- 1. Make a Budget
- 2. Create a Plan to Pay Back Student Loans
- 3. Live Within Your Means
- 4. Keep an Emergency Fund
- 5. Obtain a Credit Card
- 6. Learn More About Investing
- Portify – Credit Score Building
- More Personal Finance Resources for New Graduates
As a new graduate, you are looking to plan the next steps in your life, find a career and start your life after university. To make this planning phase easier we have created a guide with personal finance tips for new graduates.
1. Make a Budget
Getting started on making a budget can be difficult. However once you do it will make your life and managing your finances a lot easier. As a new graduate you are starting a new job or starting to look for one. Either way you need to understand how to budget according to your new financial situation, especially if you want to budget to repay student loans or debt.
Firstly, look at your income, which can be in the forms of an allowance, government support or a salary.
Then take a look at your average expenses. Your expenses can encompass:
- Household bills (rent, electricity, gas)
- Living costs (food, water, toiletries, prescriptions, clothing, housekeeping goods)
- Financial costs (insurance)
- Debt repayment costs (monthly minimum repayments on credit card bills or loans)
- Travel costs (public transport costs, car costs)
- Leisure costs (eating/drinking out, holidays)
- Additional costs (presents for family & friends, cinema trips)
To create a budget, calculate your average expenses, subtract this from your income and see how much you have spare to save.
We have created this table below to help you do this:
2. Create a Plan to Pay Back Student Loans
Now that you understand your fixed expenses, you can make your student loans repayment budget. How you repay your student loan depends on the type of employment you have. The amount of money you are due to repay depends on how much you earn. If you are self-employed, HM Revenue and Customs (HMRC) will work out how much you repay. If you are employed your employer will deduct loan repayments from your salary.
If you are studying further or are currently unemployed, you are not expected to repay until you have a job. Be aware that if you leave the UK for more than three months, or choose to go and work abroad you will still have to repay your student loan.
3. Live Within Your Means
In everyday terms, this means that you need to understand what you want versus what you need. You may want an item, like a new jacket, but do you need it? This is especially true for large, expensive purchases. Make sure that you spend what you have – not more. For example, you may want to take a day trip, but if that means you are spending more money than you are making you shouldn’t do it. Additionally, save up for purchases rather than paying with a credit card. Make sure that you are saving up for the things you can’t afford, rather than putting yourself into debt by buying them.
Living within your means also means being frugal. One way to do this is to make use of vouchers and coupons. A guide on how to use coupons can be found here.
4. Keep an Emergency Fund
With the savings you have dedicated, you can build an emergency fund. This means that you have a buffer against emergency costs like fixing your car. Use your budget to find out how much you can put into an emergency fund. Ideally, an emergency fund should cover three months of living expenses. If you lose your job, or your income is stalled – you have time before you have to resort to taking out a loan and getting yourself into debt. Emergency funds should be left for emergencies only. Not to purchase expensive items you may be unable to afford.
Finder’s loan expert Anna Serio spoke to Portify about the importance of saving as soon as you can. She said:
“Once you’ve found a job, get into the habit of saving early. Aim to have three to six months of basic personal expenses like rent, utilities and food expenses covered in an emergency. And consider starting to put money aside for retirement. Generally the earlier you start, the more you’ll be able to save.”
5. Obtain a Credit Card
Getting a credit card can be very helpful for your financial future. Using your credit card responsibly contributes to your credit history which shows lenders that you are creditworthy. Good credit can save you money on large purchases in the future such as a car, house or even the newest smartphones or tablets. Understanding how to get a good credit score is one of the best personal finance tips we can give! So we have written a whole guide on this here.
A credit card can also have other benefits such as cashback and reward points. Different cards have different reward systems. If you shop around and get a credit card with good benefits you can earn benefits such as air miles just by spending money on it.
6. Learn More About Investing
As a new graduate, investing probably isn’t on your radar at the moment. But as with the personal finance tip on building good credit, this is that can help you in the future. Investing has changed a lot, and investing wisely can mean you contribute to your retirement fund, or savings with your earnings.
Now you can invest spare change and small amounts. Apps like freetrade and moneybox allow you to invest small amounts of money from a mobile app. Each has various investment plans and deals so have a look to see if one may be better suited for your situation. Understanding how investment works can help you understand which plan to pick. If you want to learn about the basics of investing check out this great guide.
Portify – Build Healthy Credit
If you are looking for more ways to improve your credit score to get an overdraft look into using a credit building service like Portify. If you are new to the UK, have previous financial difficulties or, have a bad credit score, Portify can help. Portify offers a simple and easy way to build your credit score with Experian, Equifax and TransUnion. Join a community of 100,000+ members who have seen their scores improve by up to 100 points in just three months. We work with all major UK Credit Reference Agencies to build your credit score.
More Personal Finance Resources for New Graduates
For additional resources learn: