Very rarely can significant gains be realized without first setting goals, and the first set of financial goals that serve as the base for your financial independence are your short-term goals. Short-term goals are for saving money for emergencies, and six months of income in case you lose your job.

While most people focus on their midterm and long-term goals, they may be doing themselves a disservice by not taking care of the basics. Short-term financial goals are important because life sometimes presents unexpected surprises. Having a few thousand dollars set aside and easily available for an emergency is a smart thing to do. Having some handy cash will limit the anxiety and stress many people suffer during periods of uncertainty.

Your Lifestyle Protection Plan is designed to help you preserve your current lifestyle until you reach retirement, and being prepared for setbacks like a medical emergency, the sudden need to see a dentist, or perhaps something that happens in your home like the refrigerator giving out, or flooding in the basement, or an unexpected visit to your automobile mechanic are all circumstances that are difficult to handle if you don’t have a set aside fund designed for unexpected emergencies. One of the features of your Lifestyle Protection Plan is being prepared by achieving solid short-term goals.

When a difficult situation appears, you can’t keep it on the back burner; the situation needs to be resolved right away, and having some money set aside protects you from having to use a credit card and incurring outrageous interest rates, or having to ask a friend to bail you out. You need an emergency fund for life’s stressful moments because they do happen!

The first thing to do is to figure out how much money to set aside in your emergency fund. Start by making a list of the potential costs that might suddenly appear. You probably have insurance for your car, but you might have to have money set aside to cover your deductible, so find out what that dollar amount is and calculate it into the total. You also probably have medical insurance, but there might be an annual deductible that first has to be paid; determine what that amount is and add that into the total, too. What does it cost when your child needs to see the dentist? Make a guesstimate and add that to the total. If you own your own home, think about which appliances might suddenly need to be repaired or replaced; maybe it’s the lawnmower, or an aging tree might need to be taken down; consider the cost and add that into your total as well.

You should also think about setting aside six months of income so just in case you or your spouse/partner should lose their job, or your work hours are cut back, you have the resources to get through the hard times until a new source of income can be established. If you haven’t done so already, you should create a monthly budget and write down all the expenses you typically have every month such as mortgage or rent, utilities, food, and transportation. Take a close look at what your monthly expenses are, and then consider which of them are essential and which you could cut-back if your income was reduced. Multiply this dollar amount by the six months of cushion you should build, and add it to the total.

Now that you know what your short-term savings goal should be, you should set aside money each month until your short-term goal is reached. These contingency funds should be kept in a safe and stable investment that provides you with immediate access. You can park this money in a savings account at your local bank, but you might also consider saving the money in a money market fund offered by your bank because you may earn a little higher interest than you would in just a savings account.

You can also include such things as paying off a specific debt, or saving to replace an appliance you know will soon require your attention as an emergency expense.

Short-term goals could also include something fun, like maybe a nice vacation, or a new wardrobe. Once your emergency fund is established, you can then consider other expenditures that allow you to enjoy the spice of life.

If you plan your short-term savings goals wisely and execute your plan, you will be more capable of overcoming the financial hurdles or emergencies that present themselves, and you may also be able to sleep better at night knowing you have all the immediate bases covered.

We hope this article about the short-term financial goals in your Lifestyle Protection Plan was informative. Please contact us so we can review your Lifestyle Protection Plan and help you secure and increase your personal wealth while enhancing your retirement. Thank you! 

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

13231 SE 36th Street, Suite 215

Bellevue, WA 98006

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com