It is so easy to get caught up in the bubble of student loans and bailouts from your parents, pushing your finances to one side. After all, it’s all part of being a student, right? However, before you graduate, it’s wise to start thinking about financial planning before you enter the working world.
Of course, your goals will be individual to you but whatever they are, careful financial planning can help you meet them. The thought of going back to live with your parents could feel like a nightmare, so you might want to begin putting money aside for your own home – or a car to help reduce your commute to work. Here, we discuss top tips for managing your financial goals.
Defining your financial goals
We all have different goals based on our own personal needs, but there are common financial goals which most people might consider: a car, a round-the-world trip or a first home.
It might sound too early for you graduates, but you might want to consider setting up a pension fund and begin contributing towards that. This is a long-term goal but trust us, it’s never too early to start putting money aside for your retirement.
True Potential Investor’s Tackling The Savings Gap Consumer Savings and Debt Data report has found that we’ll need £23,000 per year in retirement to live comfortably. However, Brits are on-track to receive just £6,000 per year in retirement. Saving early gives you longer to potentially reach these goals.
It’s important that whatever goal you choose, make sure it’s within reach. It must be manageable and achievable, as you don’t want to be striving towards something that is either going to leave you short, or something you will never achieve. You may want to categorise your goals based on timescales.
Quantifying your financial goals
As previously stated, you need to make sure your goals are achievable, so once you’ve identified your goals, you’ll need to quantify them. 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 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.
Creating an affordable budget
Before you can work out how much you can save each month, you’ll need to establish your current financial situation. You should paint a true picture of your finances – don’t leave out any of your monthly outgoings, such as house utilities, car insurance etc.
And don’t forget any irregular expenses – you don’t want to leave yourself short because you have missed out on a payment. ‘Out of sight, out of mind’ does not apply here; be truthful about your expenses to create a budget that will work for you.
Invest it correctly
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, and meet your attitude to risk and capacity for loss. 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, 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.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin