Step #3:
Identify Alternative Courses of Action
So far in the planning process you have evaluated your current financial situation and established some
SMART short-term, intermediate, and long-term goals. But your goals won’t be accomplished simply by
creating them. You will have to devise strategies to help you bridge the gap from where you are today
to where you would like to be. Just as there is more than one way to get from campus to your favorite
ice cream shop in town, there is more than one route you can take to achieve financial success as you
have defined it. The next step of the financial planning process involves identifying alternative courses
of action that can lead you to your goals.
Let’s suppose you’re planning to study abroad next year. You’d like to be able to make the most of your
experience while overseas and have enough financial resources to travel while abroad. You have
decided you would like to have saved $4,000 by the time you depart in 15 months, specifically for your
travel endeavors. Maybe your financial situation is such that, so long as it persists in its current form,
you will be financially prepared for your travel adventures while abroad. But if you are like most college
students, that is not likely.
So what are your options for changing your current situation to make this goal a reality? We’ll say you
currently have an extra $1,000 in savings from your last summer job that you are willing to shift into
your semester abroad travel fund. This leaves you with $3,000 to generate over the next 15 months, or
$200 dollars a month you will need to deposit into your travel fund to reach your goal. Thinking back to
the budgeting and saving exercises from the previous chapter, perhaps you could decrease allocations
to various expenses and shift more of your monthly income to savings for your travel fund.
Recall the budget you created in chapter one. Maybe by limiting unnecessary travel and carpooling
whenever possible, you could decrease your transportation expenditures by $75 per month. Perhaps by
making more meals at home and limiting your new clothes purchases, you could cut your food and
discretionary allowance allocations by $50 each. Going to discount movie theaters could help you
decrease your expenditures on entertainment by $25 per month. By implementing good savings habits,
you may be able to free-up enough of your current income to deposit in your travel savings so that in 15
months you will have reached your goal.
But maybe you have already applied the principles of the saving activity from chapter one to your
current budget and there is little for you to cut. Adding a new job or hours to an existing job may help
you increase your monthly expendable income so you can contribute the needed amount to your travel
savings. At a minimum wage of $7.25 per hour, about 7 hours per week would help you earn your
monthly $200 contribution you need to be making to your study abroad travel fund.
Generally, your alternative courses of actions will fall into one of two categories: reallocating existing
resources, or generating new ones. Existing resources can be utilized by earmarking current savings or
shifting current allocations as in the example above. Generating new resources may require changing
jobs to improve your wage outlook, taking on additional hours or investing your savings more
aggressively to generate higher rates of return.