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All our needs can be whittled down to short, medium and long-term needs. Understanding these is the first step to creating a solid financial plan.


What Is a Short-Term Need?

A short-term need is usually anything that needs to be funded within a year. Generally, these tend to be imminent expenses. These can include funding a holiday, paying insurance, car repairs or replacing the fridge.

We recommend having enough money to get yourself out of a financial emergency. This target should ideally be 6 months of take-home pay.

In the short term, it is important that you can access your money instantly and it would be sensible to have it somewhere where you know the value won’t decrease.

Keeping short-term financial goals can give us the confidence boost we need to achieve our longer-term financial goals.


What Is a Medium-Term Need?

A medium-term need can scale between the period of 12 months and 5 years, but no longer than this. Good examples of a medium-term need include funding children’s education, the home renovation you are planning, a house deposit or funding your dream wedding.

In this case, you don’t need the money as close to hand as before, however, you can’t afford to lose money over this short period of time. That is why a low-risk investment portfolio could be the right channel for these savings.


What Is a Long-Term Need?

Long-term needs are usually your big-picture needs.

Anything over 5 years can be considered a long-term need – paying a mortgage, funding a new business venture, or funding retirement.

In this case, you have time to plan and time to build up wealth, so it is worth having an investment account that is slightly more volatile historically this will give you the potential for higher returns.


A Quick Recap:
  • Short-term financial needs: Savings for six months to one year (holiday).
  • Mid-term financial needs: Savings for one year to 5 years (home renovation).
  • Long-term financial needs: Saving for more than 5 years (retirement).


Why Are Financial Goals Important?

Having a meaningful goal can help you achieve a debt-free lifestyle and lead you down the path to financial freedom.

Setting financial goals also helps you to achieve financial success, which can lead to greater financial confidence and further money-making decisions.

Sometimes clients come to us flustered because they aren’t sure what their medium-term needs are. In this instance, we generally advise funnelling more funds into long-term goals, while keeping some money in a reserve for medium-term needs which may pop up along the way. It’s not uncommon for medium-term needs to materialise out of the blue.

When analysing your needs, you can easily complicate things, but it really is simple.

We can get frustrated when we find ourselves in a cycle of saving for long periods of time with no goals in sight. We begin to question what we are getting out of saving.

That’s why when you are looking at your financial plan, we often recommend ‘paying yourself’ first, i.e. doing something for yourself with a portion of that money.


Shocked? A lot of our clients are.

Funding your pension and bulking up your savings plan is hugely important, but we believe if you don’t somewhat meet your immediate needs then you will struggle to buy into the rest of the plan.


It is important to get your short-term priorities ticked off. For example, if taking music lessons are important to you, well work this into your financial plan. Similarly with travelling, if you plan to travel once a year to keep yourself satisfied, we’ll at that to the list. This approach will keep you invested and engaged in your financial plan. If you simply plan to cut out the areas of joy in your life to fund larger savings, you are less likely to follow through.

At Rockwell, we believe in finding a balance between enjoying your life and getting the most out of your finances. For more finical advice, arrange a chat with one of our expert financial advisors today.

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