Short Term Goals vs Long Term Goals
A friend of mine that I play tennis with owns the local health club. He once told me that they get more new clients to join in January and February than the remaining ten months.
He also told me that those same new clients typically quit coming in after about four weeks. Why? Again, they’re focused on long term goals only.
Let’s take someone that wants to lose weight for the new year. If they start off January 1 by stating, “I’m going to lose weight and get in better shape this year” then they’re setting themselves up for failure.
Instead, this person could increase their chances of reaching their goals if they shorten the term like, “In the next 30 days, I’m going to cut out soft drinks, walk two miles a day, and go to the gym three days a week.”
Not only is this goal for a shorter time period (30 days), but it’s also much more specific.
Most dentists/doctors choose their careers in order to help people but also because they want financial stability too. Unfortunately, too many go through life without it.
They get “Doc-itis” (myself included) and want everything yesterday that they’ve been putting off years to get.
Many young graduates can typically face:
- poor money management
- too much high interest debt (practice/student loans)
- or experience a crisis that’s out of their control
The good news is that the damage from most of the above is preventable.
The key is to establish short-term financial goals (achievable in one to two years) which will also help make long-term goals possible.
Most investment advisors say your first short-term goals should be getting your financial house in order by:
- eliminating credit card debt
- establishing a rainy day fund
Long-term goals include buying a house, saving for retirement, and setting up kids college funds.
Here’s X short term financial goals to focus on now….
5 Short Term Financial Goals For The New Year
1) Start an emergency fund
In my opinion, starting an emergency fund is the most important short-term financial goal to start with because it can protect you from the unexpected.
According to CNN, 40% of Americans can’t cover a $400 emergency. Not good.
Many are just a car accident or a doctor’s visit away from being in serious debt.
In a previous post, I talked about Dave Ramsey’s Seven Baby Steps to financial freedom. He recommends starting off by saving $1000 in an account that is earmarked for emergencies only.
Surprising your spouse with a week long Caribbean anniversary trip is NOT an emergency. Sorry Mrs. Debt Free!
I feel that $1000 is a bit on the low side. Initially, because we’re talking about the short-term, I’d shoot for $5,000. That should cover most common emergencies such as a car repair or AC unit going out in the heat of the summer.
Eventually, focus on acquiring at least 6-12 months of living expenses to provide a better cushion.
For instance, if you need $8,000 a month to live on, then shoot for saving $48,000 – $96,000.
I opened a Vanguard money market account to keep ours in.
2) Create a debt repayment schedule
If you’re debt situation is anything like mine was after graduating dental school and completing a residency, then you may by clueless of where to start.
I can still remember the day that my student loan forbearance ended. Staring at that page long list of different loans made reality sink in fast.
Remember, we are focusing on short term for now. Here’s some steps to help get you on your way to becoming debt-free.
Step 1: Organize your debt
Create your own debt payoff form.
Step 2: Use the debt snowball method
If you put pen to paper then this method is not about paying off debt the most efficient way. It’s more about paying it off in a way that brings fast results. Short term, remember?
List your current debts from smallest from largest. For now, don’t worry about high interest rates. Next, determine how much extra money you can put toward your smallest debt then attack it aggressively until it’s paid off.
Once that one is out of the way, take the money you were paying towards Debt #1 and add it to the next one on your list.
I remember once I got down to the fourth of fifth debt to payoff, there was some serious money going toward becoming debt-free. This method gives you a huge psychological boost to getting rid of debt once and for all.
3) Stop using credit cards
I admit, I’m stupid. For 10+ years, I’ve been paying all of our personal and practice expenses with checks and debit cards. Just within the last three months, I started paying these same expenses with a business credit card and am amazed (and appalled) of how many points I’ve missed out on. 🙁
I admit, during the process of becoming debt-free, I used Dave Ramsey’s plan to a “T” including NOT using any type of credit cards.
I guess I’d gotten so used to it, I never gave it much thought until I came across The Physician On Fire’s post about how to get free travel and cash using reward points.
My advice. If you routinely carry a monthly credit card balance then stop using them and pay them off as quickly as possible. These high interest rate debts will keep you from building real wealth.
4) Perform an insurance check-up
- scheduling my annual physical
- replacing wiper blades on both vehicles
- planning all of my marketing/meetings on a wall calendar
a. Adequate coverage
- Business Overhead
- Workman’s Comp
b. Better rate
5) Calculate your net worth
The more financial books I read, such as The Millionaire Next Door and the recently released Everyday Millionaires, the more I realize how important it is to track net worth.
Here’s what I use and recommend:
Personal Capital – They provide financial software somewhat similar to Mint.
You can track your net worth, your cash flow, your portfolio, your investments, and more.
Personal Capital will give you a starting point as to the amount of assets and liabilities you have.
I wish I’d started using them as soon as I graduated but better late than never.
If you’re still not sure where to start with creating your short term financial goals, focus the next month or two on opening an emergency fund. That way, when something unexpected happens, you’ll be prepared.