How To Achieve Medium Term Savings goals
All it takes is a simple math and a crash course in behavioral finance
When most people think of financial goals, they focus on the extremes.
In the very long run, you have goals like saving for retirement, and in the very short run, you have goals like paying your bills on time.
Medium-term goals—planning 1-5 years ahead— often get overlooked in these discussions but include incredibly important life events such as:
Saving for a house—or saving for house repairs.
Buying a car—or saving for car repairs
Planning a bucket list vacation
Starting a business
Going back to school or changing careers
This is by no means an exhaustive list of medium-term goals, but you might notice a theme—these are all goals that dramatically impact maintaining or improving your quality of life.
In this entry of Dollars & Decades, I tackle how to save for these often overlooked medium-term financial goals.
The super simple math behind any savings goal
The math remains incredibly simple whether it be a short, medium, or long-term savings goal.
A.) Figure out how much money you need to achieve said goal.
B.) Decide how many months you’ll need the money.
C.) A ÷ B = the amount you need to save each month.
If you plan your dream vacation to Italy in 18 months and you figure that trip will cost $10,000—you’ll need to save $555 per month if you’re starting from scratch.
A ÷ B is the math behind all savings goals.
But, in real life, it’s rarely that simple.
The second hardest thing in personal finance is to start a savings goal.
The hardest thing is to stick with your plan until it’s accomplished.
Here’s a crash course in behavioral finance to help you do these two hard things and crush your medium-term savings goals.