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Short- and Long-Term Financial Goals. What are the differences?

Updated: Dec 2, 2020

#personalfinancial #financialgoals #budgeting #shorttermgoals #longtermgoals #easyfinancialmanagement #savemoney #knowyourfinancialgoals #simplefinancialplanning


You can often read or hear financial planners write and talk about the differences between short and long-term financial goals. Although these goals may seem obvious at first glance, many still find it difficult to figure out what they are and why they are different.


A simple explanation would be long-term goals require more time, more money, and more effort than short-term financial goals. However, both require careful planning, are equally important in financial management and depend on one another. The immediacy of short-term targets is the steppingstone that will drive your longer-term goals. Therefore, it is important that you pay particular attention to your short-term goals because when they are completed, they help you keep track of your long-term financial goals while enabling you to achieve them.


Let’s look at some of the typical examples of short-term vs. long-term financial goals:


Short-Term (1-2 years)

  • College expenses

  • Travel

  • Wedding

  • Personal goods

  • Save a down payment for car/ house

  • Pay off debt (e.g., credit card debt payments)

  • Pay rent, insurance or student loan

  • Minor repairs and home improvements


Long-Term (5-10 years)

  • Buy a house

  • Start a business

  • Financial Independence

  • Save for kids’ education

  • Create an investment plan

  • Create multiple income streams

  • Early or late retirement savings


Short-term financial goals

To achieve your short-term goals, you should ideally set your objectives or goals of 1-2 years to keep the ball rolling and you can classify them as your basic or provisional goals. Short-term goals are easier to attain but are not necessarily the least of money's expense, but still more immediate than long-term goals. If you start focusing and determining your short-term goals early, it will make understanding and setting your long-term goals much easier. With short-term goals, you can start with the easy and more obvious ones and make a list of all your spending within 1 to 2 years before narrowing it down into the most important ones. Having clarity on your short-term goals allows you to manage your money with more flexibility while you focus on building up your savings account and ultimately achieving your financial goals over the long term.


Long-term financial goals

In the long term, a financial plan backed by careful budgeting ensures that you do not lose sight of your big financial goals and you will not get lost in the confusion as you approach those goals. Once your short-term goals are positioned and met, you can move on to long-term goals and complete them in time. Even though it is inevitably harder for some to achieve a long-term goal instead of a short-term goal, if you know what you want to accomplish in the next 5 to 10 years, you are off to a good start. Classify your long-term goals as life goals and don’t be afraid to dream big. Your long-term financial goals will inspire you to manage your spending and your short-term goals more wisely.


In a nutshell, you would want to simplify and have accuracy on the differences between both your short- and long-term financial goals so that they are realistic and achievable. If you are going to take one step further, you may use a strategic method to make your goals more realistic and accurate. One example is to use the SMART strategy: Specific, Measurable, Attainable, Relevant and Time-Bound, which we will write about in a different blog post. Stay tuned and in the meanwhile, have fun creating your short- and long-term financial goals!

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