Kentucky High School Financial Planning Home Page
Back to E-Mail Updates page
HSFPP Update # 228 – Financial Goals Can Be Achieved Through Better Financial Planning
Message from Bob: In this week’s lesson, we return to the subject of SMART financial goals, which we covered last fall in Update # 220 and Update # 221. These goals can be very helpful to anyone who is having trouble paying bills, saving money, and doing all those things we say we want to do. If you want to go to college, save for retirement, or take a year off for a round-the-world trip, SMART financial goals will help you do it!
Academic Expectation 2.18
Students understand economic principles and are able to make economic decisions that have consequences in daily living.
Academic Expectation 2.33
Students demonstrate the skills to evaluate and use services and resources available in their community.
Web Site Picks of the Week:
The FINRA Investor Education Foundation Web site provides information on the 2009 National Financial Capability Study.
Their Web site also includes the Executive Summary on Financial Capability in the United States, based on their national survey.
In the New$.... Making Ends Meet with SMART Goals and Financial Planning
by Dina Patel, undergraduate student in Computer Engineering, University of Kentucky
Many of us go through life without much of a plan, and not knowing where you’re going isn’t likely to get you where you want to go. This is definitely the case with our finances. If you don’t have a budget and a financial plan, you won’t have a clear idea of where your money is going, and you won’t know how you can save money. If you don’t know how much you have in your checking account, if you don’t know how much you’re spending, and you don’t know how much your expenses are going to be in the next month, all you’re doing is creating a recipe for stress! But the solution to your problems isn’t necessarily difficult; it just takes some planning.
Having SMART (Specific, Measurable, Attainable, Realistic, Time-bound) financial goals can be very helpful for financial planning. If you don’t remember what SMART goals are, go back to Update # 220 and Update # 221, from last fall. The first step is to decide what you really want and need. This will require some thought, as not everybody wants and needs the same things. You also need to decide in what time period you want to achieve each goal because this will help you set up a plan to achieve that goal.
You might, for example, want to go to the prom, but you don’t have any money saved for it yet. You’d better get moving, because it’s not that far off! You know you need a suit or dress, and you’ll probably need new shoes, as well. What else do you need? Find out now, go price shopping, and add up all the costs. Let’s say that you need to save $400 in four months for the prom; it could be more, so you’ll have to figure it out for yourself. Make a financial plan for how much you want to save each month, considering your income, savings, and spending. Then follow your financial plan. If you have to give up the snacks you’re used to, so be it. If the prom is worth it to you, you’ll make the sacrifices necessary.
The prom is very much a time-bound goal. You either save up enough money on time, or you don’t. But what about other goals that don’t have an external deadline? You have to decide for yourself when you want to accomplish them. Be realistic. Make sure it is something you can do by the date you have in mind. You can achieve your goal on time, or it might take longer than you originally planned. But using SMART financial plans can help you learn why you can or can’t achieve a particular goal on time. Some goals are easy to accomplish and some aren’t. Don’t let setbacks get you down, though: “failure” is a necessary part of life and you will probably learn more about yourself from your “failures” than from your successes. Everybody has setbacks, so make yours work for you. (Remember, it’s only a failure if you don’t learn from it and do better the next time.)
We’ve talked about the prom, and you might be thinking of other goals like saving up to buy a car, or to pay for college. But what about everyday life? Many teens have part-time jobs that help them pay their expenses, or maybe buy more than they would otherwise. However, don’t forget to save some money for emergencies. It can be difficult to save sometimes; but, if you find it hard to pay your bills each month, be sure to save whenever you can. If you lose your job, then your savings can help you pay your everyday expenses. You’ll also need to save money in case of car repairs or other unexpected expenses. Financial planning will help you avoid overspending and save money for those times when you’ll really need it.
Without an adequate financial plan, you will find it difficult to pay your expenses each month, no matter how much money you make. You surely don’t want to spend your life struggling to pay your bills, but many people do. According to the FINRA Investor Education Foundation’s recent National Financial Capability Study, nearly half of all Americans said they have trouble keeping up with their expenses and bills each month. A better financial plan could help them greatly.
If you don’t have enough money to cover monthly expenses, you could overdraw your checking account, which is a costly mistake. Not only will your bank penalize you for bounced checks, so will businesses you write checks to. These penalties are often more than the amount of the check itself, and they can add up quickly for multiple checks. According to the recent National Financial Capability Study, 23 percent of those who have checking accounts occasionally overdrew their accounts; and 73 percent of those who overdrew their accounts found it hard to pay bills and meet monthly expenses. This can also lead to having no money saved up for retirement. The same study found that “a smaller but significant number of respondents who have self-directed retirement accounts” have taken loans from their retirement accounts; some, in fact, have taken permanent hardship withdrawals from their retirement savings. Those who earn between $25,000 and $75,000 per year were most likely to need to withdraw money from their retirement savings. Unfortunately, these people are living now at the expense of their future. They are less likely to live comfortably in retirement and might not be able to retire at all.
Learning to make a financial plan now will also help you in the future. If you learn to manage your money now, while you’re still young, then you can have a better future with money for retirement and for emergencies. Plus, the earlier you begin investing, the more you can earn in compound interest. Don’t put yourself in a financial situation where you find it hard to survive. Start making SMART financial goals and start saving now!
FINRA Investor Education Foundation. (2009, December). 2009 National Financial Capability Study. Retrieved January 20, 2010, from http://www.finrafoundation.org/resources/research/p120478.
FINRA Investor Education Foundation. (2009, December). Financial Capability in the United States: National Survey—Executive Summary. Retrieved January 20, 2010, from http://www.finrafoundation.org/web/groups/foundation/@foundation/documents/foundation/p120535.pdf.
- Are you satisfied with your current financial situation? ___ Yes. ___ No. Why or why not?
- Do you have any financial goals that you want to achieve in the near future? If yes, then how do you plan to achieve these goals?
- Do you have any financial goals that you want to achieve over a longer period of time? If yes, then how do you plan to achieve these goals?
- Do you have funds set aside for unanticipated financial emergencies? ___ Yes. ___ No. Why or why not?
- Have you ever overspent? Did you overdraw your checking account? If yes, how did you pay for it?
- Do you have difficulties paying your monthly bills and expenses? ___ Yes. ___ No. Why or why not?
Complete Exercise 1C on Page 6 of the NEFE High School Financial Planning Program Student Guide. If you do not have a Student Guide, then to the following URL: http://hsfpp.nefe.org/loadFile.cfm?contentid=168.
Kentucky High School Financial Planning Program
The purpose of the HSFPP financial updates, video lessons, and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP, updates, and video lessons meet Kentucky core concepts. The Web site, updates, and video lessons are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.
If you are not already on our listserv:
The video lessons are available only to members of our listserv and will not be posted to the HSFPP Web site because of the timeliness of the information. If you would like to receive our video lessons, which are sent to our listserv biweekly, on alternate weeks from these updates, please sign up at the following page of our Web site: http://www.ca.uky.edu/HES/fcs/HSFP/response.htm.