First Person: Developing a Financial Plan in College

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I was lucky enough to begin my financial education early on in life. Thankfully, I had family members who were interested in personal finances and who guided me toward the right financial habits as a youngster. This meant that by the time I made it to college, I was already interested in an education and career that involved business and possibly finance.

Thankfully, at that time, things weren't as dire with the economic outlook as they are today. According to MSN Money, "College students and recent graduates face particular challenges in saving and planning for retirement. Daunting student loans, a still-uncertain job market and competition for jobs among fellow graduates may all seem far more pressing than a retirement decades down the line, but that doesn't mean post-career planning should be put to the wayside."

The better economic climate that I experienced as a college student though didn't stop me from developing a strong financial plan in college.

Understanding debt and debt reduction

Understanding debt and debt reduction can be key not only to avoiding further debt while moving out into the real world after graduation but also to better handle student loans.

For those not accustomed to dealing with calculating debt-related interest over time and similar information, there are a variety of online calculators that can make the process super easy. Understanding that $40,000 in student loan payments made monthly over 15 years at an interest rate of 6.5 percent could result in over $22,000 in interest over the course of the loan can be a strong motivator to pay them off faster. I used my own knowledge of such financial information to pay my own student loans (about $8,000) off in about a year's time after graduation even with a meager income.

Creating an emergency fund

It may not be much, but creating an emergency fund in -- or just out of -- college can be a crucial part of a financial plan. While it may not be much, since funds at this point might be at a premium, sticking any extra savings in account can safeguard against the unthinkable happening.

For example, after I graduated school, I had a job with an employer that I thought I would be with for a lifetime. That lifetime turned out to be a few weeks as the job was nothing like I thought it would be. I was able to utilize my small emergency fund to bolster my confidence enough to leave the work and find something that better fit with my career goals. Without it, I might have been stuck in a job that wasn't right and missing out on other career opportunities that were.

Forecasting a savings plan and future values

It can be hard to know what the future holds at any point in our lives let alone college. However, being able to develop a savings plan and forecast with future values in place can make setting and achieving financial goals easier.

Thankfully, there are a variety of free and easy to use online financial calculators available these days to make this aspect of our personal finances much easier than it used to be. Being able to see how $50 a week in savings, invested over a period of 40 years could become nearly $200,000 or more can be a big incentive to start saving little amounts. And in college, little amounts might be all there are to save.

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Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Calculations have not been verified by a professional. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

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