A lot can change once you graduate. Student accommodation will no longer be available to you, and if you don’t want to return to your parents, you’ll have to take a step on the property ladder. As your circumstances change, so will your needs. For example, you may want to purchase a car to help with your daily commute.
All of these things won’t happen overnight, and they certainly don’t come cheap. That’s why careful financial planning is so important for third years getting ready to graduate.
Realise what you want to achieve
A home, car or holiday—what you want to achieve will be unique to you. As well as short-term goals, don’t forget about what you’d like to achieve in the long term.
Your pension should be one of these considerations. Planning for your retirement so soon after your graduation might seem odd, but planning early is crucial to ensuring your comfort in later life. Considering we set aside an average of £142 a month towards our pension, it’s important to start contributing as soon as we can to make sure we can reach our goals.
Regardless of whether they’re short term or long term, make sure your goals are realistic and achievable. You don’t want to leave yourself without and cause a strain on your finances.
Make sure you can quantify them
Anyone can set goals, but without quantifying them they can easily slip from your mind. Your goals will only become achievable if you can iron out details and decide roughly how much you need and when by.
When quantifying your goals, make sure any proposed timescales are realistic. Choosing a large amount over a short period of time could be unachievable and place unwanted strain on your current finances or resources.
Create a budget
Deciding on how much you can contribute to your goals requires a clear overview of your financial situation. Create a list of your current monthly income and work out your monthly expenses. Categorising your outgoings together —such as housing, utilities, transportation, food, and entertainment — will make it easier to make sense of your current situation. Make sure that you paint a true picture of your finances.
Are there any areas where you can reduce your monthly spend? Look for non-essential extras — could you replace your daily coffee shop coffee with a homemade one instead? Ditch the extra drinks on a night out and pre-drink at home instead? Work out how much you can afford to put away each month, without stretching your finances too far.
Invest it right
Of course, you’ll need the right investment. Individual Savings Accounts (ISAs) are a popular choice, as they offer a tax-free way to save. This means you won’t pay any tax on the interest your account generates.
Stocks and shares ISAs allow you to set money aside for investment in everything from bonds and property or stocks and shares. This mean you could get out more than you pay in, although you may get back less than you invest.
Keep your goals, required level of return and associated risk in mind to ensure you choose the most suitable option for you.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Tax rules can change at any time.