What Exactly Is Long-Term Financial Planning?

As you move through life, it’s very important to engage in long-term financial planning to achieve your goals. But what exactly is long-term financial planning? After all, many of us just think of financing planning as a way of managing money, without thinking about whether it’s long-range or not.

Long-term financial planning mirrors the way businesses and governments plan, by having specific time frames for specific objectives. A short-term plan is one that can be achieved in 1 year or less. A mid-term plan is one that takes between 1 and 5 years to achieve. A long-term plan is one that looks out for 5 years or more.

Many people think this way already without being completely conscious of it. You may, for example, know that your mortgage will be paid off in 30 years. For the duration of that time, you need to pay your mortgage on time to your lender. At the end of that period, you’ll own the home and whatever equity has accrued in it. That’s long-range financial planning because owning a home free and clear is a goal that is going to take more than 5 years to achieve. 

You may also be planning to pay off several hundred dollars on a credit card by the end of the year. That’s a short-term financial plan because it’s a financial goal that takes less than a year.

Read our latest Quick Guide: Long-term Financial Planning in San Antonio, Texas


The Benefits of Long-Term Financial Planning

It’s important to think about long-term financial goals consciously because doing so clarifies and benefits your overall financial life.

All financial planning stems from individual goals. Your goals are likely to be very different from your neighbors, so when you work with a wealth advisor, they need to know your long-term goals so they can devise a plan to meet them.

Long-range goals can include purchasing a first or second home, planning your retirement, saving for your children’s education, creating vacation plans for you and your family, running a business, and more. It’s important to concretely identify your long-term goals in life because if you don’t identify them, you can’t actively plan to achieve them.

Once you’ve identified your long-term financial goals, you can meet with a San Antonio financial advisor who can create a plan to meet them. 


Long-Term Financial Planning Can Help Create Clarify Short- and Medium-Term Plans

Long-term financial planning will also help to clarify and pinpoint short- and medium-term goals. Let’s look at a hypothetical example. Let’s say you’d like to retire at the age of 50 and are currently 35. That long-term goal may mean that you need to save and invest for retirement diligently over the next 15 years. 

The long-term goal might necessitate a short-term goal for each year, of saving the maximum allowable in a 401(k) retirement plan, both to build your funds for retirement and to take advantage of the tax benefits of 401(k) plans. (These tax advantages include tax-free appreciation and pretax contributions, which can lower your overall taxable income and potentially your tax bracket for the year.) 

Your medium-term goals to contribute to that long-term goal may include investing in specific asset classes in order to maximize returns while also being mindful of the need for stability. They may also include rebalancing and revisiting your retirement portfolios every year and making portfolio adjustments as necessary to keep you on track for the early retirement that is your goal.

The long-term goal of early retirement can affect the entire spectrum of your financial life. Let’s say that your goal in retirement is to spend part of the year in a vacation home located across the country. You’ll also need a plan for that second home. When will you purchase it? Where do you see it being located? How much is it likely to cost? Do you have a specific plan to purchase it? How much may you need for the down payment? For the monthly payments in retirement (or now)?  

Long-term goals can also affect your shorter-term choices and plans because they cause you to think more strategically than you might without a long-term plan. Let’s say you’ve been thinking of purchasing a new car. But to work toward your articulated long-term plans, you need to save quite a bit per month toward early retirement. 

You’re also saving toward a down payment on a second home. You also know that saving for your children’s college education is a goal – and tuition and fees are increasingly expensive. It can cause you to think more strategically about when a new car is needed and how much you’re willing to pay for it. Is it truly a priority given your other goals? Long-term strategic thinking can help everyone to prioritize their multiple financial goals.


Long-Term Planning Is Part of a Comprehensive Financial Plan

Long-term planning helps your think strategically about all the components of your financial plan. These components include cash management of your monthly expenses and income, investments, retirement, educational savings, risk management (such as insurance), tax planning, and estate planning (wills, trusts, and powers of attorney). 

All these components require long-term planning. The long-term plan, however, does need to be revisited periodically. If you have young children, for example, life insurance is a prudent strategy to manage the risk of them being left without your income should you pass away. But once they are grown, you should review your need for life insurance. 

All aspects of your financial plan need periodical review with a Texas financial advisor.


How PAX Financial Group Can Help Plan for Long-Term Goals in San Antonio

A CERTIFIED FINANCIAL PLANNER™ Professional at PAX Financial Group can help you create and work with a comprehensive financial plan to meet your long-term goals. A comprehensive financial plan includes setting financial goals, creating and working within a budget, investing for your goals, saving for retirement, managing risk through insurance and other methods, tax planning, and estate planning for your family and descendants. We are fiduciary financial advisors who offer opportunities for biblically responsible investing and always place your best financial interests ahead of our own.

This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

Ready to have a real conversation about securing your future?

Schedule a free no-strings-attached phone conversation.