It’s important to have goals. Goals start as dreams or an idea and become a reality when they are written down, developed, and measured. Goals are so important to me that I have a chapter in my book Cash Uncomplicated specifically about goals.
In my book, I write about short-term, medium-range, and long-term goals. In today’s post, we’ll focus specifically on long-term financial goals and how to crush those goals.
What Are Long-Term Financial Goals?
The first question is what are long-term financial goals? Is there a set timeframe needed to qualify as a long-term financial goal? For example, would five years qualify as a long-term financial goal, while a four-year goal wouldn’t?
I don’t fixate too much on the exact length of the long-term financial goal. It’s not really about the exact timeframe, it’s more about the methodology and commitment to that long-term financial goal. I’d much rather have someone set up a solid plan towards reaching a goal than worry too much about whether it’s going to take four or five years to accomplish.
A long-term financial goal is one that is expected to take a reasonable amount of time to accomplish. A goal like saving $100 this month isn’t a long-term financial goal, but becoming financially independent would be.
In this post, I am going to give 12 examples of long-term financial goals, along with a few ways to more effectively accomplish each goal. In my book, I loosely define a long-term financial goal as one expected to take around five years or more, but again, that is fluid and can change as your skills improve.
Why Are Long-Term Financial Goals Important?
Goals in general are important and financial goals are no different. Goals, especially written goals, have a way of making our dreams turn into something real that we can set metrics to accomplish.
Our brain is an impressionable organ—it does what we instruct it to do. The input we give to our brain is responsible for the output it produces. For example, if we give our brain a challenge such as becoming financially independent in the next six years, it’s going to work for us to find solutions for that challenge. This is an example of our brain working for us.
However, if you tell your brain how bad the world is and how hard it is to reach any kind of goal, your brain is going to work to validate those thoughts. It’s going to find reasons why the world is so bad and give you excuses on why it’s impossible to reach your goals.
Long-term financial goals are a way to program your brain to work for you. The goal is an instruction you’re giving to your brain, and your brain will reward you with ways to reach that goal. Then you take action and start making progress towards the goal.
The How To
There are methods to setting long-term goals. It’s not just “come up with an idea, write it down, and hope for the best.” There are systems and processes that will help you accomplish your goals more quickly and efficiently. For a detailed analysis of goals and goal setting, read chapter 17 of my book.
Short-Term Goals
Setting short-term goals can be a stand-alone goal or a small part of a long-term goal. For example, if your long-term goal is something big like getting out of consumer debt, a short-term goal might be just to pay $100 extra on your next credit card bill.
Paying an extra $100 on your credit card bill that month is a good start towards reaching the long-term goal. It gets the ball rolling on your debt payoff and gives you a clear tangible goal to strive for. It builds momentum to repeat the process next month, and the following months.
A short-term goal can also be a stand-alone goal. An example of this would be saving $400 for camera equipment you want to purchase. Maybe you take on a side job to earn the extra money or go out to eat less the next couple months. It’s more of a one-time thing that isn’t part of your overall financial systems and plans.
Medium-Range Goals
Just like short-term goals, medium-range goals can be stand-alone or part of a big long-term goal. For example, someone who has two children ages one and three with a goal to put both of them through college.
If you think college is going to cost $150,000 for each child, your short-term goal might be to save and invest $150,000 divided by the number of years until each child will be starting college. Assuming each child will be starting college at age 18, that leaves 17 years to save for the one-year old and 15 years for the three-year old.
Using these numbers, a short-term goal might be to save $8,824 for the one-year old and $10,000 for the three-year old by the end of next year. This of course is a very generic example because it doesn’t factor in compound interest or other benefits of investing. In reality, the yearly amount of money needed to save $150,000 will be much less because of the power of compound interest.
An example of a stand-alone goal would be to save $5,000 in your car fund over the next seven months. Maybe you’ve already saved $10,000 and want an additional $5,000 so you can purchase a moderately priced car if something were to happen to yours. This is especially relevant if your car is on the older side like mine is.
Set Metrics and Reverse Engineer
To state the obvious, long-term goals can take a long time. It’s important to set metrics so that you can see tangible progress and not get frustrated when the goal isn’t reached immediately.
As alluded to in the last couple sections, setting short-term and medium-range goals can be a way to track progress towards a larger goal. Setting metrics is also a great way to do this. Creating metrics breaks down a very large item like a long-term financial goal and breaks it up into small manageable parts.
This also allows us to reverse engineer a goal, which makes the goal even more manageable. Here’s an example of a common goal for many people— retiring early. For this hypothetical scenario, imagine the subject is currently 36 years old and has received the following information from her financial advisor or from calculating the numbers herself.
- Long term financial goal: Retire at age 48, which is 12 years from now
- Money needed to retire 12 years from now: $1.7 million
- Current assets value: $325,000
- Money needed to reach target goal: $1,375,000
- Assuming 10 percent rate of return, needed yearly contributions to reach goal: Approximately $29,000 (Balance after 12 years with $29,000/year contribution: $1,702,148
- Monthly contribution: $2,417
- Weekly contribution: $558
- Daily contribution: $79
Depending on how you process information, you can reverse engineer your goal all the way down to the day. Or if you want to go further, you can go all the way down to the hour, minute, or second. The day is far enough for me so I didn’t take it further than that.
In this example, assuming a 10 percent rate of return, it’s going to take a contribution of $79 per day to reach the target goal. This is much more manageable than $1.7 million. $79 per day is a number many people can envision while $1.7 million is a lot of money and seems pretty far off.
Roadmap
Reverse engineering a goal like this is helpful because it also provides a roadmap of what you need to do. Continuing to use our example from above, if you’re able to invest $79 per day from your job, you are in a really good position. If you need to make more or take on a side hustle, reverse-engineering the goal also gives you a roadmap of how much more you need.
If you’re currently able to invest $40 per day, then you know you need to find $39 more per day to reach your goal. That could come by eliminating certain expenses, making more in full time work, taking on a side hustle, or any other combination of factors.
Set Dates and Be Specific
Long-term goals require direction, and that direction comes from you. Ever go on vacation and get more work done in the two days prior to vacation than you would in a normal week? It’s very motivating to get all your work done in the days leading up vacation so that you don’t have to worry about it when you start the vacation.
Although on a much smaller scale, this same principle applies to reaching long-term financial goals. When you have a goal to strive for, you have a clear vision of what you’re working towards. That vision helps you move towards the goal more quickly and efficiently.
Setting dates and being specific are great ways to increase efficiency. The table below illustrates more effective ways to write down long term financial goals.
Long Term Financial Goals
| Optimal | Less Optimal |
| Retire at age 48 on December 31st, 2033 | Retire early |
| Save $94,000 for child’s college on or before June 15th, 2029 | Save enough for child’s education |
| Purchase six cash-flowing rental properties in Birmingham by March 10th, 2027 | Purchase rental properties |
| Contribute $475 in extra principal every month to pay off house on February 4th, 2031 or before | Pay off house early |
Setting dates and being specific tells your mind exactly what you need to do to reach your long-term financial goals. The specific date and exact description gives you clear instructions on what needs to be done. Vague instructions like “pay off house early” goes under the “someday” category, which usually never occurs.
Written Goals
There is power in writing down long-term financial goals. Once that goal is written down, it becomes real and powerful. There is power in taking the time to write something down and then see it on paper. Thinking about a long-term financial goal is nice; actually writing it down makes it real.
Once you write down a long-term financial goal, place it in a location where you can see them multiple times a day. The more exposure you have to your written goals, the more you’ll think about them—and the more you’ll work towards those goals. Many people like to place their goals on a bathroom mirror, a board in their office, or another prominent place.
Tell Others
Once you’ve written down your long-term financial goals, tell other people, especially your spouse or partner. This adds a layer of accountability. It can be a very motivating factor knowing that others are aware of your goals. This adds a whole new layer of accountability.
Others can also provide you encouragement to work towards your long-term financial goals. They may have been in a similar situation to you, or currently be in a similar situation. Their encouragement and advice can be a nice added boost when you need a push.
12 Examples of Long-Term Financial Goals
There’s an endless amount of long-term financial goals that can be set. People are different and so are their goals. What’s important to one person doesn’t matter to another and vice versa. These are 12 common long-term financial goals.
Long-Term Financial Goal #1: Own a House
One of the most common long-term financial goals is to own a house. Owing a house has been referred to as “The American Dream.” Houses provide stability, a place to call your own, and fixed monthly principal and interest payments.
In most cases, a house requires a down payment of at least 3.5 percent. Some people like to put down 20 percent or more to reduce their payments and avoid private mortgage insurance, also known as PMI. Saving even 3.5 percent requires some intentionality and time, depending on the cost of the home.
Long-Term Financial Goal #2: Become Financially Independent
Becoming financially independent is one of the longest-term goals anyone can have. For some, it takes a lifetime of saving and investing to accomplish. Others, like many readers of this blog, strive to reach this goal much sooner. For more on becoming financially independent sooner, read my post on the FIRE movement.
Long-Term Financial Goal #3: Retire Early
Similar to the last goal, retiring early is a long-term financial goal that takes many years to accomplish. People have even retired in their 20’s and 30’s but those cases are rare. When most people think of retiring early, they think 40’s or 50’s.
No matter what age you want to retire, it takes planning and intentionality to reach that long-term financial goal. It doesn’t just happen by investing a little bit of money each month. It requires discipline, consistency, and a plan. For more on the fundamentals of saving and investing, read this post.
Long-Term Financial Goal #4: Buy a Rental Property
Buying a rental property, especially the first one, usually takes time. For someone putting 20 or 25 percent down, that could take up to several years depending on your savings rate and property cost. The term “rental property” is somewhat generic—it could mean a $50,000 house or multi-million-dollar apartment complex.
Saving for a down payment for multiple years isn’t the only way to acquire a rental property. Hustle and partnering with others can greatly speed up the process. For more resources on getting into rental properties, I recommend checking out the Bigger Pockets website, a fantastic resource for all things real estate.
Long-Term Financial Goal #5: Pay for Child’s College
College is expensive and student loan debt is sky high. A long term financial goal for many parents is to make sure their children’s education is paid for, or at least partially paid for. Much like saving and investing for other things, it’s helpful to estimate future costs and save monthly for those projected amounts.
Saving for education comes with uncertainty. Here are a few of the variables you may want to consider before deciding on an amount to save for your children’s college.
- Will college prices continue to skyrocket?
- Will some students skip college to go straight into the workforce?
- Possibility of athletic and academic scholarships?
- Can you invest in an asset like real estate and use that money to pay for college if needed?
Long-Term Financial Goal #6: Start a Business
Maybe you’re towards the end of your career and want to start a business as you approach retirement. Or maybe you’re just out of college and want to work for yourself. There are many reasons to start a business and entrepreneurship is an increasingly attractive option for many people.
There are those that are willing to dive into a business head first with little savings. For others, it’s more of a long-term financial goal in the sense that they want adequate reserves, enough capital to cover startup costs, and plenty in investment accounts in case the business doesn’t work out. If you’re of that mindset, then starting a business will go under the category of a long-term financial goal.
Long-Term Financial Goal #7: Pay Off House Early
Paying off a house isn’t a requirement for retirement but many people feel a lot more comfortable paying off their house before leaving full time work. There are many strategies to pay off a house early. Adding a little extra principal every month will reduce years off the overall payment. Adding more than a little will pay it off even sooner.
Paying off the house early is a very long-term financial goal. It’s usually not a two to three-year process. Most mortgages are 30 years so anything under that amount is technically paying off the house early. Even if it takes as long as 25 years, that’s five years early. For specific strategies on paying off your house early, see this article from Doughroller.net.
Related: Should You Pay Off Your House Or Invest More?
Long-Term Financial Goal #8: Become Consumer Debt Free
Depending on where you are in life, this may or may not be a long-term financial goal. If you don’t have any consumer debt, you’re already done with this goal. If you have just a little consumer debt, that goal is probably within quick reach. However, if you’re like millions of Americans, consumer debt payoff is a multi-year process, and will fall under the category of a long-term financial goal.
Consumer debt payoff is arguably one of the most important long-term financial goals anyone can have. Consumer debt minimizes your ability to save and invest. The lenders you’re paying on a monthly basis are compounding your money instead of you. It’s critical to reverse this cycle—eliminating consumer debt will propel anyone’s personal finances to much greater heights.
Long-Term Financial Goal #9: Targeted Net Worth
The reason this header is targeted net worth instead of a specific amount is that this number is going to be different for everyone. Some people may just need a net worth of a few hundred thousand to retire comfortably because they are going to collect from a pension or continue to work part time.
Others may want a net worth into the millions to continue their lifestyle. There is no right or wrong answer here, it’s an individual choice. Whether the number is in the hundreds of thousands or multi-millions, it’s more than likely going to be a long-term financial goal unless that money is made in an incredibly short amount of time.
If you’re unsure or have never thought about what you want your net worth to be, try this post on the FIRE Movement.
Long-Term Financial Goal #10: Travel the World
There are people who like to travel, and then there are people who really like to travel. If you’re someone who wants to travel the world, you probably fall into the latter category. Traveling the world comes with the expected cost of the travel itself, including food, accommodations, experiences, etc. It also comes with the cost of not working during that time period.
Unless you’re able to work remotely, which many people are these days, you’ll need to leave work or retire. If you’re able to work remotely, you can travel and work at the same time. If you’re not, you’ll need to save enough to support your travel for the length of time you’re gone. Maybe it’s for a year, two years, or even longer.
If you’re not able to work, or don’t want to work during your traveling, you’ll need to create a long-term financial goal to save enough for that travel. Depending on where you travel, those expenses will greatly vary. Camping will obviously cost much less than staying in luxury hotels. As will overall cost of living in each country.
Long-Term Financial Goal #11: Buy a Vacation Home
Buying a vacation home is a long-term financial goal. More than likely you’ll need to put down at least a 20 percent down payment on a vacation home because it’s not going to be your primary residence.
Vacation homes look different for everyone. For some, that may be a small cabin in the woods. For others, it might be a lavish six-bedroom house the extended family can stay in for holidays.
Long-Term Financial Goal #12: Save One Year Worth of Expenses in Cash
The last, but not least long-term financial goal is saving up a year’s worth of expenses in cash. How long this takes will depend on your savings rate. In rare cases, some people will be able to do this in less than a year. For most people though this is going to fall under the category of a long-term financial goal.
For example, a family with a yearly spending average of $60,000 will need to save $60,000. If the net income for that family is $62,000 that goal is going to take a long time to reach. However, if that families net income is $100,000 that long-term financial goal will be reached in a much shorter amount of time.
Summary
Setting long-term financial goals is a very important part of personal finance. It provides your mind with a roadmap of what it needs to do. They also require you to think about what you want, and then make a plan to get it.
It’s easy to drift through life not knowing what you want and allowing the time to pass by. Long-term financial goals provide you with the specifics needed to take action on what you want, and get them in a shorter amount of time.
