A student can lay the groundwork for a secure financial future or even financial independence with the right amount of preparation and financial education. A financial plan is often necessary to get off on the proper foot. Students can make that plan and stick to it if they know how to develop financial goals and what kinds of goals to pursue.
Let’s analyze financial objectives, how to set them, and how to improve the odds of achieving them.
What Is a Financial Goal?
A financial aim is an aspirational monetary target. This could be in preparation for retirement or to fund next year’s vacation. Saving money, making investments, and eliminating debt can all be facilitated by having well-defined financial objectives. Your financial objectives are waypoints on the path to the life you envision for yourself.
Why Is It Important to Set Financial Goals Early?
When you start planning for your financial future at a young age, you give yourself a better chance of becoming financially secure as an adult. More money will be available for retirement if you begin saving and investing at an early age.
Types of Financial Goals
There are essentially three distinct categories of monetary objectives to think about when you plot out your future:
Short-term: These are long-term objectives that you hope to achieve during the next 12 months. Small trips, apartment changes, and significant purchases like new computers and couches all fit into this category.
Medium-term: In this situation, you have a good idea that it will take you anywhere from one to five years to achieve your objective. Maybe you’re putting away money for something more substantial, like a graduate degree, a wedding, or a down payment on a house.
Long-term: Long-term goals are those that you anticipate taking longer than five years to achieve, such as saving for retirement or amassing a larger down payment on a property.
Think carefully about your goals and the time frame in which you want to achieve them.
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7 Financial Goals for Students
Alissa Krasner Maizes, creator of Amplify My Wealth and a certified attorney and registered investment advisor, advises clients to first consider their values before making any financial plans.
“Your list of what you value most can guide you in making the best decisions for you, making you more successful in reaching your goals,” adds Maizes. The next step is to establish some long-term financial objectives that reflect your core principles, beginning with more manageable targets that are easy to monitor.
Some possible learning outcomes are listed here.
Create a Budget
Your budget can help you see how your money is coming in and going out. It is important to document your income, expenses, and savings (if appropriate) regardless of how much money you have to start with. A budget can help you track your income and expenses in one place.
“Creating a budget is an essential step toward financial stability,” said Markia Brown, a Certified Financial Education Instructor and Registered Financial Associate at The Money Plug LLC. It aids you in keeping tabs on your cash flow, figuring out where your money is going, and where you may make cuts.
It’s something you can do in a matter of hours or days to accomplish a larger objective. Brown recommends keeping track of all of one’s income and then examining one’s expenditures. The next step, according to her, is to classify your costs as necessities or luxuries. When money is tight, this can help you prioritize where to make cuts.
You can use it to determine how much of your income to put toward retirement savings or debt repayment, for example. “Review and adjust your budget regularly to reflect changes in income and expenses,” Brown advises.
Open a Savings Account
Establish a pattern of saving today, and you’ll be more at ease with the idea later on. Brown explains that you may open an account at numerous banks with as little as $5 or $10. Make regular deposits into your savings account with the use of recurring transfers. Saving as little as $5 each week will help you get into the habit of saving.
Although creating a savings account is typically as simple as inputting your information online, Maizes recommends thinking about if you’d rather do so at a physical location closer to your place of study. “Think about the interest rate they’ll pay you on your savings, or if they have student accounts with bonuses, fewer fees, no ATM fees, and lower minimums,” they advise.
Choose the best account for your needs by comparing at least two and no more than four different options.
Start Investing for Retirement
According to Jeff DeMaso, a Chartered Financial Analyst, former portfolio manager, editor, and founder of The Independent Vanguard Adviser, investing for retirement may be a key aim for everyone, regardless of income.
The benefits of compounding, which DeMaso called “the eighth wonder of the world,” are gradual to manifest. You should start investing as soon as possible, even if it’s a tiny amount.
Make regular contributions to a retirement account, such as a 401(k), if your company has such an option. Maizes adds that you can also set up a Roth individual retirement account (IRA). Using this method, you can begin saving for your future while taking advantage of your low tax rate.
DeMaso suggests finding low-cost index funds and setting up automatic investments, whether through an employer-sponsored plan or a personal account. Raise your yearly contribution to your retirement fund as your salary rises.
Establish an Emergency Fund
In order to be financially stable once you graduate from college, Maizes recommends starting an emergency fund. You could get financial aid from your parents or other organizations (such scholarships and grants) to cover most of your expenses. However, it can be more challenging to deal with unforeseen bills after graduation.
Putting money aside now for a rainy day can grow into a sizable sum in the long run. An emergency fund is like a savings account in that it can be created with very little money. You should aim to have enough money saved up to cover at least six months of living costs. You might begin with as little as $10 each week and raise it as your salary and financial position allow.
“Your emergency fund is your safety net in the event that you ever run out of money,” Maizes added. Having a savings account for unexpected expenses is a good long-term objective for anybody.
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Apply for Financial Aid to Reduce Student Loan Debt
Graduating with a mountain of student loan debt can be demoralizing. To lower the amount you need to borrow, Maizes suggests looking into scholarships and grants.
Maizes suggested thinking about applying for “no repayment required” scholarships and awards. “Students are encouraged to apply for these opportunities both inside and outside of their current institution.”
Talk to the head of the department you’ll be studying in and the school’s financial assistance office to find out what options you have for paying for college. Complete the FAFSA every year to find out what kind of financial aid you could receive for college.
Instead of taking on additional debt to pay for college, you might check into government work-study programs to supplement your income.
Start Building Credit
It is advised that students and young adults begin establishing credit as soon as possible.
“You’ll need a loan to buy a new car or house,” DeMaso said. The interest rate you’ll pay on those loans is dependent on your credit score. So, get a head start on establishing a positive credit record.
Obtaining and responsibly using a credit card is a simple and effective means toward that end. Select one or two purchases per month to charge to your credit card, and then promptly pay off the entire sum. Make credit card purchases a regular component of your budget, but never go beyond what you can comfortably afford.
Credit card interest rates are high and can be a hindrance, as DeMaso points out. Make smart purchases with your credit card to avoid falling deeper into debt.
Use Debt as Little as Possible
Finally, if you absolutely must take on debt in order to fund your education, use as little as feasible.
To offset costs, “finding another way to make money through tutoring, internships, dog walking, babysitting, and retail can go a long way,” as put forth by Maizes.
Following graduation, Maizes suggests formulating a repayment strategy to eliminate student loan debt as soon as possible. You should prioritize paying off the debt with the highest interest rate first, while still making the minimum payments on the remainder. If you have extra money after paying off one loan, put it toward the next one.
Depending on your level of student loan debt and your capacity to put aside additional cash for debt repayment in your first post-college employment, this could be a goal for the intermediate to long term. While debt consolidation is a priority, you can still put money toward other objectives.
What is a common financial goal?
One can set short-term, intermediate-term, and long-term monetary targets. Having a savings cushion for when unexpected expenses arise is a frequent financial objective.
What are 5 long-term goals for students?
Building an emergency fund, paying off student debts, saving for a car down payment, saving for a house down payment, and investing for retirement are all excellent long-term objectives for students to work toward. A student can benefit from each of these objectives in terms of developing sound financial habits and giving them something to work for.
What is the best financial goal?
There is no “best” financial aim; nonetheless, saving for retirement is likely the most important long-term goal for most people. Whomever establishes financial objectives is responsible for achieving them. Your current situation, future aspirations, financial standing, and commitments should all inform your decision regarding an appropriate target.
The Bottom Line
A financial plan should be established at an early age. In fact, you may better prepare yourself for the future of your finances if you start practicing excellent financial habits and learning how to make financial objectives right now. Making a plan for one’s financial future is a vital start in the right direction, but it is by no means a guarantee of a prosperous future.
Maizes recommends acknowledging your progress and rewarding yourself at key points along the way as you seek to achieve your financial goals.
“Whether you have extra money each month or not, celebrate being mindful of your money,” Maizes said. “This is a huge accomplishment. These steps will always serve you well and help you make better decisions with your money.”
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