April is Financial Literacy Month, and Powercat Financial Counseling is taking this opportunity to write a series of articles related to basic financial management. To kick the month off, we’re starting with setting financial goals.
Setting goals, especially financial ones, can be a challenging, and sometimes daunting, task. Having goals is important, though, in that they give you something to aim for and work towards. To quote Zig Ziglar, “If you aim at nothing, you will hit it every time.” A good place to start is to think about your life in the future. How do you want to live? What do you want your life to look like? Do you want to be debt free, buy a car and a house, start a family, or travel? How will you accomplish these tasks and get to the life you really want? Thinking about these things now is important. When you graduate and enter the workforce, it is easy to get caught up in your daily routine and not give much thought to your future. You will probably be inclined to think a few weeks or months ahead, but it might be hard to think a few years ahead.
Short-term vs. Long-term:
A short-term goal is one that is set for two years or less, and a long-term goal is one that is set for five or more years. Some examples of short-term goals are planning for spring break and summer trips and building an emergency fund, while long-term goals might be buying a car, buying a house, or paying off student loans. Even if you have trouble coming up with specific savings goals, you should still try to save whatever you can. A good first goal for everyone, which should be a priority, is an emergency fund. An emergency fund is a separate store of money which you access only in emergencies (ordering a pizza in the middle of the night because you don’t have food around is not an emergency). If your car suddenly got a flat tire, how would you pay for it? If you lost your job all of a sudden, where would the money come from to get you by until you get another job? These are the types of situations in which an emergency fund would be useful. It is recommended that you work up to having three to six months’ of living expenses saved up in the event you lose your job or are unable to work due to an injury. This may seem like a lot of money, and depending on your situation, you as a college student could probably afford to wait a little while to get to the point of having this much saved. Your parents may be willing to bail you out if something comes up. But it is still a good idea to have at least $500 to $1,000 on hand in case of emergencies. Life happens: will you be prepared when it does?
When setting goals, it is important to define them well. Your goals should be Specific, Measurable, Attainable, Relevant, and Timely, or “SMART.” If your goal doesn’t have these characteristics, you will likely give up on it. This is why it is important to write out your goals with these specifications and keep it somewhere where you will see it on a regular basis. You will also want to prioritize them. It is important to note that your goals may change over time and to review them periodically to make adjustments as necessary. Set a reminder for yourself every few months to review your goals and see if you need to adjust them. Maybe something came up since you set and prioritized your goals, or perhaps your goals will drastically change once you graduate; if so, you will want to make the necessary adjustments and re-prioritize.
Motivation to Save
Some people find saving to be difficult for them, whether it is because they feel like they are depriving themselves or they have loans to repay that they don’t think that they can save. One way to save without “missing” your money is to ask your employer or your bank to direct deposit a portion of your paycheck to a separate savings account. The general recommendation is that you save 10% of each paycheck; however, be careful not to set aside so much that you aren’t able to pay for your immediate expenses. Every little bit adds up, so save as much as is within your means even if it is only $10 or $20 a month. If you are able to save more than 10%, that is great too.
“If you are failing to plan, you are planning to fail,” said Benjamin Franklin. Planning really can be a challenge, especially if you don’t know how to start. One website that might be helpful is Sorted.org: https://www.sorted.org.nz/a-z-guides/setting-goals#s6. It helps you to organize your goals with its “goals worksheet” and walks you through the planning and implementation process, offering tips along the way. It even talks about goal-setting in relationships, which can be even more of a challenge than setting goals on your own.
In closing, it is important to set goals in order to achieve the life you want. Start thinking about it now and begin developing a plan to get you there. You will want to evaluate the short term and the long term, but allow for some flexibility in case your desires or values change. Saving as much as you can now and building up an emergency fund will pay off in the long-run. Be on the lookout in the next few weeks for more helpful tips about personal financial management during Financial Literacy Month. If you have any questions about setting goals or financial management and would like help with any of those, please make an appointment on our website: www.k-state.edu/pfc/services. We provide free and confidential counseling to all K-State students.
Peer Counselor II
Powercat Financial Counseling