Setting great financial goals as a college student – a guide

There is a difference between financial dreams and financial goals for college students. Research has shown that setting S.M.A.R.T. goals increases the chances you achieve them. SMART stands for specific + measurable + achievable + realistic + time-based.

Before we talk about the SMART method of goal setting, we need to talk about how different two students’ situations can be. One student has to worry about how to finance her college education or if she even can afford an undergraduate degree. Another student can count on his parents to pay for whatever prestigious private institution he likes to attend, even paying for graduate school.

For those that can count on full support from their parents, setting financial goals is not much different than for anyone else. The kinds of goals they want to pursue may more depend on their file stage, such as being single, married, with kids, than being focused on how to pay for college. In this article, we’ll focus on students that need financial aid to afford college.

A chalk board saying: dream-big & make it happen
Image by Gerd Altmann from Pixabay

Financial goals that fit your needs

Setting financial goals seems easy. Who does not want to earn a lot of money, buy a mansion or retire early? However, these are more dreams than concrete goals. As a first step, you want to assess your general financial situation.

You should ask yourself these questions:

  • Do I have existing debt? Do I need to make payments on this debt?
  • Is my emergency fund big enough?
  • What expenses do I estimate for college?
  • Do I have to borrow money to finance college and living expenses?

Armed with the answers you can set an overall objective. We recommend setting the objective to end up with the minimum amount of debt at the end of college.

Experience with money

Another important aspect is your financial literacy and your prior experience with money. Do you manage your own money? Do you have a bank account? Do you have a credit card? How good are you managing your money and your credit?

Experience with spending money matters a great deal. There are many shiny objects that we’d like to have and spending money is made way too easy these days. However, being frugal makes it easier to succeed financially.

Think about how your family manages money. Do they manage income and expenses with a budget? Do they save enough for long-term goals? You also need to look at how much you have learned from the spending habits of your family. Are you going to emulate the paycheck to paycheck lifestyle?

Going to college is a time where young adults learn a lot of new things. Most are responsible for their own money for the first time. You want to increase your financial literacy and learn how to be responsible with money, credit, and learn about the budgeting process.

Formulate S.M.A.R.T. goals – with examples

A SMART goal is a goal that is sufficiently defined to be reached successfully. The Acronym stands for

  • Specific
  • Measurable
  • Achievable
  • Realistic
  • Time-based

Let’s make an example: “Saving money for emergencies” is your money dream.

A goal should be specific, so you know exactly when you reached it. “Save money for emergencies” is not specific enough for a goal. To express the goal more specific you want to state “I will save an emergency fund of $3,000”. This is specific because you are the actor that does the saving and there is a specified amount of money for emergencies. You can even imply that the word “emergency fund” indicates that the money is kept in a separate savings account.

Is this goal measurable? Now it is. I can measure how much of the $3,000 goal I have already saved.

Is the goal achievable? That depends on the health of your monthly budget. You can improve on your goal to make it more testable if it is achievable by restating “I will save $300 a month towards an emergency fund of $3,000”. Now you can state that after 10 months you will reach your goal. A time span of 10 months seems achievable.

But is this goal realistic? This can’t be answered without knowing your income and spending in your budget. However, You may determine that it is not realistic to save $300 / month, $150 / mo seems to be more realistic. In that case, you can determine that it will take you 20 months to achieve your goal. So you need to re-test your assessment that the financial goal is achievable.

Last but not least we want to see if the goal is time-based. As we already calculated that it will take 20 months’ worth of time to save the required amount of money for emergencies, our goal is time-based. An alternative formulation would be “I will save for an emergency fund of $3,000 in 20 months with a minimum of $150 per month” This would give you some flexibility to reach the goal earlier.

As you can see turning financial dreams into financial goals can help you to turn them into reality, if you follow the SMART goal guidelines. Besides, the S.M.A.R.T. goal test is not only for financial goals but for any goal you want to achieve. Imagine how you are in control, setting your academic goals with the same precision.

Examples for short-term financial goals for students

Financial goals vary as much as the people that set them. As we focus on students that are not flush with money, here are some typical examples

  • I need to reduce my credit card balance of $450 to zero by June and continue to pay my credit card in full each month.
  • I want to save $320 by the end of the semester to be able to pay for next semester’s books in cash, instead of putting them on the credit card.
  • I resolve to reduce my budget for eating out by $150 per month. This will be offset by an increase in spending on groceries to cook at home for $50.
  • This semester I want to care very well for my books, so I can resell them for 60% of what I paid for.
  • I want to find a summer job by April, so I can earn $2,000 to reduce my loan amount next semester and to afford a vacation around Christmas.
  • Before next semester starts, I want to find a work-study job that pays for my entire discretionary spending of $300 / month.
  • I want to raise my GPA to 3.0 this semester, so I don’t lose my remaining grant money of 14,000 dollars.

As you can see, short-term goals usually need to be achieved within three to six months. Further, financial goals can address earning money or saving money so it can be spent on a purpose.

Typical Long-term goals for undergraduate students

As college is usually only four years, there are not many really long-term goals to aim for. However, some of the goals have long-term implications. Especially mid-term financial goals, that reduce the amount of student loan debt you need to finance your education, will reduce the balance you need to pay back the loan. This can reduce the monthly payment or the time until you will be debt-free again.

An archery target, symbol for "What is the goal of a personal budget?"
Hit the target with smart goals

Here is a list of long-term financial goals a student might set:

  • I want to adhere to the recommended course load each semester, so I can graduate in 4 years and don’t need extra time to finish my degree. This keeps the loan amount as planned and allows me to earn money earlier, so I can start repaying as soon as possible.
  • I will study hard to achieve at least a GPA of 2.0, so I can pick a job with a salary in the top 20%, which helps me to make at least one extra payment a year on my student loan.
  • I resolve finding a job within a month that pays at least $300 a month so I can save $200 monthly towards a semester abroad in the final year of undergraduate studies.
  • I will find a job before next semester starts, that pays better health insurance benefits than the college offered plan with high deductibles.
  • In the next 12 months I will find a job that offers two-year college tuition reimbursement.

Remember, that you want to limit the number of financial goals to very few. For example, when you try to achieve 8 financial goals at the same time, you will contribute to each one only a little every month. You will be discouraged because the measured progress towards your goal seems so slow.

You can always achieve financial goals one at a time. If you have more than one, you can decide which one is more important and achieve this one first. Then you can pick the next goal and make it happen. A word of caution: Do not pick only short-term goals and never get to the long-term goals. It is OK to not save for retirement while being a college student. However, don’t make it something you learn in college for the rest of your life.

Be accountable for your goals

Setting goals for your money is a good start. If you test your goals with the SMART rule you are off to a great start. However, there is one more element that needs to be in place. That is accountability for your achievements.

We highly recommend having proper budgets in place. One budget for the overall “project” to earn a college degree or a secondary degree. The second budget should be a monthly budget. The monthly budget you need to craft in accordance with your project budget. Further, you need to see if your monthly budget balances each month. If the budget does not balance, you need to find ways to increase your income or reduce your expenses. Just make sure this does not affect your studies negatively. Because the worst blow to your budget plan is to leave college without a degree.

Having financial goals is an important part of personal finance at any phase of your life. You can assess your budget only in connection with your financial goals. You don’t need a financial planning professional to achieve your money goals. Setting goals that are specific, measurable, achievable, realistic, and time-based can ensure that you set effective financial goals.

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