Entering college life might seem like entering into a Utopia for many students. They think it is the ultimate “real world” that can never be compromised for any damn reason.
They imagined it is the perfect time to do something great, have fun, start a new relationship, and many other things. But they often forget that college life is the prime time for taking out responsibilities.
This is the time when many of the students become responsible for their finances. Some students may learn financial basics from their parents. They get personal finance advice from their parents or family members since childhood and hit the ground with confidence.
But many college students didn’t get enough knowledge from their parents about how to manage their finances and fulfill financial goals in life. As a result, they keep struggling with limited funds to cope up with their multiple expenses and forget about how to spend wisely to gain more.
A student must know how to pay for college, and other expenses related to his/her future life. So, let’s get more info on how students can become financially sound by setting up financial goals.
How to set up smart financial goals being a student?
1. Set some financial goals
You need to review your financial situations and write down your financial goals. You need to list your current financial assets and income sources.
There is a concept of setting SMART financial goals, they are practically the characteristics that you want in your financial goals. They are as follows:
Getting rich before your retirement is not a SMART financial goal. But saving to buy a vacation home or a new car before you turn into the ’50s is a SMART goal. Your goal might be saving for retirement or paying down debt, your financial goals should motivate you to work hard and fulfill your targets.
2. Start a budget
You should try to set up a budget as soon as possible. During your college days, you should always control your expenses and save more.
For this reason, you should start budgeting your finances and track your spending. Many financial goals may become successful depending on your budgeting skills.
Your budget should cover these aspects:
- A proper monthly spending plan and how to follow it
- Options to reduce monthly bills
- Managing outstanding debts and avoid more debts
- Saving for emergencies
- Set up short-term, medium and long-term goals
- Keeping provision for family needs
You should calculate your income and expenses for the semester. Make sure you consider fixed expenses and all the variable ones. After considering such expenses you may set up a budget for a month.
Similarly, you may use some financial apps to track your spending. After a month you may see that in which category you have spent more. Then you may try to reduce expenses on that category and save more.
3. Avoid unsecured debts
If being a student you are using credit cards, make sure you use your cards wisely and keep your credit utilization ratio below 33%.
If you are already carrying a heavy debt load (especially unsecured debts such as credit card bills, payday loans, or personal loan debts), you should work on paying then off asap.
Credit card balances, payday loans will carry a high-interest rate compared to other loans. Apart from that, they also have late fees and additional charges which may increase your debt amount. If you miss any payment on credit cards or payday loans, it will be very harmful to your credit.
So, you may consolidate your debts with a low-interest loan and pay your debts off.
Payday loan payment due dates may extend for two weeks or 15 days most of the time. So, if you have taken payday loans from legal lenders, make sure to opt for a payday loan debt consolidation option and get out of that misery once and for all!
4. Look for a decent job
Find out your key skills and improve them. It will be helpful for you to find a decent job with a good salary. As a student, working full-time might not be possible for you. But working for a few hours a week may help you get some extra cash.
You may use your hobbies to earn extra dollars. You may teach online, write online, or sell online and start earning.
5. Keep an eye on your credit score
Your credit score is a strong indicator of your financial health. There are 3 major credit bureaus, Equifax, Experian and TransUnion which primarily assign FICO scores, ranging from 300 (poor and high risk) to 850 (excellent and low risk).
Things you should do:
- You should review your credit report and get a clear picture of your credit profile. Make sure you look for errors/bad items and remove them asap from your credit report.
- You can get a copy of your credit report free once every year from each of the credit bureaus.
Building a high credit score can help you get offers on loans with low-interest rates, credit cards, home loans, and car payments. When you search for a new home and apply for mortgages, or get a new job, your credit history and score will play an important part.
6. Start thinking about retirement savings
I know it is a bit early, but it is wise to start early for retirement savings. The sooner you start saving for retirement, the more chances you may get to grow the resources such as personal savings account, bank savings, investment portfolio, etc.
There are lots of other financial goals that you may choose while in college. Whatever goal you choose, make sure your goals are practical and affordable to you. Best of luck.