College students often ask us what they can do to reach financial success. The first step is to define your financial goals and develop a plan to reach them. Read more below.
- Define your goals – What do you want? Here are some common financial goals:
- Pay off a credit card or loan
- Create an emergency fund
- Contribute to a retirement plan
- Save for a down payment on a home
- Save up for a large purchase such as a car, boat, big screen TV
- Set aside money for travel
- Save up for college
- Invest money in the market
- Start up your own business
- Write down your goals. When you write down your goals, you are more likely to achieve them. It also helps you assess what you really want.
- Prioritize. You may have a lot of goals. After you write them down, prioritize them. This will help develop a plan of action you can stick to.
- Be specific. Define an amount, a time frame, and what the money is for in your financial goal. Example: “I would like save up $20,000 within the next 10 years for a down payment on a house.”
- Be realistic. Set a goal that is reasonably attainable. You can always revise your goal in the future depending on how you are doing with your plan.
- Develop a plan of action. After you define and prioritize your goals, come up with a plan on how to meet your goals by working with your monthly budget. For example, if you want to save $1,000 for a new TV over the next year, see if you are able to set aside $84 a month towards it. If so, after 12 months you will have the $1,000 you need to make the purchase plus interest you earned on your savings.
- Don’t forget interest. If your goal is to save a certain amount of money, open an account that will allow you to earn the highest rate of interest and your savings will increase faster. If your goal is to pay something off, keep in mind you are paying interest on that item. Many experts advise that you put any extra money you have for paying off loans and credit cards to the item with the highest interest rate first.
- Set milestones. If you want to save $5,000 in the next five years, set short term goals along the way. You may decide that during the first year, you will save $700, the second $800, the third $1,000, and so on.
- Commit yourself to your goals. You will probably have to make some trade-offs in order to meet your financial goals. Maybe you want to go to Italy for a week and you also want to save for a house. Weigh the importance of each goal and commit to meeting your milestones. Many times, you can still reach both goals – it may just take a little longer.
- Review your progress. Periodically check to see how you are doing with meeting your financial goals. Make adjustments to your plan as necessary.
Saving $1 a day
| No Interest | 3% daily compounding | 5% daily compounding | |
| Year 1 | $ 365 | $371 | $374 |
| Year 5 | $ 1,825 | $1,969 | $2,073 |
| Year 10 | $ 3,650 | $4,256 | $4,735 |
| Year 20 | $ 7,300 | $10,002 | $12,542 |
| Year 30 | $10,950 | $17,757 | $25,413 |
Saving $5 a day
| No Interest | 3% daily compounding | 5% daily compounding | |
| Year 1 | $1,825 | $1,853 | $1,871 |
| Year 5 | $9,125 | $9,844 | $10,366 |
| Year 10 | $1,8250 | $21,282 | $23,676 |
| Year 20 | $36,500 | $50,009 | $62,710 |
| Year 30 | $54,750 | $88,786 | $127,065 |
10 steps to reaching your financial goals:
- Define your goals – What do you want?. Here are some common financial goals:
- Pay off a credit card or loan
- Create an emergency fund
- Contribute to a retirement plan
- Save for a down payment on a home
- Save up for a large purchase such as a car, boat, big screen TV
- Set aside money for travel
- Save up for college
- Invest money in the market
- Start up your own business
- Write down your goals. When you write down your goals, you are more likely to achieve them. It also helps you assess what you really want.
- Prioritize. You may have a lot of goals. After you write them down, prioritize them. This will help develop a plan of action you can stick to.
- Be specific. Define an amount, a time frame, and what the money is for in your financial goal. Example: “I would like save up $20,000 within the next 10 years for a down payment on a house.”
- Be realistic. Set a goal that is reasonably attainable. You can always revise your goal in the future depending on how you are doing with your plan.
- Develop a plan of action. After you define and prioritize your goals, come up with a plan on how to meet your goals by working with your monthly budget. For example, if you want to save $1,000 for a new TV over the next year, see if you are able to set aside $84 a month towards it. If so, after 12 months you will have the $1,000 you need to make the purchase plus interest you earned on your savings.
- Don’t forget interest. If your goal is to save a certain amount of money, open an account that will allow you to earn the highest rate of interest and your savings will increase faster. If your goal is to pay something off, keep in mind you are paying interest on that item. Many experts advise that you put any extra money you have for paying off loans and credit cards to the item with the highest interest rate first.
- Set milestones. If you want to save $5,000 in the next five years, set short term goals along the way. You may decide that during the first year, you will save $700, the second $800, the third $1,000, and so on.
- Commit yourself to your goals. You will probably have to make some trade-offs in order to meet your financial goals. Maybe you want to go to Italy for a week and you also want to save for a house. Weigh the importance of each goal and commit to meeting your milestones. Many times, you can still reach both goals – it may just take a little longer.
- Review your progress. Periodically check to see how you are doing with meeting your financial goals. Make adjustments to your plan as necessary.
