Start this year off by asking yourself, “What do I want?” That might seem like an overly simplified place to start when setting financial goals for your ENTIRE life, but you’d be surprised. If you’re reading this article, you’re most likely staring at a stinking pile of student loan debt with a shovel in hand, wondering where to begin. Whether you’re a recent grad settling into your shiny new job OR you’re several years into your career, you might be wondering why you’ve barely made a dent in paying off your student loans. You are not alone. For millions of people student loan repayment is a fact of life. But instead of putting your financial dreams on hold till you’ve paid your penance, there’s a couple things you can do this New Year that will help you get back on track and moving in the right direction. It’s time to dream big, and it starts with deciding what you want.
Imagine Financial Goals
Setting financial goals isn’t a big scary process. Try to think of it as an ongoing practice rather than a one-and-done deal. As life ebbs and flows, you’ll want to be flexible adjusting your financial life so you can cover your obligations while still maintaining a reasonable progression toward your goals. While envisioning your financial future, it’s imperative that you set clear goals to work towards. Developing short, mid, and long-term goals is key to making forward progress in the most efficient manner. Short-term goals are things you want to accomplish within one year, like establishing an emergency fund or creating a budget that actually works for you. Your short-term goals are going to change fairly often as life changes, but you still want to gain ground on your long-term goals. Mid-term goals are things you want to happen in a few years, such as financing a home or paying down education loans. Long-term goals are those that you’ll accomplish many years down the line, like investing in rental property or building an adequate retirement fund. Sometimes those goals seem too far away to worry about right now but if you’re smart you will take them seriously. The best thing you can do when setting goals is to close your eyes and really imagine having those things. It will build a desire – a fire in your belly – to do whatever it takes to reach that goal.
Set a Budget
A budget is not only your best friend, it’s the backbone of your financial life. Sticking to it can be tough, but within a couple months you’ll see progress. This next thing is important. If your budget isn’t written down, it’s not a budget. If you don’t give yourself limits, you’re likely to spend more than you should and your goals will start slipping away. When setting a budget, you have to be honest with yourself. Having good intentions isn’t the same thing as being realistic about what you’re willing to give up so you can set aside that money for your goals. Think about it. Where is the money going to come from when unexpected bills pop up, not to mention when you want to retire? You’ve got to be vigilant with your budget; you’re not sifting for gold here. That’s real money going out the door every time you open your billfold.
Check Your Progress
While it’s extremely important to prioritize these goals, you don’t have to approach them one at a time. Taking time to reimagine what life would be like when you reach your longer-term goals helps to keep up the motivation and daily sense of purpose as you tackle your short and even mid-term goals. Remember, be flexible. For instance, you don’t necessarily have to dig yourself out of student loan debt before you start investing in your other goals. Life isn’t always linear, so don’t get frustrated when it seems like all you’re ever accomplishing is one short-term goal after another. You’ll find that both the small things you do on a daily and monthly basis and the big things you do every year and over the decades will help you achieve all of your financial goals.
Stay Informed
While it’s extremely important to prioritize these goals, you don’t have to approach them one at a time. Taking time to reimagine what life would be like when you reach your longer-term goals helps to keep up the motivation and daily sense of purpose as you tackle your short and even mid-term goals. Remember, be flexible. For instance, you don’t necessarily have to dig yourself out of student loan debt before you start investing in your other goals. Life isn’t always linear, so don’t get frustrated when it seems like all you’re ever accomplishing is one short-term goal after another. You’ll find that both the small things you do on a daily and monthly basis and the big things you do every year and over the decades will help you achieve all of your financial goals.
Revisit Your Plan
You also want to revisit your financial plan every time you have a big life event that will inevitably affect your finances – getting married, having a kid, switching jobs, paying off your student loan debt (cough cough). Reassess your goals AND your budget, then adjust accordingly. Imagine the day when the hundreds of dollars you paid every month for your student loan debt can now be utilized towards other investments – ones that finally compound in the black! Another reason to revisit your financial plan every few months is to see if you were able to achieve the short-term goals you had set out to earlier in the year? If you did, then celebrate. No really. Do a little something nice for yourself. If not, then why weren’t you able to get there? And don’t think that circumstances or other can get you off the hook. Remember, you are the only one in charge of reaching your goals. You’re smart. You can do this.
Be Consistent
Again, it’s doubtful you’ll make perfectly linear progress as you move forward through your goals. The important thing is not to be perfect, but to be consistent. If you get hit with an unexpected car repair or medical bill one month and can’t contribute to your emergency fund, don’t beat yourself up; that’s what the fund is there for. Just get back on track as soon as you can.
The Sooner, The Better
Again, it’s doubtful you’ll make perfectly linear progress as you move forward through your goals. The important thing is not to be perfect, but to be consistent. If you get hit with an unexpected car repair or medical bill one month and can’t contribute to your emergency fund, don’t beat yourself up; that’s what the fund is there for. Just get back on track as soon as you can.
Finally, yet perhaps most importantly, financial planning is NOT just for the soon-to-retire. We all need a plan, and the sooner you start, the better. Start researching today. Knowledge is power and the more informed you are, the more at peace you’ll be with your financial life, knowing that every day is another step closer to your bright future.
This is all about your life and how you want to live it now and in the future. Set your goals and stick to them! If you find yourself year after year dancing around a goal rather than putting one foot in front of the next, be honest with yourself. It’s possible that goal isn’t quite as important as you made it out to be. It’s at that point that you….revisit your financial plan and adjust accordingly. Now you’re getting it!
We at ELFI exist to empower grads just like you to make educated financial decisions. If you’re struggling to manage your student loan debt, consider refinancing to help make your repayment plan more affordable. Learn more about how updating your loan term might bring your future into focus and see how easy it is with ELFI.
