One of the essential conditions for being and staying ‘on course’ is financial stability. It might be challenging to envision one’s future, but it is possible to stay motivated by setting realistic short-term and long-term goals. A personal financial plan can help students take control of current spending habits, make informed financial decisions, and achieve the goals after graduation. In the following essay, I will explain why financial planning is vital for college students and discuss my goals and personal strategies for the next five years.
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As a student, I understand that planning ahead and making wise choices are essential for financial security and the achievement of success in life. Student loans, and living expenses, such as housing, food, or transportation, place a considerable burden on young adults attending college. Financial knowledge may help effectively organize and manage available monetary resources and gradually accumulate wealth (Grable and Palmer 1-5). Financial literacy required for careful planning can involve budgeting skills, understanding of the time value of money, and awareness of saving and investment options. Therefore, my personal plan is based on a set of financial goals and potential strategies to achieve them.
My primary short-term goal is to have complete control of my finances, so I plan to create a budget planner to manage my current income and expenses. Keeping a planner might assist in the understanding of the main sources of income, examine spending habits and indicate financial goals for the next month or year. A healthy budget should be close to the recommended percentages of net income spent on (housing, transportation, food, entertainment), so the planner can suggest ways to create a positive balance (Downing 7). Moreover, the feeling of control by planning in advance may alleviate the stress associated with uncertainty and motivate a person to take advantage of financial opportunities (Grable and Palmer 1-4). For instance, analyzing repeated or unnecessary purchases may prevent wasteful spending in the future, while extra savings may be used for micro-investments. Alternatively, financial goals may become a part of a personal journal that can be employed to learn about one’s strengths and weaknesses in the financial area.
The next goal is to decrease the flow of money out and increase its accumulation. The efforts or sacrifices to save money during college can bring results in the future (Downing 5). Transportation expenses represent a significant part of overall spending, so I plan to drive less and walk more to save money on gasoline, car maintenance, and repairs. Additionally, credit cards and loans involve high-interest rates, so the short-term financial goal is to discipline myself to rely on cash, minimize the use of debt-accumulating bank products, and carefully monitor debit cards. Finding the sources of income, such as part-time jobs or investment dividends, may help accumulate funds for the future. However, it is crucial to maintain a healthy balance between academic and work responsibilities. Earning good grades and enough money from part-time work or passive income sources might help achieve the financial goal related to the money flow.
Another financial goal in my 5-year plan is to be financially secure and independent since living from paycheck to paycheck might be risky at times of uncertainty and global crisis. The adverse effects of the COVID-19 pandemic on the local and global economy, job market, and personal income, reveal the urgent need for personal savings. Establishing a basic emergency fund or a savings account with a small amount of money may assist in reaching the goal of financial stability and security. Financial advisors suggest that the amount of backup money in an emergency fund should be calculated depending on basic monthly expenses (Mill 42). The fund will allow me to fulfill financial obligations in cases of unpredictable or expected expenses due to job loss, health emergencies, or disasters. Thus, I hope to begin building an emergency fund to support me in the case of a crisis and alleviate finance-related stress.
Opening an investment account is the last goal in my financial plan. It is also helpful to know about the time value of money. The financial concept means that the sum of money a person/business has now is worth more than the identical sum will be in the future due to the loss of value called inflation (Mill 41). Based on that idea, investing even small amounts of money will bring more benefits in the future than spending it shortly after earning. The financial planning strategy also includes the assessment of financial risk tolerance (Mill 235). Investments may have uncertain outcomes, so the ability to take risks while investing is needed to take timely action when the investments are declining in value.
In conclusion, financial planning can help college students use basic financial knowledge and budgeting skills to achieve financial security. My 5-year financial goals for financial prosperity include keeping a budget planner, decreasing spending, creating an emergency fund or a savings account, and investing. The strategies to reach these goals might prevent wasteful spending, minimize the use of credit products, and help build and maintain wealth.
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Downing, Skip. On Course: Strategies for Creating Success in College and in Life. 8th ed., Cengage Learning, 2017.
Grable, John, and Lance Palmer. Introduction to Personal Finance: Beginning Your Financial Journey. Wiley, 2018.
Mill, Alfred. Personal Finance 101: From Saving and Investing to Taxes and Loans, an Essential Primer on Personal Finance. Adams Media, 2020.