Deciding on and outlining your financial goals is an important first step in reaching them. To make progress toward achieving your goals, it's helpful to turn them into SMART goals
. SMART goals are: Specific, Measurable, Attainable, Realistic,
For example, let's say one of your medium-term goals is to go with your friends to San Diego for spring break. Here's how to make this a SMART goal.
- Specific: A specific goal is, "I want to spend spring break in San Diego with three friends." A vague goal, by comparison, would be, "I want to do something fun over spring break."
- Measurable: You need $500 for your share of gas money for the drive to San Diego and back, your share of the split hotel room cost, and food for the week. This is more concrete than, "I need money for the trip."
- Attainable: You have about five months in which to save for your trip, and you'll save the money from your work-study job. You'll need to save $100 per month, or $25 per week, to go on the trip. You are more likely to see results with this goal than if you say, "I'll save any money that's left over at the end of the month."
- Realistic: You and your friends will drive the 1,000 miles in 15 hours, splitting driving time between the four of you. A vague goal is something like, "We'll make the trip in a day."
- Time-bound: You'll have 75 percent of the money saved by March. A vague goal would be, "I'll have the money by early spring."
This is just one example of a SMART goal. As your life beyond college unfolds, try to think of how you can apply this SMART goal-setting approach to future short-, medium-, and long-term goals. Examples of these types of goals could be as follows:
- Debt reduction. If you graduate from college with debt, paying down your student loans and/or credit card bills should be a top priority. Focus on the debt that has the highest interest rate first, as it will cost you the most money over time.
- Emergency fund. After you graduate and are paying your own living expenses, be prepared for the unexpected. Try to have a minimum of three months’ worth of living expenses in the bank.
- Spend less than you earn. If you want to learn to manage your money well, develop the habit of spending less than you earn, starting with your very first job. A second life success habit is to learn to pay yourself first, which means routinely putting a little bit of every paycheck into savings.
- Employee benefits. Many employers offer a variety of benefits to their employees, such as health insurance, retirement plans, life insurance, educational assistance, and other advantages. As a new employee, make time to learn about these benefits.
- Transportation. Consider public transportation as a cost-effective alternative to commuting to work by car. It will save you the cost of car payments, car insurance, gas, oil maintenance, parking fees, and tolls. If public transportation is not a viable option, consider buying a reliable used vehicle to meet transportation needs.
- Work attire and/or equipment. As a new employee, you may need to purchase new clothing to fit your employer's standards. Your job may require that you purchase certain tools or equipment. If you go on to graduate school, you'll have tuition and text expenses, along with all the usual living expenses.
- Getting married/starting a family. Weddings can range in cost from relatively little to tens of thousands of dollars. (Remember that you can use money that you don't spend on a wedding for other things in your budget or on your list of goals.) As a couple, you and your spouse will share costs that each of you previously paid individually—rent, utilities, groceries, etc.—so living expenses generally go down. Put the savings toward a shared financial goal.
- Saving for a home. To buy a home, you'll probably need a deposit, called earnest money, of at least $500. Beyond the initial deposit, many lenders want to see a down payment of anywhere from 5 percent to 20 percent of the home's purchase price. For instance, on a $100,000 home, you'd make a down payment of at least $5,000.
- Saving for retirement. Although you are far from retirement, starting now to save small amounts of money consistently over time can add up to bigger overall savings in the future. Remember that your company may offer a tax-advantaged retirement plan that you can participate in.
- Ongoing education. While your first job is no doubt exciting and rewarding, many people end up changing companies and/or careers throughout their working years. So, plan for some educational expenses for online classes, graduate school, and training in order to keep up with the times and enhance your future employment opportunities.
- Saving for children’s college. If you get married and have children, you likely will want to help pay for their college expenses. As you know from having just graduated, college is a big expense. Get started now with investing even small dollar amounts for a newborn, and add to these college savings regularly.
- Caring for parents. As you age and start your own family, your parents will be aging too. Depending on their financial and health situations, they may need some financial help from you at some stage in their life, such as when they require assisted living or nursing home care.
For further guidance on bigger financial issues that await you in the years to come, visit www.smartaboutmoney.org
, and keep an eye out for classes, seminars, and other information sources that can help you learn the basics.