While not the easiest thing to do, setting mid-term financial goals, typically spanning 3 to 5 years, is essential to help ensure your financial future is safe and secure. These intermediate objectives bridge the gap between immediate needs and long-term wealth building.
Even if you do not have a specific plan in mind, you can never go wrong with saving money in case of emergencies or big-ticket purchases. In fact, having any goal at all is better than having none.
This is because, without any saving efforts from your end, you tend to spend more money and even put yourself at risk of going into debt.
That being said, if you are looking for mid-term financial goals you can try out along with your short-term goals, you’re in the right place.
Here are three common mid-term financial goals you can strive to achieve with your saving efforts over the next 3 to 5 years:
Top Mid-Term Financial Goals for Your Future
1. Building Home Equity Through Strategic Savings
One of the most impactful mid-term financial goals is saving for a home purchase. Even if you’ve just started saving money, it pays to set aside specific amounts for a home as early as possible.
This way, you give yourself more time to accumulate savings for a down payment, typically 10-20% of the purchase price, and qualify for a favorable mortgage loan with better interest rates.
When planning for homeownership, consider the total cost beyond just the down payment.
Closing costs typically range from 2-5% of the home’s purchase price and include fees for appraisals, inspections, title insurance, and legal services. Additionally, you’ll need to budget for moving expenses, immediate furnishing needs, and potential renovations.
Create a dedicated savings account specifically for your home fund and automate regular transfers to ensure consistent progress toward your goal.
First-time homebuyers should research available assistance programs, including FHA loans that require as little as 3.5% down, VA loans for eligible veterans, and state-specific first-time buyer programs that may offer down payment assistance or favorable terms.
Consider working with a mortgage pre-approval specialist early in the process to understand exactly how much you can afford and what documentation you’ll need to gather.
On the other hand, if you already have a home, saving money for repairs should be among your key mid-term financial goals. Unexpected large repairs are part of home ownership, and it is better to plan financially for them rather than have to borrow money to pay for them.
At Calamita Wealth Management, we recommend setting aside 1-3% of your home’s value annually for maintenance and repairs.
Current homeowners should prioritize building a comprehensive home maintenance fund that covers both routine upkeep and major system replacements. HVAC systems typically need replacement every 15-20 years, roofing every 20-30 years, and appliances every 10-15 years.
Create a timeline of when major components in your home will likely need attention and save accordingly. Consider energy-efficient upgrades that can reduce long-term utility costs while increasing your home’s value, such as improved insulation, smart thermostats, or solar panels.
2. Securing Adequate Life and Disability Insurance
If you have a partner or children that rely on your income to live comfortably, you may want to consider obtaining life insurance as one of your mid-term financial goals. This way, in case you pass away prematurely, your loved ones will have the financial means to get on with life without too much financial difficulty. As a rule of thumb, many financial planners recommend coverage equal to 10-12 times your annual income.
However, when determining your exact life insurance needs, conduct a thorough analysis of your family’s financial obligations. Calculate outstanding debts including mortgages, car loans, and credit cards, then add future expenses such as children’s education costs, which can range from $50,000 to $200,000 per child depending on whether they attend public or private universities. Factor in your spouse’s potential lost income if they need to take time off work to grieve or care for children, and consider ongoing living expenses for at least 5-10 years.
Choose between term life insurance, which provides coverage for a specific period at lower premiums, and permanent life insurance, which combines coverage with an investment component.
Term life is often more cost-effective for young families, while permanent insurance may benefit those with estate planning needs or high net worth. Review your coverage annually and adjust as your financial situation changes, such as after major life events like marriage, childbirth, home purchases, or significant salary increases.
Another policy you can consider getting is disability insurance that will cover your income should you be unable to work because of an injury or disability. Disability insurance replaces 50-70% of your income if you become unable to work, protecting your family’s financial stability.
Disability insurance is often overlooked but critically important, as the probability of becoming disabled for 90 days or more before age 65 is approximately 25%. Understand the difference between short-term disability (typically covering 3-12 months) and long-term disability (extending to retirement age).
Evaluate whether your employer offers group coverage and consider supplementing with individual policies that offer better benefits and portability.
Pay attention to the definition of disability in your policy. “Own occupation” coverage is more comprehensive than “any occupation” coverage, as it pays benefits if you cannot perform your specific job rather than any job.
With that said, when looking for an insurance policy, we highly recommend working with an insurance licensed fee-only financial advisor to find the best policy at an affordable and sensible price. Fee-only advisors are not permitted to be paid commissions. Therefore, the risk of being sold an expensive policy with high sales commissions is mitigated.
When shopping for insurance, obtain quotes from multiple carriers and compare not just premiums but also policy features, financial strength ratings, and customer service records. Consider factors such as elimination periods (how long you must wait before benefits begin), benefit periods (how long benefits continue), and cost-of-living adjustments that protect against inflation. Review policy exclusions carefully and understand under what circumstances benefits might be reduced or denied.
3. Eliminating Student Loan Debt
Do you still have lingering student loans? You aren’t alone; millions of Americans still do, with the average borrower carrying over $37,000 in student loan debt. It should be one of your mid-term financial goals to pay it off.
A student loan will impede your ability to save money, and the mounting interest will make your financial life more challenging while delaying other important financial milestones.
Before developing a repayment strategy, thoroughly understand your loan portfolio. List all loans with their balances, interest rates, servicers, and terms. Federal loans offer various repayment options including Income-Driven Repayment plans that can lower monthly payments based on your income and family size, though these may result in higher total interest paid over time.
Private loans typically have fewer flexible options but may offer competitive rates for borrowers with strong credit scores.
Consider the debt avalanche method, where you make minimum payments on all loans while directing extra funds toward the highest-interest loan first. Alternatively, the debt snowball method focuses on paying off the smallest balance first to build psychological momentum.
Calculate the total interest savings of each approach to determine which works best for your situation. Even an extra $50-100 per month toward your loans can significantly reduce the total interest paid and shorten your repayment timeline.
As such, we highly recommend that you find a way to pay off your student loans as quickly as possible within your 3-5 year timeframe. An excellent way to do this is to refinance your loans to lower interest rates, which can save you thousands over the life of the loan. However, note that you may lose some federal benefits from your student loans this way, so do a little research when looking for ways to pay off the loan.
Before refinancing federal loans, carefully weigh the benefits you’ll lose, including potential loan forgiveness programs, income-driven repayment options, deferment and forbearance protections, and death and disability discharge provisions.
Private refinancing typically makes sense when you have stable employment, good credit, and federal loans with interest rates above current market rates. Shop around with multiple lenders, as rates and terms can vary significantly. Consider making extra principal payments before refinancing to improve your loan-to-income ratio and qualify for better rates.
Explore additional strategies to accelerate loan repayment, such as using tax refunds, work bonuses, or windfalls toward loan principal. Some employers offer student loan repayment assistance as a benefit. Check with your HR department about available programs.
If you work in public service, research Public Service Loan Forgiveness, which can eliminate remaining federal loan balances after 120 qualifying payments while working for qualifying employers.
Achieving Your Mid-Term Financial Goals
These three examples of mid-term financial goals, home savings, insurance protection, and debt elimination, are geared towards a brighter financial future. They can be a great way to practice handling your money to help ensure that you are financially sound at all times.
By focusing on these 3-5 year objectives, you create a solid foundation for long-term wealth building and financial security.
Success in achieving mid-term financial goals requires consistent monitoring and adjustment of your strategies. Establish specific, measurable targets with realistic timelines, and break larger goals into smaller monthly or quarterly milestones.
Use budgeting tools and apps to track your progress, and consider automating savings transfers to remove the temptation to spend money earmarked for these goals. Regularly review and adjust your goals as your income, expenses, and life circumstances change.
With that in mind, if you need assistance in managing your financial situation and setting appropriate mid-term financial goals, we highly recommend reaching out to financial planners to help you out. They will help you take control of your financial standing, ensuring that you not only maximize your current situation but secure your future financial goals through strategic planning and disciplined execution.
Calamita Wealth Management offers fee-only financial planning services in Charlotte, NC, to help individuals over 50 plan for their retirement successfully and securely. Todd Calamita, a CERTIFIED FINANCIAL PLANNER® (CFP®) professional, and his team are here to help y0u secure your future today!
