With dissertations, exams and several deadlines, the last thing on your mind in your final university year is planning you financial future. You’ll still be dependent on student loans and bailouts from your parents but once you graduate, things will change. This is why before you graduate, it’s wise to start thinking about financial planning.
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.
Whilst everyone’s goals will differ, no matter what they are, financial planning can help you meet them. Here, Stocks and Shares ISAs provider, True Potential Investor, share their tips for managing your financial goals.
Identify your goals
Common goals include saving for physical items or experiences, such as a home, car or holiday – but as previously mentioned, these goals will vary between individuals depending on your priorities and personal needs.
And whilst it might seem like a life time away – literally – it would be wise to start considering to put money aside from your pension. 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 save an average of £142 a month towards our pension, it’s important to start saving as soon as we can to make sure we can reach our goals.
Any goals that you set yourself need to be achievable. You don’t want to leave yourself without and cause a strain on your finances. You may want to categorise your goals based on timescales. For example, a short-term goal might be buying a car, while a long-term goal could be contributing to your pension.
Your goals should be quantified
The second step is to quantify your goals. Setting goals is easy to do, but 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 and when by.
Timescales should also be achievable. You must be 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
It’s important to look at your monthly finances before you decide how much you can put away each month. Your financial situation will influence how much you can comfortably set aside. 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.
Once you’ve created a list of your outgoings, you can look for areas where you might be able to cut back on spending. 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
The next step is to choose the right investment to support the growth of your funds. 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.
One option you could look at are Stocks and shares ISAs – a way for you to put significant amounts of money aside and invest it in bonds, 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.
Ultimately, always choose the most suitable saving or investing option for you based on what you’re saving for, the level of return you’ll receive and the associated risk.
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.