Short-Term vs Long-Term Goals: 8 Tips for Allocating Funds

For many Filipinos, financial planning often takes a back seat to daily needs and responsibilities. However, learning how to set clear financial goals and how to fund them can make a huge difference in achieving the kind of life you dream of. Whether you want to save up for a weekend getaway, start your own business, or prepare for retirement, knowing how to allocate your money based on the timeline of your goals is a crucial skill you’ll want to learn sooner than later.

Financial goals generally fall into two categories: short-term and long-term. Short-term goals are those you aim to achieve in the near future, typically within one to three years. These might include building up an emergency fund, going on a trip abroad, or starting a small business. On the other hand, long-term goals are major life milestones that usually take five years or more to reach. These can include buying a house, preparing for your child’s college education, or topping up a retirement nest egg. Each type of goal calls for a different strategy.

With that in mind, let's explore how you can better allocate your funds for both types of goals.

Tips for Allocating Funds for Short-Term Goals

Open a Dedicated Savings Account

One of the first steps you should take towards allocating funds for short-term goals is to open a separate savings account specifically for your goal. This can help you avoid mixing your savings with the money you use for day-to-day expenses. It will also give you a clear view of how much you have saved and will allow you to track your saving progress more easily. 

Thankfully, many digital banks like Maya make it incredibly easy to open a savings account. Most apps have a clear and user-friendly interface, often with a button or banner that says “Open savings account online” to guide you through the process. The steps are simple and typically require only basic information and a valid ID.

What makes digital banks even more convenient is that many of them offer goal-setting tools, allowing you to set targets and track your progress. You’ll definitely want to check out Maya Personal Goals, whose features will allow you to keep several sub-accounts for separate financial goals and earn a guaranteed 4% p.a. interest monthly per goal.

Set a Realistic Target

Setting a specific and achievable target for your short-term goals is key to staying focused and motivated. If you know exactly how much you need to save and by what date, it will become much easier to create a realistic plan and stay on track.

For example, if your goal is to save PHP 20,000 for a vacation in six months, you can break this down into smaller, manageable amounts—like saving around PHP 3,300 per month or PHP 770 per week. This makes the goal feel more attainable and helps you stay on track as you monitor your progress.

Treat Savings Like a Monthly Bill

It’s easy to neglect your savings if it’s not treated as a priority. One effective strategy is to treat your savings like any other bill you need to pay every month. Just as you’d allocate money for utilities, groceries, and other expenses, set aside a fixed amount for savings. The key here is consistency—make saving a non-negotiable part of your monthly budget, even if you’re only starting with a small amount. 

Cut Back on Unnecessary Expenses

To accelerate your progress toward a short-term goal, it’s important to examine your spending habits and identify areas where you can cut back. Do you often eat out or buy coffee every day? Small, frequent expenses like these can add up over time, detracting from your savings.

But if you reduce or eliminate these unnecessary expenses, you can free up more money to direct toward your savings goal. Additionally, look for ways to minimize non-essential subscriptions or impulse purchases that can be delayed until after you’ve met your goal.

Tips for Allocating Funds for Long-Term Goals

Develop a Comprehensive Financial Plan

For long-term goals, it’s essential to develop a comprehensive financial plan that outlines how you will reach your target. Start by determining what your goal is and how much it will cost. Let’s say you plan to buy a house in 10 years; estimate the cost of the home and factor in down payments and monthly mortgage rates.

Then, break the larger goal into smaller milestones that can be achieved within specific time frames, such as saving a certain percentage of the down payment each year. This will help you manage your funds more effectively.

Manage Debts Wisely

Managing your debt is also a key part of allocating funds for long-term goals. High-interest debts, such as credit card balances, can significantly slow down your progress, making it harder to save for your long-term goals.

That being said, prioritize paying off high-interest debt first to free up more money that can be allocated toward your savings. Once you’ve paid off your high-interest debts, focus on managing any remaining debts while continuing to save for your long-term goals. 

Look for Additional Sources of Income

Depending on your long-term goal, relying solely on your primary source of income may not be enough. Consider finding additional sources of income to accelerate your progress. This could include side jobs, freelancing, online selling, or starting a business.

Even if it’s just an extra PHP 5,000 a month, this added income can make a significant difference in reaching your long-term goal faster. The more income streams you have, the more money you can allocate toward your goals, whether it's a retirement fund, a child’s education, or buying your first home.

Seek Professional Financial Advice

When it involves investments or large sums of money, managing long-term financial goals can be complicated. If you don’t consider yourself a whiz with numbers, it’s a good idea to seek professional financial advice to help you create a more effective strategy for reaching your goals.

Financial advisors can provide insight on how to allocate your funds between savings, investments, and debt repayment. They can also help you understand tax implications, investment strategies, and market trends that could impact your financial future. 

All in all, the key to achieving both your short-term and long-term goals lies in proper planning and consistent saving. The way you allocate your funds today can shape the opportunities you create for yourself tomorrow.

Start with what you have, stay committed to your strategy, and be open to adjusting your plans as your needs evolve. With the right mindset and tools at your disposal, reaching your goals will be well within your control.