FLM Step 12: Wise Bread blogger Linsey Knerl on goal setting

In honor of Financial Literacy Month, we created a microsite that offers 30 simple steps to financial wellness–one for each day of the month. To enrich the experience, we asked some amazing people to guest post during the month on a topic that is related to the day’s step. Their dedication to financial literacy is truly inspiring! Today, Wise Bread blogger Linsey Knerl writes about setting short-, mid-, and long-term goals.

The latest report on U.S. savings didn’t look very encouraging. As the average savings rate dwindles (to almost zero in some demographics), it may see a bit overreaching to give advice on how to utilize savings objectives. The truth, however, still remains – the best way to make a purchase for many consumers is to save for it first. Here is a brief overview of the three kinds of savings goals, and how you might wish to use each to achieve your financial aspirations.

Short-Term Goals

These are the goals that seem easiest to save for, as they are set to be achieved within two years. The key to succeeding with these types of goals is to make sure you are very detailed in how you wish to achieve them, what they will cost, and how the money will be used.

Let’s say you’re wanting new living room furniture: You could start by picking a price range you feel comfortable with, the type of set you are saving for (a 5-piece vs. a 10 piece, for example), and how much a month or week you will putting away for that goal (as well as where you will be storing that cash.) As you get closer to meeting your target, you may find that you can get a larger, more lavish set, or quite possibly, you may have extra cash leftover (from buying a set on clearance, for example.)

Mid-Term Goals

These are savings ambitions that can usually be realized within 2-5 years. Similar to those short-term goals, they need to be specific and targeted with the amount you will put away every month, and what you plan on using the money for. Since the goals are set farther away, however, you also need to be realistic and prepare for any setbacks that may cut into your goals. (A layoff in three years shouldn’t be something that you aren’t prepared to deal with in relation to your mid-term goal.) You should also allow some “cushion room” to keep from becoming frustrated with your goals.

Long-Term Goals

These are the goals that most of us are familiar with. They require more than 5 years of commitment, and can take up to a lifetime to achieve. A large down payment for a house, college savings, retirement, or the capital to start a small business could easily fall into this category. They also seem to be those goals that are either absolutely necessary for later in life (retirement, for example) or those things that drive us to stay committed to such a far-off goal (the plan to buy an acreage or to put a new product out on the market.) Regular savings is the only way to achieve these goals, so it is best to set aside that money before you ever see it (either through an automated savings plan or a paycheck deduction.)

The economy doesn’t have to deter you from setting realistic goals for a more stable and enjoyable future. A regular “checkup” of your savings plan and progress may be just what you need to keep yourself on track and motivated. (A bit of accountability with a spouse or friend may also help to stay disciplined in meeting savings goals.) Good luck!

Linsey Knerl is a freelancer and a busy mom of four who enjoys the simple life and helping to spread the message of frugality. She blogs for Wisebread.com and hosts Living Large on a Small Budget on Blog Talk Radio. You can look for her work in the upcoming Wise Bread book 10,001 Ways to Live Large on a Small Budget, scheduled to be released in early May.


Kim McGrigg is the former Manager of Community and Media Relations for MMI.