Graduate finance - the stark reality

24 May 2017 | University Advice | Thomas Peacock

As you prepare for your final set of university assignments, the next stage of adulthood becomes a lot more uncertain. For some, it is chasing that dream career and relocating to a big city. For others, it’s settling down, buying a house and starting a family. Sadly, there is one factor that can devastate all plans; poor personal finances.

The idea that "you only live once" often encourages poor financial decisions during your first steps to independence. It’s not until you want to make a big commitment that you realise the impact of your earlier financial indiscretions. For many twenty-somethings, the fact that their financial house is in a state of ruin is a source of great stress. However, it is not too late to change things, it is never too late to take control of your financial situation.

Now is the time to get real. Tackle your finances head on. How much do you owe and how much of your income can you afford to dedicate to debt re-payment? How much credit card debt do you have and what is the interest rate? Looking at the raw data may seem overwhelming, but it is a necessary first step. After all, you wouldn’t cross the road without first checking for traffic, right? You should diagnose which habits and decisions have gotten you to this state, formulating a plan to rectify things. Some people pay too much in rent and would benefit from downsizing their life style until they make real dent into their debts. Others haemorrhage money on weekends or need to curb their shopping habit. Regardless of the reasons for your financial situation, you will not be able to solve it unless you look at your finances honestly.

Some say that during your time at university the first step to financial independence is picking the bank account that is right for you. Student accounts have many benefits, such as interest-free overdrafts, low-interest credit cards, and various cash back schemes. However, if not treated carefully, post-graduation, these benefits can quickly become a financial burden, damaging your financial profile. Before you head down this path, talk to your bank about options such as converting your student account into a graduate account that holds down the interest rate for an extended period. Look for options that give you the opportunity to pay off your debt quicker and with fewer negative consequences.

Ideally, be gainfully employed on graduation. This isn’t the case for many, and sadly some companies have popped up offering “unemployment” loans intended to help you until you find a job. These loans may help short term, and so are very tempting, but they can damage your overall financial profile if you fail to find adequate employment in the requisite time. Furthermore, they come with very high interest rates, causing many to fall into a debt spiral. Not good.

While you’re looking for a job, ask friends and family for financial assistance. Unless you are really unlucky, repayment agreements are likely to be more favourable than borrowing from a bank. If it transpires that you are not able to meet agreed payments, be upfront. During periods of financial hardship friends and family are likely to be understanding and, lenders might be able to allow you to apply for forbearance on your loan. Do not, under any circumstances, simply ignore debts you are unable to pay. Hiding will only increase your woes exponentially.

A recent UK survey conducted in 2016 found that 4 in 10 people have less than £1,000 in their savings account. It’s always a good idea to have a backup fund when you are in the position to save. Whenever possible save, even if it’s a small amount each month. This will allow you to put money towards those bigger purchases and, in the event that the worst happens, you will have some funds to fall back on.

Financial independence is strongly linked to self-discipline. Knowing the true cost of things and keeping a careful eye on your finances will help to ensure that enjoying the moment doesn’t leave you shackled to debt tomorrow.

Craig Poku

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