As you approach the end of your degree, it’s easy to get caught up with assignment deadlines and exam revision, whilst relying on student loans – but after graduation, everything changes. There’s no student safety net, which is why it’s wise to consider financial planning before you graduate. Once you’re no longer living in student accommodation, putting money aside for a property of your own may be high on your list of priorities. As your circumstances change, so will your needs. For example, you may want to purchase a car to help with your daily commute. Your goals will be personal to you, but whatever they are, they will require careful financial planning to ensure that you reach them.
Step 1. Define your goals
Although goals will differ individually, and are dependent on your personal needs, there are some common goals that include saving for physical items or experiences, such as a home, car or holiday.
A long-term goal that you might want to consider is that you might want to start putting money aside for your pension. Saving for your retirement so soon after your graduation might seem odd, but planning early is crucial to ensuring your comfort in later life. Research in True Potential Investor’s Tackling The Savings Gap Consumer Savings and Debt Data report shows that we’ll need £23,000 per year in retirement to live comfortably. In contrast, Brits are on course to receive just £6,000.
Step 2. Quantify your goals
That’s the easy bit, but once you’ve identified your goals, you’ll need to quantify them – failing to quantify them makes them easy to fall behind on. Your goals will only become achievable if you can iron out details and decide roughly how much you need to save and when you want to save it by.
Be realistic with your timescales; choosing a large amount over a short period of time could be unachievable and place unwanted strain on your current finances or resources.
Step 3. Create an affordable budget
You need to figure out how much money you can afford to put aside each month, and to do that you need to examine your financial situation. Look at your income and all of your outgoings before you create a budget. It’s a good idea to start categorising your outgoings together — such as housing, utilities, transportation, food, and entertainment — it will then make it easier to make sense of your current situation.
Make sure you paint a true picture of your finances and don’t forget about irregular expenses, such as one-off insurance payments or maintenance costs. ‘Out of sight, out of mind’ does not apply here; be truthful about your expenses to create a budget that will work for you.
Step 4. Investing your money
After working out how much you’re able to save each month, the next step is to choose the right investment to support the growth of your savings. 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 are one option if you’re looking to save towards a goal, as the amount you save could be invested in bonds, property or stocks and shares. This mean you could get out more than you pay in, although there is a level of risk involved.
Ultimately, always choose the most suitable saving option for you based on what you’re saving for, the level of return you’ll receive and the associated risk.