What is financial planning? How do I begin to create a financial plan? What is my "net worth", and how do I determine how much it is? What if I find that my net worth is zero or a negative number? How do I know which goals are short-term and which are long-term? How can I start to save money toward my goals if I am in school? What if, after I graduate, I can't afford my student loan payments? What are the tax benefits that are available to students in school and borrowers paying on their student loans? What's the best way to start saving money towards my goals? How does investing work? Why is "risk" an important concept to investrors? What is meant by "diversification"? Why is an employer retirement plan such a good investment? How does time impact the amount of money I save and end up with? What is the best way to start saving/investing? Why is insurance important and how do I determine whether I need it? How does insurance work? What are some common types of insurance? Are there online forms I can use as a guide to develop a long-term financial plan?

What is financial planning? Basically, financial planning means making conscious decisions to save money for your future security. A financial plan might include a list of your goals, the cost, their time horizon, savings method(s) and anticipated rate of return needed to achieve these goals. Another important piece of a financial plan is protection against financial loss. How do I begin to create a financial plan? The first step is to identify your future goals – a car, a home, education for your children, retirement, etc. Then you can categorize these goals by time frame – how long will it take to achieve each goal? By identifying goals and determining time horizon, you can begin to develop strategies to achieve each goal. Remember, a financial plan helps you get from Point A (today's situation) to Point B (goals accomplished). The Financial Plan Worksheet will help you get started. What is my "net worth" and how do I determine how much it is? Net worth is simply the amount of wealth a person has. Their wealth is measured by assets and liabilities. To determine your own net worth, make a list and total your assets, then make a list and total your liabilities. Subtract your total liabilities from your assets and the remaining amount is your net worth. Use the Net Worth Calculator! What if I find that my net worth is zero or a negative number? Do not panic. It is not uncommon for students to find that their debts outweigh their possessions, giving them a negative net worth. In time, your debts (credit cards, student loan, etc.) will be paid down and you will accumulate assets (car, home, money in bank, etc.). Being smart about your spending habits and saving money will help you to increase your net worth more quickly. How do I know which goals are short-term and which are long-term? Only you can determine how long it will take you to achieve each of your goals. Typically, goals that take less than five years to achieve are short-term goals, and goals that take longer than five years are long-term goals. For instance, it may take you two years to save for a car down payment, and seven years to save for a home down payment. So in this case, purchasing a car is a short-term goal and purchasing a home is a long-term goal. How can I start to save money toward my goals if I am in school? Remember, no matter what your situation, to "pay yourself first." This means contributing to a savings or investment account before you pay other monthly bills. It's important to get into the habit of saving, even if it's just a small amount while you are in school. Cutting costs and being smart about spending will help you to save money. Some of the places where you can trim expenses are: Housing Telephone Transportation Shopping Entertainment Banking How can I start to save money toward my goals if I am in school? You can avoid a panic attack after graduation by researching your loans now and figuring out what your monthly payments will be. Contact your financial aid office or go to www.nslds.ed.gov for a complete list of your loans. But if your monthly loan payment(s) is unaffordable, there are a variety of repayment options available that will help make your loans more manageable. Review the links below and talk to your lender for more information. Graduated Repayment Plan Income-Sensitive Repayment Plan Extended Repayment Plan Deferment Forbearance Consolidation What are the tax benefits that are available to students in school and borrowers paying on their sutdent loans? There are several tax benefits that allow a student (or student's parent) to claim either a tax credit or tax deduction against tuition and fees paid toward a college education. There is also a tax deduction that a borrower may claim against the interest paid on his/her student loan. See the Tax Benefits Guide for more information on these and other programs. What's the best way to start saving money towards my goals? The time horizon for each goal determines the best strategy for saving. Short-term goals (five years or less) may be accomplished by saving. This means putting your money into a savings account or CD. Long-term goals (more than five years) are typically achieved by investing. Investments are generally riskier and provide higher returns over the long term. How can I start to save money toward my goals if I am in school? Investing is simply committing money in order to make a profit. You can invest your money in a company, the government or a product. Many employers offer retirement plans as an investment option to their employees. Below is a short list of the basic types of investments: Stock Bond Mutual Fund Why is "risk" an important concept to investors? Risk is the possibility of losing money. By investing, you are accepting the possibility of losing some money. Risk may vary, depending on the type of investment. Generally, stocks are riskier than bonds. This means that you could lose more money OR you could make more money with a stock. Investors want to make sure they do not lose all their money, so they balance their investments, making sure to include some low-risk types along with higher-risk types. What is meant by "diversification"? Diversification means "not putting all your eggs in one basket." Diversifying is like protecting your money. Investors diversify by spreading their investments across a variety of investment types and industry types. So if one company or industry falters, investors do not lose all of their money. Why is an employer retirement plan such a good investment? There are several reasons that an employer retirement plan makes sense: Pre-Tax Contributions Tax-Deferred Growth Employer Contributions Diversification How does time impact the amount of money I save and end up with? You earn interest on your savings and investments, and with time you'll be earning interest on that interest – it's called compounding. The longer you leave the money in the account, the more interest will accrue. Remember, interest is free money! So the sooner you start, the sooner you will have free money growing for you! What is the best way to start saving/investing? To begin saving (for short-term goals) visit your bank or credit union and ask about savings accounts and CDs. For investing (for long-term goals) talk to your employer about its retirement plan or you can research plans and types of investments online. See the Links for recommended sites. Why is insurance important and how do I determine whether I need it? Insurance helps to protect you financially in case of an accident or loss of property. To determine whether you need insurance to cover something, ask yourself if you would be able to recover financially if that item were broken, lost or damaged. How does insurance work? When you have insurance you transfer the risk of a loss to the insurance company. The insurance company would then assume the cost of repairing, replacing or compensating you for the item. Below are three helpful terms to know when dealing with insurance: Premium Deductible Payment What are some common types of insurance? Below is a list of the most common types of insurance. Please refer to the Links section for resources that can provide additional information about each type. Car Health Home Property/Renter's Disability Life Are there online forms I can use as a guide to develop a long-term financial plan? Yes, the Financial Plan Worksheets include two sample financial plans and a blank one you may use to develop your own plan.