How to Plan for Mid Term Financial Goals
Mid-term financial goals sound a bit like a test halfway through the semester at college. Mid-term financial goals can also be called mid-life financial goals. The Centers for Disease Control and Prevention estimates the average lifespan of an American to be 76.1 years. If we take that figure and divide it in half, we get about 39 years, the approximate midpoint of an average person’s life. If we add five years before and after the midpoint, we get 34 to 44 years as the mid-term of life.
If you are already older than 44 years old and you have not met your mid-term financial goals, you need to seriously re-evaluate your situation because it is going to get a lot harder, not easier, to prepare for your financial future. You need to start planning for end-of-life goals and how to survive if your money runs out. Focus on retirement goals and estate planning. I discuss those topics in other articles on the Goalry blog.
This article is for the younger adults who still have time to prepare for their mid-term financial goals. You have found a guide to manifest the types of financial goals that many do not know how to do most of their lives.
You Just Discovered Goalry
If you are still a young adult, and especially if you are in your twenties, you are in luck because planning for your mid-term financial goals and then taking the steps necessary to achieve them is well within your grasp.
I will show you how to get your finances under control and how to live below your means, so you always have some extra cash on hand for emergencies and to invest in your future. Get a key to Goalry, pick up the tools you need, and learn how to use them to advance towards your goals.
I am also going to show you how to make this game of life more fun.
Tools Needed to Advance:
- Budgetry : Expense tracker and planner.
- Billry : Track spending and save on bills.
Use these tools to get your monthly spending organized for success and to pay bills on time. Make sure you have an emergency fund of three months' living expenses stashed away and put aside something each month thereafter to invest. Now, let’s talk about how you make some money for your mid-term financial management goals.
The Rule Of 72
To get where you are going, you need a road map. To figure out the value of a potential investment opportunity that you encounter on the way, you will need to understand the secret code found in the Rule of 72.
The Rule of 72 is an easy way to figure out how long it will take to double your money when you earn a certain rate of return on your investment. All you have to do is, divide 72 by the rate of return. This will give you the number of periods it will take to double your money. A period could be a year or another length of time.
Here is a table that shows the Rule of 72 results for various returns on investment (ROI).
| ROI per Period | Number of Periods to Double Investment |
|---|---|
| 1% | 72 |
| 2% | 36% |
| 5% | 14,4 |
| 7% | 10,3 |
| 10% | 7,2 |
| 12% | 6 |
| 15% | 4,6 |
| 18% | 4 |
| 20% | 3,6 |
| 24% | 3 |
What is the meaning of this secret code? There are many. If you leave money in a traditional bank's saving account, paying a measly 1% per year, it will take 72 years to double your money. An average 20-something American will probably not live long enough to see that happen.
Not only will your money take a very long time to double, but your money will also lose purchasing power. By earning only an ROI of 1%, you will lose value in your saved money because you will buy less than before. The U.S. dollar is devaluating over time at the average rate of approximately 2 to 4% per year. The U.S. dollar had lost 96% of its value since 1913 when the private Federal Reserve Bank took over the American banking system.
The erosion of the value of the U.S. dollar over time is not so noticeable to younger people, but older adults can remember a time when things cost much less than they do today.
One U.S. dollar today buys the same amount as four cents would buy in 1913. A candy bar and a soda for a few pennies were normal back then. Kids could go to the movies for ten cents and have money left over to buy popcorn after paying the admission price.
As you can see in the Rule of 72, you need to reach at least 5% ROI to cover the dollar's devaluation and be able to double your investment money in 14.4 years.
A better goal for positive mid-term results is to earn an average 10% ROI. That is your main goal. Put as much money as you can into investments that earn an average of 10% each year. In that way, your money will double and then possibly double again around the time you reach mid-life.
What about earning a higher ROI?
Usually, a higher ROI also means that there is more risk of losing your investment money. This suggests you need to exercise caution in making your investment choices. However, there is one sure-fire investment strategy that will help you achieve an 18% or perhaps a higher ROI. Let me explain.
Get Rid Of Credit Card Debt
If you are around 18 to 23 years old, your average debt is $16,043, as reported on Debt.org. If a large portion of this debt is unpaid balances on credit cards, you will probably pay the median annual percentage rate (APR) of 19.96% up to an average maximum APR of 23.69%.
For a high-interest rate credit card, banks are doubling the amount you owe them. You pay double for your credit card debt about every three years if you do not pay off the balance every month. Getting rid of credit card debt is the same as investing and earning a high ROI on the same amount of money.
Do you understand the math?
If you have a $10,000 balance on a credit card with a 23.69% APR, you pay $2,369 each year in interest. That sandwich you bought for $10 using that credit card will have cost you $20, including credit card interest, around three years later. If you pay off the credit card balance instead, the following year, you will have an extra $2,369, the same amount as if you invested $10,000 and earned 23.69%.
Tools Needed to Advance:
- Debtry : Track debts to pay them off.
- Loanry : Consolidate high-interest credit card debts to lower-interest rate loans.
Stuff Happens
Even with the best planning, things can happen that we are not prepared for. It is good to have insurance coverage to protect your assets. Know how to get some short-term cash if you are in a jam. This is why it is always a good idea to have three months' living expenses stashed away. Some are now recommending a longer time for emergency cash.
To calculate your emergency cash needs, think of the lowest-cost way you could live and multiply that by the safety net of three, six, or even 12 months.
It is best to have this amount in cash if the electronic systems do not work. You may need cash if there is no way to access your funds using a bank card or ATM. Storing cash safely is a bit risky too. Make sure it is in a fireproof safe or lockbox and not kept in any place accessible by anyone but you or a highly-trusted loved one.
Tools Needed to Advance:
- Cashry : Cash flow management tools and referrals to sources for emergency cash.
- Insurry : Shop for insurance and compare rates and terms.
Buy a House
The largest investment made by most people is their house. I liked owning a house so much that I bought many of them. It is still quite possible to live rent-free by “hacking” a house. Let your roommates pay enough to cover all the expenses of the place while you live there, taking care of it.
If you are thinking of buying a house, take your time and save money for the down payment. Use other people’s money, if possible, to leverage your investments. Get very good at finding a bargain in the area(s) where you choose to live. Be sure to extend your potential living area far away from the big cities and work remotely if you can. There are many nice places out in the country that are much more affordable than living in the big cities.
Consider hunting for your first house as a treasure hunt. This is the fun part I was speaking about at the beginning. As you evaluate an area and get up to speed about all the details, you will learn so much about people there and how they live.
I am constantly looking for a house to buy that will produce a positive cash flow. The pandemic made this work more challenging and also created new opportunities. I like working with the time element and converting a home to weekly rentals of the rooms. It helps if the roommates have similar interests.
I once filled up a house with all my construction workers who were single and just starting their building careers. The house had a plumber, an electrician, a carpenter, and a bricklayer. Those guys could fix anything. We managed a business that took care of apartment buildings. When we had spare time, we fixed up the house. We sold the house once it was remodeled for a tidy sum and split the profits between us.
The point is to be clever about finding your “perfect” place. I have never found it yet. That is why I keep looking for it. However, I have lived in many terrific places and had the pleasure and pride of fixing them up.
Tools Needed to Advance:
- Creditry : Repair and rebuild poor credit and improve your credit to get better loan terms.
- Accury : Get accurate valuations of homes you are thinking about buying.
Tax Management
Wealthy people manage their taxes and organize their finances to take advantage of the best tax options.
This includes putting money away in an IRA, having a 401k plan at work, and, if married, setting up a living trust to avoid probate upon death.
While building your wealth, it pays to stay informed about tax regulations as they constantly change.
Tools Needed to Advance:
- Finance Education : Goalry offers financial education articles and videos.
- Taxry : Choose an appropriate tax filing solution and get help from tax professionals.
- Wealthry : Investment, retirement, and net worth builder.
Conclusion
A person’s mid-term life goals are special and unique to them. I find it surprising that few people take the time to think about what they really want in life. Everyone needs to write it down to concentrate on it long enough to achieve the goal.
I started my dream book when I was in my twenties (now I am in my sixties). I wrote down all the things I wanted to do and have. Some call this a “bucket list.” I am happy to say I did everything I wanted and many more wonderfully surprising things too. Even the most challenging and horrible things I faced in life were interesting.
I highly recommend you make your equivalent of a dream book and keep adding to it and referring to it throughout your life. As you achieve your goals, you will enjoy looking back at the process. Even the most outrageous things that I put in my dream book came true. They did not happen at all at once. Many took decades to develop and occur.
What I learned was the most important thing about financial goals is that it is not the money that you really want. Of course, you need the money. However, the most important things are the ability to manifest your dreams, make your dreams come true, and be kind to others in the process.
Keep Track of All Your Financial Goals. Goalry Can Help! Welcome! it stand out