16/07/2008

So, you’ve graduated with your media-related degree and you’ve found a job. After three or four years of being permanently broke, you’re now in the money. How can you make that money work for you, help you to achieve your goals and stay out of the debt trap?

The first thing to do is to decide what your goals are. You might want to become debt-free by paying off your student loans, or reducing your overdraft. Or you might want to buy a car or a flat. Whatever it is you want, set yourself a goal and commit to it.

Boring, perhaps, but budgeting is the secret of making your money work for you. Your budget will let you know how much you can afford to pay to people you owe money and show you how much you can put aside to achieve your goals. 

Put your salary into the budget. Make sure that your tax code is correct and that you’re claiming all your allowances. If your code has BR (Basic Rate), contact the Revenue. You’re definitely paying too much tax. If you make regular donations to a charity, let the Inland Revenue know, as this can increase your tax free income, as can contributions to a pension scheme.

Look at your priority spending – rent, utilities and food. Add these to your budget. You can’t do much about your rent but you may be able to get a better deal on utilities. Use one of the websites, like www.uSwitch.com, to check what other deals might be available.

Track your discretionary spending. Keep a spending diary for a week and write down everything you spend, from bus and train journeys, the coffee from Costa in the morning, to clothes and evenings in the pub. Can you cut back anywhere? Be honest with yourself.
 
Now look at what you have left over. Once you know that figure, you can start planning to become debt free.

Concerning the repaying your loans, make a list of how much you owe and to whom. You’re likely to have student loans, maybe an overdraft and possibly a credit card. You can’t ignore these debts, but you don’t have to pay them off in a year either. Don’t rush to repay your student loans. 

Relatively speaking, they’re cheap and the idea is that you pay them back over your working life. 

Do you have an overdraft? Don’t stay loyal to the bank which saw you through your student years. Check out any deals on offer from other banks. Some offer interest-free overdrafts for a year – The Royal Bank of Scotland and Lloyds TSB offer graduate packages which include interest-free overdrafts of up to £2000 for up to three years. 

Halifax/Bank of Scotland offers an interest-free overdraft of £2750 for one year after graduation, as an extension of your student facility. These can save you serious money, so make sure you’re getting the best deal and switch if you have to.

If you have credit card debt, pay the biggest amount to the card with the highest interest rate. Once you’ve built up a decent credit rating (after six months or so), consider switching to a card which offers a good balance transfer rate.  Some offer zero per cent - again, websites like www.uSwitch.com or www.moneysupermarket.com can help here. 

Savings: You can’t really start saving until you’ve paid off your debt but it is a good idea to put a little away every month. Besides being a good habit, it’s better to have a little put away for Christmas or for big annual bills than to have to find it all from one month’s salary. 

Pensions: It’s never too early to start saving. Check out what your employer is offering. Even a small amount can be beneficial and there are tax advantages too.

Buying a House: This may be beyond your means until you have repaid some of your debts. However, you might decide to buy with a friend or friends. This can be a good way of getting on the property ladder, but make sure you get an agreement drawn up by a solicitor to cover what might happen if you fall out or one of you wants to sell. 

The Co-operative Bank and Scottish Widows currently have specific packages aimed at graduates, but the credit crunch means that other lenders have cut back substantially and may be unwilling to lend to you if you have high student debts. 

Money may be too tight to mention right now, but with careful management, you should soon be able to reap financial rewards from your sacrifices during your studies.


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