A Grad’s Guide to Mastering Your Finances

As a grad, not only are you about to are you about to step into a brand new career, but you’re also about to juggle a bunch of adult responsibilities – including your finances.

While you may be used to managing your student loan on a day-to-day basis, you’re about to face a whole new ball game as a grad. You’ve now got to figure out how to budget for things like rent, groceries, transport, and of course, those well-deserved indulgences; all while on the graduate job hunt, or taking on a temporary part-time gig.

Get ready to improve your finances with our helpful money advice for the new grad:

Create a budget

Embarking on the journey to financial freedom kicks off with a simple but essential move: creating a budget.

Start off by jotting down all the cash inflows from your monthly paycheck, as well as freelancing hustles and any other streams of income.

Next, it’s time to sketch out your monthly financial outflows – whether it be rent, utility bills, grocery expenses, commuting costs, and those looming student loan repayments.

So, why create a budget?

Quite simply, you’ll have a thorough overview of your finances. You’ll see exactly how much money is coming in, when and how cash needs to be spent, and the amount you have left over to enjoy as you wish.

The golden rule? Stay true to your budget. With dedication, you’ll prevent stumbling into unwarranted debts or those “whoops, I splurged again” moments.

Tackle student loans as a grad

Student loans are a huge financial weight that all graduates face. Repayments for both tuition fee loans and maintenance loans commerce once your income surpasses a certain threshold.

The threshold for Plan 2 loans (introduced after September 2012) is linked to the UK’s average earnings and is updated annually. The repayment amount is calculated as a percentage of your income above the threshold, set by the government, but is always subject to change.

For instance, if you earn above the threshold, a portion of your income is deducted automatically through the PAYE (Pay As You Earn) system, however, if you’re self-employed, you’ll need to calculate how much you’re likely to owe and pay the sum at the end of the financial year.

While student loan repayments are designed to be manageable, it’s wise to plan ahead. Staying informed about your specific loan type, repayment thresholds, and interest rates will empower you to make sound decisions when it comes to your finances and limit any worry or stress.

Start a grad emergency fund

Life is a rollercoaster of experiences, and just when you think you’ve got it all figured out, unexpected surprises come knocking at your door. With this in mind, you should think about starting an emergency fund. Think of it as a safety net that you can rely on when life throws a curveball your way.

Aim to put aside roughly three to six months’ worth of your typical living expenses to start off with, in a separate savings account for those ‘just in case’ moments.

You never know when your car may break down, or you’re unfortunately made redundant from your graduate job and need cash to bridge the gap.

Contribute to your retirement fund

Thinking about retirement after your graduation may feel as though you’re looking way too far into the future as a new grad, but it’s best to start sooner rather than later to provide financial stability in your later years.

If your workplace offers a retirement plan, don’t hesitate to jump on board – especially if they throw in a matching contribution – it’s like a secret stash of “free money” waiting for you. And the icing on the cake? The pot grows over time, thanks to compounding interest.

But what if your graduate job doesn’t come with this retirement package? The good news is that you’ve got options.

Consider setting up an Individual Retirement Account (IRA). You get to decide how to fill it up, whether it’s with regular contributions or those occasional payments every now and again that you can afford.

Build your credit score

Achieving a healthy credit profile isn’t just for peace of mind, it’s a strategic move that can shape your entire economic future.

To start off, prioritise paying your bills on top. This doesn’t just help you stay on top of your finances, but it also informs creditors that you’re a responsible and reliable borrower. In turn, this lays the foundation for a positive credit history and boosts your financial credibility in the long run.

Next – the use of credit cards. Responsibly using your credit cards means staying well within your limits. Avoid maxing out your cards and steer clear of spiralling debt. By doing so, you showcase your capacity to manage credit wisely, which contributes to a good credit score.

A first-class credit history yields tangible rewards; the most notable being lower interest rates on loans. When it comes time to make significant investments, like purchasing a car or taking the leap of homeownership, a solid credit score can swing the interest rate pendulum in your favour. This translates to more affordable loans, reducing the overall financial burden of these important life purchases. So, it really is a win-win.

Be patient and persistent with your finances

Crafting a solid financial groundwork doesn’t happen overnight as a new grad. As the saying goes – ‘Rome wasn’t built in a day’. What’s more, your circumstances may change, unexpected challenges may arise, and your goals may evolve.

Remind yourself that each step (no matter how seemingly small) contributes to the larger picture when it comes to building your finances. Embrace the journey with resilience, patience, and ambition, and you’ll find yourself well-prepared for every challenge and situation that heads your way. Good luck!