Mid-term goals – what the heck do we do with them? Kyle and I currently have no mid-term goals, but I’ve put some thought into them this week because of some interactions I’ve had with friends and financial clients. Some of our peers in NC are looking forward to buying homes!
Mid-term goals take a bit of different thinking than short-term and long-term goals. For example, the long-term goal of retirement is something we expect to save for year-in and year-out, even if the rate changes a bit. Short-term goals are easy to create, especially if they recur yearly like our season tickets or our CSA – it’s a fairly static price and time-frame.
This is how I break down these goal categories in terms of yearly income (more or less):
Saving for a car is an example of a mid-term goal, but I wouldn’t set it up in the same way I would with a short-term goal. With a short-term goal, I would immediately start saving for the next period’s expense when I pay for the current period’s expense – for instance, as soon as we pay our car insurance, we start saving up for the next installment. But it would be silly to save for your next car over the entire lifetime of your current car – on the order of 10 years, hopefully. A car can be paid for in a few years – typically 3-6 years if you financed the car, and if you save up in advance you have interest rates working for you instead of against you.
We have three reasonable mid-term goals that we would like to accomplish in the next several years – replacing each of our cars and saving for a down payment on a home. Like I said before, we’re not currently working toward any of these goals – I suppose because our current budget feels tight and we hope to maintain our standard of living while experiencing income increases over the next few years that will enable us to save more aggressively. (That’s what I’m telling myself, anyway… You can dispute the likelihood of that happening!) I think we’ll start working toward these goals nonspecifically when Kyle gets a real job and more specifically once we are living in a city in which we’re interested in ‘putting down roots.’ And then it will just take as long as it takes to save up.
When have you started to save up for mid-term goals in the past (or currently) or when do you plan to start? Here are the various points I find reasonable:
- when some money frees up in your budget
- when you can make the goal specific and detailed (e.g. price range of home and target month/year to buy)
- as found money/bonuses/side hustles comes in
- a few month in advance
- 1-3 years
- 3-5 years
In some ways taking on debt is easier than making all these squishy decisions. You get what you want and someone else determines the term and you make room in your budget for the payments – isn’t that always easier to do retrospectively when you have all the details? But I think it’s worth it to attempt to premeditate and prepare for these large purchases.
How do you decide to start saving for a mid-term goal? Have you created any mid-term goals other than a car or house down payment?