The purpose of your short-term goals is to set the foundation that prepares you for the sudden immediate financial needs of daily life, like having enough funds to cover a medical or dental emergency, unexpected car repairs, and stockpiling the equivalent of six months’ income in case your job situation is disrupted. Funding your short-term goals eliminates anxiety and helps you move forward so you can secure your midterm goals without the financial chaos that surprise expenses create.

Midterm financial goals are different, and these are the funds you’ll need in the next 3-5 years. Some examples of midterm goals are such things as saving enough money to replace your car, pay off your debts, or finish coursework for a degree or certificate that advances your future financial situation.

Because you’re planning 3-5 years out, it’s best to keep your goals realistic but also flexible. If you set your goals too high, frustration can prevent you from reaching them. While we’ve all mastered the ability to save money for an annual vacation or new bedroom set, when it comes to more ambitious goals, sometimes the price tag and the amount of time it takes to achieve goals with a longer timeline can require real personal effort and dedication to your purpose in order to stay disciplined for the length of your savings path.

If one of your midterm goals is to save enough money for a down payment on a home, or you want to set aside the funds you’ll need for your daughter’s wedding, or create a savings fund for your child’s college education, you have to have the discipline to save a specific amount of money every month.

The importance of establishing a monthly budget cannot be overstated, and one of the ways to have an effective monthly budget is to identify how you might be spending excessively. When you keep a log of all the expenditures you make during the month, you may be surprised to see how much you spend on coffee, cell phone service, birthday gifts and fast food lunches. Once you see how your funds are being spent, you’ll see the value of taming or eliminating some of your spending habits so you can have enough money to achieve your more important financial goals.

A wise suggestion to follow is that every time you receive your paycheck or monthly income, the first person to pay is yourself. The first check you write is to pay a deposit into your savings plan just as if your savings plan was a monthly bill. Most people save money as though it were an option, not a requirement, and typically money is spent on a variety of nonessential miscellaneous temptations and purchases. This is why it’s important to change your thinking and recognize the importance of establishing a budget and making a monthly deposit that meets your intended midterm goals.

Your Lifestyle Protection Plan will help you organize your thoughts and provide the structure you need to plan for your financial future. With midterm goals, the funds are not needed immediately like they are for short-term goals, so these funds can be invested, allowing the value to appreciate over time and speed up the accumulation of your goal funding. Your midterm savings could be placed in a growth mutual fund where your funds are relatively safe and yet still have a good opportunity for growth until you need them. Of course, you should always check with your financial advisor to make the best choice for your unique financial situation.

We hope this article about the importance of establishing midterm goals was informative. Please contact us so we can review your Lifestyle Protection Plan and help you achieve the goals that set you on the path to financial independence. 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