10 things graduates need to know about money
When you graduate you have enough to worry about so make sure you have all of your finances in order with our help.
So you’ve graduated with a load of student debt whilst trying to adjust to being weaned off your student loan installments. Would it be fair to say that money is now one of your biggest worries along with finding a job?
Well, the good news is that you’re not alone. For many grads the worry stems from the uncertainty of leaving the relative comfort of university and not really knowing where to start in this big new chapter of your life.
The best remedy here is simply getting a grip on your finances and understanding a couple of really important things.
In this guide we’ll share with you the 10 things we think that all graduates should know about when it comes to money, covering everything from saving on your weekly shop to getting the best deals on your bank overdraft. You’ll find a lot more in-depth advice in our graduate money section.
How to manage your student loan repayments
The thought of leaving uni with a whopping amount of student debt can be nerve-racking. But thankfully, it’s probably not as bad as you might think.
You’ll only start paying your loan back once you’re earning over £17,335 (or £21,000 if you start your studies from 2012 onwards) and only a percentage of anything over this threshold.
This repayment system has been designed to make student loans affordable, so you’ll have a reasonable amount coming in to cover it.
Repayments will be deducted straight from your pay cheque, so you don’t need to arrange any monthly payments yourself and probably will barely notice the deductions. If it isn’t being taken off and you know it should be, speak to your employer to avoid any shocks later in your career.
For much more detailed advice on repaying your student loan, turn your eyes in the direction of our student loan repayment advice.
Student loans are the best deal you’ll ever get in terms of a loan (except from maybe your parents), so don’t think that you need to pay it back early. If you do have any spare cash, put it towards a mortgage and getting a foot on the property ladder.
Know your credit rating
If you’re thinking about buying a house or getting finance on a car, you’ll need to consider your credit rating.
Because your credit rating is what lenders will be using to determine the risk (and how much interest they’ll charge if they do offer a loan).
One of the most common misconceptions about credit ratings for graduates is that since you haven’t had any non-student debt in the past, you won’t have any trouble getting finance or credit in the future.
But in reality, the opposite of this can be true and many graduates will need to build their credit rating because their risk factor is essentially an unknown.
Start by taking out a credit card and using it occasionally for purchases, but making sure you pay it off in full every month. By proving that you are a responsible borrower and are more than capable of repaying back your debts on time will quickly increase your credit rating.
Also, make sure that you’re on the electoral roll. It’s another one of the key indicators that banks use when deciding whether to give you credit.
How can I check my credit rating?
It’s relatively easy. You can request a full personal credit report on a free trial from Credit Report Matters. Simply sign up here, receive your pack and then cancel your subscription within 10 days.
All bills must be settled
Before you move out of your student accommodation, make sure that you’ve finalised any bills and let the utility companies know that you’re moving out.
Even a simple oversight could affect your credit rating in the future, so especially if the bills are in your name, get them sorted out!
It’s also a good idea to provide a forwarding address to your previous landlord to ensure you receive and further bills or letters in your name.
Get the best deal in your new place
If you’re moving into a new property, take time to shop around for the best deals on utilities such as electricity, broadband etc. before committing yourself. With such a big expenditure, there are big savings to be had!
Having your own place is expensive
Hopefully you’ve secured yourself a great graduate job and you’ll be looking forward to living somewhere a little bit nicer than where you stayed during your uni days!
Never forget though that there are so many additional expenses when it comes to having your own place, especially when you’re sharing with less people, so signing up with a housemate or two could be a wise decision.
It’s also worth remembering that rental prices and general costs of living can vary widely across the country and even within local areas. Pick a place you’d be happy to live in but can afford.
Going back to the nest
If you’re really keen on saving some cash, don’t forget that there’s no shame in moving back home with your parents for a while (if they’ll let you)! It could be a really savvy move and allow you to save up for a deposit for a property of your very own.
Learn about paying tax
If you enter the world of work on an annual wage beyond the current personal income tax allowance, you’ll be eligible to start paying tax. This is taken straight from your pay cheque before you receive it.
Do be careful that you haven’t been put on an emergency tax code and that you aren’t paying more than you should be. Check with your companies HR department in the first instance, and if you’re still in doubt, contact HMRC directly.
If you’ve been paying income tax during university, then double check that you haven’t overpaid tax. You can do this by adding up your income for the tax year, measuring it against the tax-free allowance and working out what tax you were liable for above this amount.
Lots of students benefit from a welcome tax refund every year, but it’s often up to you to request it! Alternatively you could pay a small fee for someone else to do it all for you here.
You can still get discounts!
You’ll have to wave goodbye to your student discount, but that’s not to say you can no longer get money off the things you buy!
Firstly, you can still try and blag being a student every now and then by ‘forgetting’ your library card (or you might even be brave enough to flash your expired one!).
You can also use our deals section to hunt down a wide range of offers.
Beyond this, get into the habit of using voucher and cashback websites such as Quidco.com for online shopping, and download one of the many Apps for your phone for savings on the high street and in restaurants.
Choose a graduate bank account
Different banks offer different deals for graduates every year, so don’t just assume that staying with your current bank is your only option.
If you have quite a big overdraft, you could save a considerable amount of money by switching it to another provider.
Shop around and find out which ones are offering 0% interest on overdrafts, or if you expect to be in credit most of time, which ones will offer you the highest interest payments on your balance.
Think about your pension (sorry, what?!)
It might seem like a long way off before you feel you need to start worrying about your pension, but the sooner you start paying into a pension fund, the better and wealthier you’ll end up being when you come to retiring.
Find out what your employer offers and seriously consider taking advantage of this, as they’ll have to pay in a contribution also!
If there isn’t a workplace pension scheme in place or you’re self-employed, consider taking out a private pension.
Many flexible deals are now available that will appeal to those who have recently started their own business.
You’ll have more money than you did as a student, but that doesn’t mean that you shouldn’t spend it wisely.
Careful budgeting is essential and could be the difference between being able to afford a house in a few years and having nothing to show for your first couple of years in graduate employment.
Work out how much you need to spend every month to cover living expenses, and consider setting up a savings account or a cash ISA. The latter is one of the best ways to save money, and your interest is completely tax free.
Save money on your shopping
Food is always one of the biggest costs to consider.
With a little bit of wise shopping, you can save a small fortune on your shopping bills. Before heading out to do your weekly shop, check online for any free coupons that can give you great discounts and deals.
A great website for saving on your online food shop is MySupermarket.co.uk which compares the cost of your basket in real-time across all major supermarkets.
Getting into these habits straight after university will mean that you have a lot more disposable income, and can put your money towards the things that are most important to you.
By addressing these 10 areas, you’ll find that you’re much better placed for keeping your finances in order.
How have you managed your finances since you left university? Do you think that you’ve developed some money-savvy habits, or are you still finding your feet?