let's pretend that I'm 16 years old and hope to become a Doctor of Osteopathy (DO).
My short term goal is to finish high school.
My mid term goals are to finish college and gain admission to a medical school.
My long term goals are go graduate from medical school and to begin to practice Osteopathy.(1 vote)
- I want to know everything about the stock market. do you have any guidance?(0 votes)
- You will not learn much about it here. I suggest that you look at a different education provider.(0 votes)
What is the average percentage of the people that use short, medium, and long term goal?(0 votes)- All of us should have all of those goals. Things like:
Short term, get a good job. Medium term, buy a nice house. Long term, retire in comfort.(0 votes)