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Tips to Setting Midterm Financial Goals

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When you’ve created a budget, established an emergency fund, and paid off your credit card debt—or at least made a good dent in those three short-term goals—it’s time to start working toward midterm financial goals. These goals will create a bridge between your short- and long-term financial goals.

Get life insurance and disability income insurance
Do you have a spouse or children who depend on your income? If so, you need life insurance to provide for them in case you pass away prematurely. Term life insurance is the least complicated and least expensive type of life insurance and will meet most people’s insurance needs. An insurance broker can help you find the best price on a policy. Most term life insurance requires medical underwriting, and unless you are seriously ill, you can probably find at least one company that will offer you a policy.

Gallegos also says that you should have disability insurance in place to protect your income while you are working. “Most employers provide this coverage,” he says. “If they don’t, individuals can obtain it themselves until retirement age.”

Disability insurance will replace a portion of your income if you become seriously ill or injured to the point that you can’t work. It can provide a larger benefit than Social Security disability income, allowing you (and your family, if you have one) to live more comfortably than you otherwise will if you lose your ability to earn an income. There will be a waiting period between when you become unable to work and when your insurance benefits will start to pay out, which is another reason why having an emergency fund is so important.

Pay off student loans
Student loans are a major drag on many people’s monthly budgets. Lowering or getting rid of those payments can free up cash that will make it easier to save for retirement and meet your other goals. One strategy that can help you pay off your student loans is refinancing into a new loan with a lower interest rate. But beware: If you refinance federal student loans with a private lender, you may lose some of the benefits associated with federal student loans, such as income-based repayment, deferment, and forbearance, which can help if you fall on hard times.3

If you have multiple student loans and won’t stand to benefit from consolidating or refinancing them, the debt avalanche or debt snowball methods mentioned above can help you pay them off faster.
Consider your dreams
Midterm goals can also include goals like buying a first home or, later on, a vacation home. Maybe you already have a home and want to upgrade it with a major renovation—or start saving for a larger place. College for your children or grandchildren—or even saving for when you do have children—are other examples of midterm goals.

When you’ve set one or more of these goals, start figuring out how much you need to save to make a dent in reaching them. Visualizing the type of future you want is the first step toward achieving it.

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