What are long-term financial goals, and why it’s important to have some? Check out this guide to long-term financial goals with examples.
Among the most common goals in life are homeownership, financial stability, and early retirement, but none of those are achieved overnight. That’s where long-term financial plans come in because those kinds of smart financial goals are among the toughest to achieve for a number of reasons.
We’ll be exploring the most important of them below.
What are Long-Term Financial Goals?
Long-term financial goals are those targets you set yourself that form part of the “big picture” of your life. They typically take a long time to achieve but are also very lasting and meaningful in their scale. In other words, your long-term financial goal is the sum of the cumulative work of your short-term financial goals.
Why You Should Have Long-Term Financial Goals
Why is it important to consider long term financial goals? Doesn’t it just make our lives boring? You might think that on the surface it’s dull or unexciting to have long-term financial goals, but the truth is that such goals are what will help to ensure you can afford to live the fulfilling, exciting, and meaningful life that you want.
In addition, having long-term financial goals gives us things to shoot for; a target to reach for, and a direction in which to take ourselves. They help us to build structure and order into our lives, and it is most often within such structure that people thrive.
Finally, if you plan to have children in the future, then you’d better be as prepared as possible financially. Raising kids isn’t cheap, and building towards practical financial goals will make it easier and more successful for you.
Examples of Long-Term Financial Goals
Every individual will have different ideas on what constitutes a desirable financial goal. Some people want to become millionaires or even billionaires, while many are happy just to be comfortable with what they have. Others will settle just not to stress about money from month to month.
Despite that, we’ve come up with a list of long term financial goals examples that we think apply to many people out there.
Paying Off a Mortgage
One of your short-term goals may have been to save for a downpayment on a house or apartment. Having done that, you now have a financial long-term goal to pay off that mortgage in full, perhaps before you reach a certain age or just before the pre-set year that the mortgage was set to be repaid.
This is a sensible and common financial goal as paying off the mortgage means that you now own that property outright and no longer have to live under the stress of missing payments, facing foreclosure, or other issues where the bank or another financial institution might take the house away from you.
Building a Retirement Fund
While the age of your desired retirement might be different, the general goal of building a big enough nest egg for retirement is part of the long term financial planning of most people.
There are people in the world who are happy to work until they drop, but others want the chance to live out their golden years in leisure and comfort. To do that, they need a very strong retirement fund.
Some people begin planning for their retirement in their 20s. It’s a very good example of long term financial plan and a smart move because it means that they can pay much smaller installments over a longer period of time for the same results. It also means that people can take advantage of low-risk investments that take longer to mature.
Working for Yourself
Common long term money goals involve reaching a point where you can first say goodbye to your old 9-5 lifestyle and the boss you hate (or not) and start calling the shots yourself. It’s an exciting proposition but takes a great deal of grit and determination to make it something that gives you financial security for life.
If you get it right, however, it means you can become financially independent on your own terms. You can also create a commercial legacy to hand down to your children which means they don’t have to struggle as jobseekers or from-scratch entrepreneurs themselves if they don’t want to.
Building a College Fund for the Kids
Long term investment goals of many parents include sending their kids to college, and hopefully somewhere quite prestigious that will be a credit to their resume in the future.
Getting them seriously educated will take a lot of money, though, especially if you’re thinking of sending the kids out of state. There are colleges that cost upwards of $70,000 a year. That’s a lot of short-term savings to build a fund in the long term that your kids can use for their higher education.
Maintain a 12-Month (or more) Emergency Fund
Some people might say that this is a short-term rather than long-term financial goal, but building and maintaining a 12-month (or longer) emergency fund takes a lot of time and effort.
Getting it off the ground is one thing, but reaching that critical target of 12-months’ worth of money and keeping it there is another thing altogether. If you want to maintain this fund for years to come, then it becomes a longer-term savings goal.
Buying a Dream Car
One of the most common long term monetary goals is buying a dream car. This one, though, is a bit of a “gray area”, as there’s a difference between buying an affordable VW sedan and a luxury Italian super SUV like a Lamborghini Urus — about $200,000 difference to be precise — so if you have big dreams for an “ultimate” driving machine, then you might have to take a more long-term approach.
Tips for Achieving Long-Term Financial Goals
So now we all have a clear idea of what the definition of long-term financial goals is, what they look like, and you may well have thought of several others that are meaningful to you while you have been reading our own examples.
The next question is how do you get there? We prepared some further tips on how you can make them more likely to happen, whether you’re interested in long term financial goals for a business or your personal life.
Tip #1: Start Early
In our example of building a retirement fund, we mentioned that people sometimes start in their 20s. This approach should be the case for your entire financial life. The earlier you start, the less pressure you have and the more that the smaller amounts of money that you put into savings and towards your goals will mean.
If you leave it until too late to start building a financially sound future, then you find the only way to get there is through much riskier ventures. It’s still possible to achieve what you want, but you’ll always regret not starting sooner.
Tip #2: Be Realistic
The next critical tip is that you have to be realistic with your goals. We should learn this from a young age, that overstretching our goals is really just a road to disappointment and thus never actually reaching those goals.
If you think you’ll go from D grades to A grades in a semester, you’ll never get there, but if you plan to get from Ds to Cs this semester, Cs to Bs the following semester and into the A range next year, then you are onto a winner.
This is also true with your long-term financial goals. Short-term targets are ones that you can achieve within a month, a quarter, or a year at the most.
Long-term targets are ones that take at least 2-3 years and up to 10 or even 20 years to come to fruition. If you push yourself toward unrealistic targets and timelines, you doom yourself to failure.
Tip #3: Understand the “Need” and the “Want”
It’s important to look at your lifestyle and your aspirations and think about which of those things fall into the category of “need” and which fall into that of “want.” It’s great to have things you want, but they should always be put after the things you need.
For example, if you need to get out of debt, but also want to buy a new car, then the debt reduction has to take precedence. Getting out of debt — solving the “need” — is what gives you the space and strength to then pursue the “wants” without getting into more debt.
Tip #4: Track Your Finances
If you want to move towards your long-term financial goals, then you need to have some idea of where you stand with your current finances. Do you have a grip on your income and expenses? Do you know how much your car really costs you? How much did you spend on dining out last month?
These are numbers and figures you need to master. If you want to bring expenditure under control, you first need to know where all the money is going.
Tip #5: Save When You’re Poor
Finally, one more critical bit of advice is to save while you are poor. Many people think that they should just use all the money they have now and that they’ll save money when they have more of it. This is wrong-headed.
If you spend too much when you have little money, then you will spend even more when you have money. What you have is a spending issue, and it won’t go away just because you have more money. Save even while you’re poor and then you’ll save even more when you’re wealthier and those goals get all the more accessible.
To wrap up, it takes courage and commitment to reach one’s long-term financial goals. If you have the vision to see them clearly, and the grit to ride out the hard times to make them happen, then you should get there sooner or later.