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Developing Goals
STEP 1: DEVELOP GOALS
Goals serve as the foundation f or planning. They tell you why there is a need to plan.
Planning involves determining the actions to be taken to achieve particular goals. Whether personal,
professional or financial--or all three--the ground rules for goal setting are the same. Your goals
should be compatible, practical and attainable. All of the major questions and issues associated with
attending college, graduate or professional school and choosing a career are involved in the planning
necessary to achieve your goals. The key questions are:
How will you finance your education?
What debt level can you manage?
Does your choice of school reflect a realistic and manageable level of debt?
How will you handle family crises and pressures for financial assistance?
What professions or occupations are you considering?
What area of the country or world do you want to work?
Will you choose a salaried job, start your own business, teaching, do research or work on commission?
Will you be able to balance loan repayment with your expected income?
What are the implications of these personal and professional decisions for potential earnings?
Making goal-setting decisions involves three major steps:
1. Defining What Your Goals Are
Take the initiative to become familiar with all necessary forms and applications.
Timeliness in identifying sources of financial aid and requesting and submitting
applications is extremely important. Be prepared to submit your application on the
day when it can first be accepted.
2. Ascertain Your Costs
· Inquire about estimated education expenses (tuition, books, equipment and laboratory fees)
- Compare educational costs at different institutions
- Compare financial aid packages from different institutions
- Know interest rates charges for various types of loans
- Compare the cost of living in different geographical areas--rent, food,utilities, transportation, childcare
The estimated costs of basic educational and living expenses will be instrumental in determining the
amount of loan you need to consider. Knowing the various interest rates will guide you in managing
the type of loan to undertake. Be sure to estimate costs for a full 12-month period, not lust an academic
year.
STEP 3: IDENTIFY INCOME SOURCES
- Loans and other money from family and friends
- Scholarships and grants from community organizations, churches,
charities or local and national organizations
- School grants and loans
- Government grants and loans
- Salary (after-tax dollars)
STEP 4: ANALYZE CASH FLOW
It is impossible to begin a financial plan without establishing where your money is coming from and where it is going and when. Please see Financial Planning and Debt Management - Budget Fundamentals , a sample projected cash flow analysis.
STEP 5: DOCUMENT TOTAL ASSETS: WHAT YOU AND YOUR FAMILY OWN
- Cash, checking and savings balances
- Stocks and bonds
- Real estate
- Insurance (the cash value of the policy)
- Personal property (car, furnishings, art, books, stereo, TV)
STEP 6: DOCUMENT TOTAL LIABILITIES: WHAT YOU AND YOUR FAMILY OWE
- Mortgage
- Insurance premiums (life, health, auto and property)
- Tax debts loan balances (personal, auto, educational)
- Charge account and credit card balances
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The documentation of liabilities provides a long-term picture of what you and your family owe.
Total liabilities should be subtracted from assets to determine your total net worth.
STEP 7: OUTLINE OPTIONS
- List all funding options at schools you wish to attend
- Keeping your professional goals in mind, list pros and cons of each option
- Make choices among your alternatives
- Be realistic
STEP 8: DESIGN YOUR BUDGET
Your budget is the base on which you build your financial plan. It is a method of making informed
decisions on how to spend your limited amount of money. The task is to make a fixed amount of money
meet your expenses over a specific period of time.
When creating a budget you must set spending priorities: those items to which you give a
preferential rating when it comes to spending. Zero-base budgeting is one good method for
setting these priorities. In this approach, you examine each item separately and evaluate it
to arrive at a minimum spending level with which you are able to live. Non-discretionary expenses,
e.g. rent, are allocated first. Priorities then apply to only discretionary items. Your budget is
a working document; so don't be afraid to make revisions. Think of it as a road map to provide you with
financial direction.
At this point, you should design a budget for a year at the school you wish to attend or are attending.
Using the information you have received from the school about financial aid packages and educational costs,
the information you have been able to ascertain about the cost of living, and what you know about your
lifestyle that will affect your finances, whether it be a love of fine wine, or a jalopy that breaks down.
Use the one of the sample worksheets. If you need help, seek advice and assistance from a financial
professional--banker, financial planner or financial aid professional.
- Categorize and record your predicted yearly sources of income and
arrive at a total.
- Separate expenditures into fixed and variable, using the Budget Worksheet.
- Allow an emergency fund for unexpected or unplanned events that would affect your financial
situation
- Ascertain if you exceeding income, expenses, are in a deficit position, expenses exceeding income.
If so, go back, and look at your expenses.
- Determine which can be reduced and by how much. Remember, variable expenses are under your control.
- Determine if your credit habits need to be changed.
You are now ready to go for it!
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