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With so much to achieve in the short-term, newlyweds could put their long-term goals in jeopardy without a clear, disciplined strategy for achieving their short-term goals.
Who can fault a young newlywed couple for their lofty ambitions and story book dreams for the future? But, when the honeymoon is over, they need to focus clearly on what’s immediately ahead, or they could see their long-term goals getting out of reach. It’s important to set long-term goals, but before that planning can begin, it’s the short-term goals that need attention.
Very often it’s the magnitude of all of things that need to be achieved in the short-term that can derail long-term goals, which can put young married couples in a perpetual state of catch up. To prevent that, newlyweds need to have a deliberate strategy for achieving their short-term goals with an eye towards planning for their long-term goals.
Newlyweds have much to accomplish in the short-term, which is generally defined as the first three to seven years of their marriage. Some short-term goals are more pressing than others which is why it’s important to prioritize them. Among the goals newlywed couples want to achieve are:
Planning for Short-term Goals
By definition, planning for short-term goals doesn’t allow for the luxury of time. Ideally, the planning takes place well before the wedding date, so that, once they walk down the aisle together, the plan is well underway. Without a clear strategy and the discipline to execute it, a couple could find themselves on the defensive as their short-term needs and goals begin to conflict with their long-term goals. By strictly adhering to these steps, couples can stay on track to meeting both their short-term and long-term goals.
1. Set clear short-term goals and prioritize
Each short-term goal should be clearly defined with specific dollar amounts and time lines. If there are multiple goals, you must prioritize them as they will be competing for limited savings dollars. Once you determine how much needs to be saved each month that becomes your goal commitment.
2. Budget for Your Goal Commitment
One of the challenges for newlyweds is getting control of their finances. Although many people look at a budget as a spending plan, it’s really a savings plan. The problem is many people budget for spending, which often leads to spending whatever is available. When you budget for savings, your savings goal commitment becomes your top expenditure, which is set aside before any expenses are paid. If your expenses run long one month, you don’t cut the goal commitment, you cut other expenses, starting with non-essential expenses.
By faithfully following your savings plan each month, you can more easily prioritize your spending and find creative ways to save more money. It will also enable you to track you progress towards your savings goal.
3. Track Your Goals Monthly
Achieving short-term goals is difficult without discipline and accountability. Short-term goals can easily turn into longer term goals if they are not tracked closely. The best way to track your goals is to break them down into monthly milestones, or commitments. For instance, a $20,000 savings goal for buying a house in five years can seem daunting; but it can appear more manageable when you focus on a quarterly benchmark of saving $1,000. As you reach your annual goal of $4,000 you have cause for celebration and more motivation.
4. Prepare for the Unexpected
If there’s one thing that life teaches us it’s to expect the unexpected. Very rarely does life unfold according to plan; and, with short-term goal planning, there is little margin for error. The odds of something happening, whether it’s a job loss, a medical emergency, a debilitating injury, or a major car or home repair, are fairly high between two people. Before they commit to any short-term goal, newlywed couples should put a complete protection strategy in place, which includes covering everything with sufficient insurance - their lives, income, and property. And, before anything else, accumulating enough funds in an emergency fund to cover six months of living expenses should be short-term goal number one.
5. Contribute to an Employer-Sponsored Retirement Plan
This may seem contradictory to the general principle of focusing on short-term goals before long-term goals; however, as a practical matter, young newlywed couples will be far better off if they can start saving for retirement as early as possible, even if it’s just a couple hundred dollars a month. The one thing young couples have working for them right now, that won’t always be there, is time.
When you have an opportunity to combine the time value of money with the magic of compounding returns, you take it. But, the real motivation for young couples is the matching contribution to their retirement account by their employer. That’s an instant return on your money that you’ll lose forever if you don’t take advantage.
It’s highly recommended that you commit to a monthly contribution from your paycheck that will at least qualify for a full matching contribution, and then plan your budget and goal commitment around your net take-home pay.