Long-Term Goals

A long-term goal is anything greater than 6 months away. That could range from spending next summer in Europe to relocating after graduation, or making an early, wise start on your retirement nest egg.

Due to the fact that these goals are further down the road, you have various options for saving money to work towards a long-term goal.

FOR EXAMPLE:

Let's take a look at the each of the long-term goals mentioned above to see how different avenues can be used to reach these goals.

• Spending a summer month in Europe .

We'll make a few assumptions here:

• It's the beginning of summer semester and since you are about to have a really boring summer taking extra classes you decided that next summer is going to have to be pretty spectacular to make up for it. You want to spend a whole month in Europe.
• Round-trip tickets to England will cost $1,200.00.
• Let’s say it costs an average of $20.00 to stay overnight in a youth hostel. If you stayed every night in a hostel, that would be about $600.00 (30 nights x $20).
• Let’s estimate an average of $10 per day for food. That's a total of $300.00.
• You will also need a way to get from country to country. A one-month Global Eurail Youth Pass (as of August 2007) runs $709.00.
• You will also need to have some spending cash for miscellaneous expenses. Let's figure on $500.00.
• This brings your total long-term savings goal to $3,309.00. Now let's start breaking that big number into manageable pieces.

Since you have to buy your tickets well before your departure date, let's take the $1,200.00 for that expense and make it a 9-month goal. This leaves $2,109.00 that you'll have to save by summer.

We will also assume that since you have been going to school for one year straight without doing anything fun, you have your emergency savings goal fully funded.

You now have 9 months to save the $1,200 for tickets, and you have 12 months to save the remaining $2,109.00. This means you will have to save $134 a month for your tickets ($1,200 divided by 9) and $175.00 a month ($2,109.00 divided by 12) for your remaining expenses.

For the next 9 months you will have to save a total $309.00 a month for your European vacation. Once you have your tickets covered, you can drop that amount down to just $175.00 per month to reach your remaining savings goal $527.25.

So your first step is to evaluate your budget and determine if you have the means to save $309.00 a month and still have enough money left to live on. Remember there are tons of scholarships out there that could help you with living expenses. All you have to do is look. Try Web sites like www.fastweb.com or your campus scholarship office.

• Relocating after graduation.

You've enjoyed your time here in the Land of Enchantment, but now you'd like to see what food is like without green chili. So you decide that once you graduate, you'll be moving somewhere else.

If, for example, you're just starting your sophomore year and expect to graduate in three years, you have that amount of time to save enough to make your move. Actually, because you may be leaving as soon as you get your diploma in May, that gives you about 33 months to store away the money you'll need.

Let’s take a look at some of the expenses you will have to cover if you want to move to San Diego after graduation.

• Moving van: $300.00
• Apartment damage deposit in San Diego : $1,000.00
• First and last month's rent (small one bedroom apartment $1,000 a month): $2,000.00
• Living expenses until your first paycheck: $2,000.00

The estimated total you'll need to get way closer to the Pacific Ocean will be $5,300.00. So, again, let's break that down into manageable pieces. $5,300.00 divided by 33 gives you a monthly savings goal of only $161.00.

That is not a huge amount of money if you start saving right away. Time is on your side, and since this goal is so far away, you have the opportunity to use compound interest to help you reach your goal.

As soon as you have your first $1,000.00 saved up for your relocation, put it in a Savings Certificate. The advantages of this are two-fold:

• First, you won’t be able to touch the money (without a significant penalty) while it's in the Certificate. Certificate terms typically range from 3 months to 5 years, so you can select the one that's best matched to your long-term goal.
• Second, Certificates earn a much higher rate of return than a basic savings account. And at set periods during the term of the Certificate, the interest you've earned is added to the amount you originally deposited, so you'll start earning interest on interest. This means that your money is working much harder for you.

Just be sure to do regular check-ups to make sure you're on track to meet your goals — and that your money is working as hard for you as possible. And compare interest rates on several different savings options. In addition to Certificates, there are Money Market Accounts and online savings accounts.

• Retirement.

You may be thinking, “I have my whole life ahead of me, so I don’t have to worry about retirement until I am old.” You couldn't be more wrong! With the future of Social Security in serious question, people your age will be increasingly dependent upon what they've managed to put safely away throughout their working years.

When dealing with retirement planning, you have no bigger asset than TIME. The sooner you start saving for the “golden years” the more “golden” they're going to be.

Most people don’t start thinking about retirement until they start their careers. However, you can start saving various ways before then. If you have even a part-time job while you're in school, you can start putting money into a Roth IRA. With this type of account, when you start making withdrawals during your retirement years, the money will be tax-free.

Individual Retirement Accounts (IRA’s) have lots of different formats and tax advantages if you plan ahead. You can also start investing in stocks and mutual funds if you can squeak out some extra money for that. Historically, the stock market has averaged an 11% return over time. Since you are young, you have the time to ride the ups and downs of the stock market in order to accumulate quite a nice nest egg.

Once you do start your career, look into what your employer can do to help you plan for retirement. Do they have a pension plan? (These are becoming increasingly rare.) What about a 401-k Plan? Be sure to investigate every option available to you at each of your employers.