Have you started planning for your financial future? Even when you’re busy getting settled in college, it’s imperative to set goals for yourself and create a plan for reaching them.
Cultivating robust financial literacy skills will guide you through paying off student loans and planning for adulthood and retirement. It may feel daunting at first, but keep your eye on the prize! Remember, setting small goals can lead to great rewards down the road. Let’s explore how to set financial goals as a college student.
7 Tips for Financial Goal Setting
Thinking about setting financial goals is one step in the right direction. But how do you go about making it happen? Here are seven ways to crush your financial goal-setting in college:
- Budget for All Expenses
Before moving on to loftier goals, you need a reasonable budget that covers all your expenses. Yes, this includes fun expenses! Besides the basics like housing, food, transportation, healthcare, and utilities, don’t forget to set aside money for:
- Entertainment and travel
- Retirement
- Savings
- Taxes (if you have a part-time or full-time job)
- Debt repayment (if you’re taking out student loans)
Life can be expensive for a student on a limited budget. But with proper planning, you can spend responsibly and enjoy college life.
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- Build an Emergency Fund
An emergency fund is an account where you store money for unexpected dire situations. Having one can help you avoid falling into debt if say, you lose a job or become ill out of nowhere. Life happens, and we have to prepare for the good and the bad.
A general guideline is to have an emergency fund equivalent to at least three months’ worth of living expenses. If possible, it’s best to accumulate six months’ worth. The last thing you want is to go into debt when something goes wrong because you didn’t have enough cash on hand!
The best part about building an emergency fund is you don’t need a lot to get started. Even $1,000 will cover most emergencies if used wisely. To reach this goal, save up gradually by setting aside $50 from each paycheck until you reach $1,000.
- Create a Passive Income Source
In addition to working a part-time job, it doesn’t hurt to look for other ways to make money. As a college student, you may not have enough time to devote to another side hustle. But what if we told you it’s possible to make money without working every day?
You can earn money in your sleep with passive income. This involves putting in a good amount of work and effort upfront, but you could reap monetary rewards for years to come. Consider these passive income stream ideas:
- Write a book and publish it online
- Sell digital goods on Etsy
- Rent out your car or bike
- Take and sell stock photos
- Start a blog and add affiliate links to your articles
The options are endless—you just have to find what aligns with your interests and lifestyle.
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- Switch to a No-Fee Bank Account
If you’re using a traditional bank, your account may have a monthly fee (or other maintenance fees). This can be a substantial expense for students trying to save every penny and pay off debt. Looking for an alternative method of budgeting? Switching to a no-fee bank account could help you cut down on unnecessary expenses.
The first step to finding a no-fee bank account is to call your current financial institution. Ask if they offer any accounts with no fees attached. Even big-name banks have free account options, so you may not need to abandon yours altogether.
- Pay Off Student Loans
Student loans are a fantastic resource for funding your education and getting opportunities that wouldn’t be available otherwise. But they can also put a real damper on your financial security in the long run if you don’t manage them properly.
If you have extra money after paying your monthly expenses, consider paying off your student loans. Even small steps make a big difference. You may find yourself saving thousands of dollars over time by making extra payments each month.
Don’t fret if this isn’t possible right now. Here’s how you can pay down student debt efficiently:
- Focus on paying off the highest-interest-rate loan first
- Make the minimum payments on all your bills to avoid fees
- Consolidate multiple student loans into one
- Manage Credit Card Debt
Credit cards are a convenient way to get yourself out of a bind. But it can be tempting to keep spending when you don’t physically see money leaving your wallet. Sometimes, we spend more than what we can afford—and it’s crucial to avoid falling into this revolving trap.
Manage and steer clear from credit card debt by:
- Not spending more than you earn
- Not spending more than you can pay back on time
- Using cash to pay for items whenever possible
If you’re not sure how much you can spend, it’s time to refer back to the budget you created.
- Set a Specific Time Frame for Achieving Your Financial Goals
Having a clear deadline in mind makes it easier to plan and prioritize your activities in a way that helps you make progress toward your goals. Many students put things off when they have no accountability or a definitive time frame.
It’s important to be reasonable when setting deadlines. The key is to set something realistic, but not so long-term that it seems unachievable. A goal with an end date that’s a year or two out will keep you focused on the bite-sized tasks you must do to get there. It’ll also give you enough room to make adjustments along the way if needed.
Pro tip: Give yourself an incentive for reaching your goals on time. This could be something like a fancy dinner or the purse you’ve been eyeing for a while. Establishing healthy financial habits shouldn’t be a chore!
Setting Financial Goals Early Leads to a Fruitful Future
Financial goal setting as a college student can be overwhelming at first. But with these seven golden tips, it’s possible to set sensible goals that don’t feel so far-fetched. The sooner you start, the better off you’ll be in the future!
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