Long-Term Financial Goals: 8 Key Steps To Secure Your Future

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When you’re working toward a stronger financial future, long-term goals play a key role. Even small steps in the right direction can add up over time and bring you closer to the life you want to build.

This guide explores what long-term financial goals are and how to achieve these goals.

What Are Long-Term Financial Goals?

Long-term financial goals typically take at least five years to accomplish. These goals involve making significant headway in building your wealth and financial security.

Common Examples

Some common examples of long-term financial goals include:

• Saving for retirement
• Paying off debt
• Buying a home
• Paying off a mortgage
• Funding college costs for a child
• Building generational wealth
• Buying a vacation home
• Taking a once-in-a-lifetime trip
• Starting a business

Everyone has unique financial goals, which means your specific long-term goals will probably look different from the list above. But these are a good starting point to get an idea for what type of goals qualify as long-term.

Short-Term vs. Long-Term Goals

Short-term goals — like paying off debt — can often be achieved within a year and serve as stepping stones toward long-term goals. Once a short-term goal is reached, you can redirect that progress toward bigger priorities, such as saving for retirement or buying a home.

8 Steps To Achieve Long-Term Financial Goals

When you consider some of your long-term financial goals, it’s easy to feel overwhelmed. For example, if you want to save $1 million for retirement, taking the first step can be daunting.

Breaking up your goals into more manageable tasks can make it easier to move forward.

1. Create a Budget That Works

Your first step should be making a detailed budget that outlines your income, expenses and savings goals. With this, you can track your spending to identify areas where you can cut back and allocate more funds toward your savings.

Here’s some quick steps you can take:

1. Write down how much you spend each month on necessities. This category would include your rent or mortgage, utilities, food, transportation, etc.
2. Go back over your debit and credit card statements for the last year. Look for how much you spent on discretionary items, like dining out, gifts, entertainment and so on.
3. Decide how much you can trim so that you can put money toward your savings goals.
4. Make sure it’s an amount you can live with, because if you’re too strict with your spending you might be tempted to just give up.

2. Start With an Emergency Fund

If you haven’t already started an emergency fund, do this right away.

Most experts recommend having between three and six months’ worth of expenses in a savings account for emergencies. This sounds like a lot, but it’s necessary for two reasons.

1. It will give you the funds you may need if there’s an emergency, such as if your car needs to be replaced or you lose your job. Without an emergency fund, you could find yourself having to pay these expenses with a credit card, which means you’re paying ridiculously high interest.
2. It gets you in the habit of saving. You’ll probably need to cut back somewhat to sock away that much cash, so you’ll need to determine what’s important to you. Once you do that, you’ll be putting some money into your emergency fund every month.

Once you’ve fully stocked your emergency fund, you can start putting that same amount of money toward your long-term goals.

3. Pay Off High-Interest Debt

High-interest rate debt, like credit cards, can keep you from reaching your financial goals. If you are carrying a balance on your credit cards, start paying it down aggressively, as soon as you’ve built your emergency fund.

Pro Tip

Carrying a credit card balance with a 24% APR? Paying it off is like earning a guaranteed 24% return on your money — something you won’t find in any investment.

4. Automate Your Savings Plan

When you made your budget, you came up with the amount you wanted to save toward your goals. Treat this amount as you would any other necessary obligation, like your rent or utilities.

If possible, set up an automated transfer from your checking to savings or investment account to make sure that you stick to the plan.

You could try breaking your paycheck into percentages such as with the 50/30/20 rule. This rule breaks up your funds into the following sections:

• Needs: 50% of your funds
• Wants: 30% of funds
• Savings: 20% of funds

5. Maximize Tax-Advantaged Accounts

Is retirement one of your long-term goals? If so, you should take advantage of tax-advantaged retirement accounts such as 401(k)s, IRAs or Roth IRAs. These accounts offer tax benefits that can boost your savings over time.

Maximize your contributions to these accounts to benefit from compounding growth and potential employer-matching contributions.

6. Use Raises and Bonuses Strategically

As time goes on, hopefully, you will get increases in your salary, and you may get a bonus or other windfall.

When this happens, instead of splurging on a big celebratory purchase, increase your savings amount by at least half of the amount of your raise or bonus.

7. Track Your Progress and Adjust

As you march toward your goals, make sure to track your progress along the way. Seeing your progress toward long-term goals can help you stay motivated to stick with the plan.

Keep In Mind

If you’re falling behind on your savings goals, take time to reassess. Rising expenses? Look for areas to cut back or explore ways to boost your income to stay on track.

8. Stay Disciplined Through Market Changes

Throughout the journey toward your long-term goals, it’s likely that the economy will experience ups and downs.

While market downturns make it tempting to switch up your investment plan, do so cautiously. In many situations, it’s best to stick it out with your long-term investment plan.

It is also good practice to consistently review your financial progress and adjust your savings and investment strategies as needed.

How Compound Interest Helps You Save Faster

The most powerful savings tool you have is time. The sooner you start saving for your long-term financial goals, the better off you’ll be.

The reason is simple: compound interest.

When you put money into an account that earns interest, and you leave it there, you will get interest on the money you deposited. Eventually, you will get interest on that interest, too.

Compound Growth Example

Suppose you put $100 in a savings account that earns 5.00% APY. At the end of the first year, if you don’t put any more money in, you’ll have $105. If you leave it in there for another year, how much will you have? 

You may say you’ll have $110, but you’ll actually have $110.25. And the year after that, you’ll have $115.76. This might not seem that big, but if you’re continuing to add to your savings, it can really add up.

The table below highlights how much compound interest comes into play over time. In each example, the starting balance is $0 with 7% annual growth each year.

Long-Term Goal Examples by Life Stage

Your life stage can have a big impact on your financial goals. Here’s a look at some examples:

In Your 20s and 30s

• Saving for retirement:
  • Although it’s tempting to put off saving for retirement until later, starting early can make it easier to hit this long-term financial goal due to the effects of compound interest.
• Looking ahead to homeownership:
  • If buying a home is a part of your future plans, saving up for a down payment might represent a large financial goal in your 20s and 30s.
• Paying down student loans:
  • If you are weighed down by significant student loan debt, paying off this burden could be a long-term financial goal.
• Building financial freedom during unconventional work arrangements:
  • Many more young people are turning to the gig economy for work, which can have an impact on their finances. For example, if you are a freelancer, building a robust emergency fund to last you over a year might represent a long-term goal to provide some financial stability.

In Your 40s and 50s

• Bumping up retirement savings:
  • If your retirement savings aren’t where you want them to be, your 40s and 50s are a good time to increase your contributions to retirement accounts.
• Saving for college:
  • If you want to help your child pay for college, saving early can make that dream a reality.

Nearing Retirement

• Topping off the nest egg:
  • As you approach retirement, you might push more of your funds into retirement savings to get you through your golden years comfortably.
• Estate planning:
  • For those who want to pass along generational wealth, setting up an estate plan in the lead-up to retirement can help.

Final Take

The amount of money you save is less important than when you start. The earlier you start, the more time your money has to earn interest for you. Don’t wait until you think you have enough money to start saving. 

Choose one long-term money goal to focus on this week — like starting a retirement fund, mapping out a debt strategy or building a savings log. Begin with manageable steps, stay steady and review your progress each month to stay on track.

Caitlyn Moorhead and Karen Doyle contributed to the reporting for this article.

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