Short Term Planning vs Long Term Planning
Planning is a crucial process that helps one in developing his goals for his future. There is a famous saying which says that if you are not planning for success, you are planning for failure. This means that to achieve success, planning is essential for everyone. Now, planning can be both long term and short term. Planning is all about creating advantageous circumstances for oneself later in life. You tend to set as goals things that you think are important for you in later life and strive to achieve them in small steps. In life, there are always goals that need to be accomplished earlier than some goals that can be pushed back for later in life. For early goals there is short term planning and for later goals there is long term planning. There are obvious differences between these two types of planning that will be discussed in this article.
If you are a young man who has got a job and just got married, you would obviously think of getting a new car for yourself and renting a bigger flat. These are your short term requirements for which you would make a plan accordingly. But once a few years have passed and you have two kids also, you would desire to have a house of your own down the line. Even this can be termed as a short term goal as you can hunt for the property and try to get a loan from a bank to shift in your new home with your family. However, you need to think about the future of your kids’ higher education and your own retirement. These are financial goals that need long term planning.
In general, short term financial goals are smaller and need lesser financial resources and easier to achieve than long term goals. If you are planning to buy a car, it is easy as you can avail a car on installments and repay the loan in a few years. But if you are thinking about life after retirement, you are planning for the uncertain as you do not know how long you are going to live neither do you know how inflation will affect your savings for life after retirement. Thus planning for a period, say after 20 years, is harder and complex than saving for the down payment of a new car that you wish to buy in a year or so.
Long term planning is defined as an exercise that is aimed at formulating a long term plan to meet future needs. The estimation of future needs is done through extrapolation of current needs and cost of living. Long term planning goes on concurrently with short term planning as for long term financial goals; one cannot forgo short term financial goals. Another important feature of long term planning is that it involves breaking the goal into smaller, achievable goals.
• Life is all about planning for future and this involves both short term planning as well as long term planning.
• Short term planning is easier and one knows the goal in concrete terms whereas long term goals are complex and uncertain.