"I’m too young to worry about the future"
The sooner you start taking a serious interest in your finances, the better. Whatever your financial situation, understanding the basics and planning for the future is important. Getting into good habits at an earlier stage of life can mean avoiding a lifetime of financial stress. This way, by the time you really need to start making serious financial decisions, you can avoid the common mistakes that lead to serious problems later on.
Student debts
Many students in the UK are now graduating university with tens of thousands of pounds of debt. With student loans, credit cards and interest-free overdrafts readily available for students, it is easy to obtain credit during your studies – and also easy to forget that everything you borrow eventually has to be paid back. Student loans and overdrafts are often advanced interest-free or with special terms attached so that you don’t need to make repayments until you start to earn an income over a certain amount. However, other forms of borrowing such as credit and store cards don’t come with any special dispensations, so you must be sure to keep up to date with your repayments or you may end up doing serious long-term damage to your credit rating – which you will regret later on. Take advantage of interest free balance transfer credit cards if you are feeling the pinch with your credit card repayments, as these give you a window of opportunity to repay the balance without throwing away money on interest payments. Repay your debts in the order of highest to lowest interest rates; if your overdraft is interest free, delay repaying this while you have other higher interest forms of debt to worry about. If you are struggling with multiple repayments each month, you may wish to consider a consolidation loan to roll all your debts together – but try to avoid consolidating a student loan because you will probably find that interest rates on a student loan are very low in comparison to regular unsecured loans.
Earn more, spend more
As you enter the workforce proper and begin earning a more attractive salary, your tastes will more than likely evolve at the same time as you begin to enjoy a more sophisticated lifestyle. However, it is important to keep your spending in check in order to avoid getting into financial difficulty. Bankruptcy is on the rise among the under 25s, with more and more young people being advised to file for bankruptcy each year by leading financial advice charities, due to large, unmanageable amounts of unsecured debt. Avoid this by always living within your means; work out a budget and stick to it, saving a little each month for a rainy day. If you need to use a credit card, make sure it is one that offers an interest-free period on new purchases so that you can repay gradually without being hit by high interest charges.
Give your finances a make-over every few years
Be careful of falling into a financial rut as you slip into comfortable habits, as you may miss out on some great deals. You should always be on the look-out for new products that might better suit you as your financial situation changes over time, as there are many products that are designed to compliment your finances at different stages of your life. For example, at the age of 23 you probably don’t need to worry about life insurance, but once you take out a mortgage it is very important to ensure that you have a life insurance policy in place to protect your family from your debts in the event of your death. Also, don’t assume that whatever your friends and family swear by when it comes to their finances will suit you; everyone’s financial situation is unique, and you should always seek advice that is tailored to your personal circumstances. For example, your best friend may have just got a great deal on a guarantor mortgage by getting their parents to guarantee the mortgage, but you may be better off with a graduate or professional mortgage, where your borrowing is based on your potential earnings.
Please note: this website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research. For more please refer to our terms and conditions of use.