Saving for Short-Term Financial Goals: What You Need to Know

Saving for a specific financial goal is both exciting and overwhelming. And without the right strategy, saving can feel like an uphill battle. 

If you want to save for a short-term goal, such as buying a car or building an emergency fund, but don’t know where to start, this guide is for you. Let’s get in!

What Exactly are Short-Term Financial Goals?

First things first, identify what matters most to you in the near future. Generally speaking, a short-term financial goal is one that can be accomplished within a few months to a year. They provide a solid foundation for a financially secure and confident lifestyle. 

Examples of short-term financial goals include:

• Building an emergency fund 

• Buying a car

• Saving for a vacation

• Saving for a down payment on a house

• Making home improvements

• Improving your credit score

For each short-term financial goal, there will be a different game plan. For instance, to build an emergency fund, you will need to save at least 3 to 6 months’ income in a high-yield savings account. Whereas, for a vacation, you will start by estimating the total cost of the trip before creating a dedicated travel fund.

Setting SMART Financial Goals

Now that you know what short-term financial goals are, structure your goals using the SMART framework.

Specific - Specify what you’re saving for and how much you need to save. 

Measurable - Have the exact amount you want to save in mind. 

Achievable - Consider your financial situation and resources to make sure your goal is attainable. 

Relevant - Make sure your short-term goal aligns with your overall, long-term financial goals. 

Time-Bound - Set a target timeline for yourself.

Open a Savings Account

One of the best ways to achieve a short-term financial goal is to open a savings account. It allows you to put aside money from your day-to-day spending. Moreover, it pays interest, so you can get a better return on your money. Types of savings accounts include:

• Easy access savings account

• Regular savings account

• Fixed-rate bonds

Learn the features of each savings account and choose the one with the best savings rates.

Cut Unnecessary Spending

It might seem futile, but cutting down spending is one of the easiest ways to save more. Take a closer look at your monthly budget and determine how much of it goes to avoidable expenses. This could be entertainment subscriptions, weekly takeouts, or shopping. 

Invest Your Money

In addition to a savings account, you can also keep your leftover cash in an investment account. Here are some short-term investment options you can consider:

• Certificate of deposit (CDs)

• Money market funds

• Bonds

• Stocks

• Mutual funds

• Treasury securities

Rebalance your investment portfolio often. 

Monitor Your Progress

Saving and investing money is not enough. You need to monitor your progress continuously. Utilize budgeting tools and spreadsheets to stay on track and achieve your goals. 

Consistent monitoring will help you identify areas where you can save and invest more effectively. Remember that saving for a financial goal requires patience and determination.