Short, medium, and long term goals (article) | Khan Academy (2024)

You have learned how to set SMART goals for your money, but how do you plan for different types of goals? Depending on your needs and wants, you may have short, medium, and long term financial goals. These goals have different time horizons and risk levels, and require different strategies to achieve them.

Short term financial goals are goals you want to achieve in less than a year, such as buying a new phone, saving for a trip, or paying off a small amount of debt. These goals are usually low risk, meaning you are unlikely to lose money or face unexpected costs. To reach these goals, you need to budget your income and expenses, and save a portion of your money in a safe and accessible place, such as a bank account or a money jar.

Medium term financial goals are the ones you want to achieve in one to five years, such as buying a car, saving for college, or starting a business. These goals are usually moderate risk, meaning you may face some uncertainty or fluctuations in your income, expenses, or returns. To reach these goals, you need to plan your income and expenses, and invest a portion of your money in a diversified and flexible way, such as a mutual fund or a certificate of deposit.

Long term financial goals are the ones you want to achieve in more than five years, such as buying a house, saving for retirement, or leaving a legacy. These goals are usually high risk, meaning you may face significant changes or challenges in your income, expenses, or returns. To reach these goals, you need to project your income and expenses, and invest a portion of your money in a growth-oriented and long-lasting way, such as a stock or a bond.