10 top tips to graduate finances

Category: Students
Date: 6/22/2008

After years of studying hard at university, the transition from student to graduate is a time for celebration, but also time to look to the future - finding a job and financial security.

Many graduates will be starting their careers and earning for the first time, whilst trying to cope with the added debts of a student loan, an overdraft or various credit cards.

Follow our top 10 tips to graduate finances, and you'll be top of the class when it comes to financial stability.

10 top tips to graduate finances

1. Set up a budget
   Your first priority after graduating should be to set up a monthly budget to help work out where your finances are going each month. Use our budget calculator and you'll be more aware of where exactly your money is going, and how much you can afford to put towards reducing your debts.
   
2. Hold fire on that student loan
   Whilst the majority of student debt lies with the Government's student loan scheme, the interest charged on it makes it one of the cheapest debts for graduates, and it does not need to be repaid until you are earning more than £15,000. Although you should not ignore your student loan, if you have more pressing debts such as credit cards and overdrafts, these should be tackled first.
   
3. Work out a repayment plan
   After using the budget calculator, it is essential that you start drawing up a list of all of your debts to work out exactly how much you owe, and how much you can afford to pay each month. Prioritise which debts should be paid off first, such as credit cards and store cards, and work out a repayment plan. If you can't keep up with credit card repayments, consolidate them by transferring your balances with a 0% balance transfer credit card and set up a standing order to pay back as much as you can each month.
   
4. Then pick a graduate bank account more suitable for you
   Graduates will often remain loyal to their student account provider, but as long as you have proof of qualification and have managed your bank account within your agreed overdraft limit, then there is no reason why you shouldn't move to a graduate bank account from a different provider.
   
5. Check your interest-free overdraft limit
   An interest-free overdraft limit will let you go into the red without being charged a fee for the privilege. Natwest and Abbey both offer a £2,500 overdraft in in year one, £1,000 year two, then £500 in year three.
   
6. Check the authorised overdraft rate
   With an authorised overdraft you can operate in the red, but you will have to pay for the privilege. With current rates from around 10% to 18% choosing carefully can make quite a difference.
   
7. Check the unauthorised overdraft rate
   An unauthorised overdraft is spending money outside your agreed overdraft limit and should always be avoided if possible. However, graduates incomes and expenditures can initially be rather erratic, and this may occasionally result in unauthorised borrowing. This can be an expensive, and should be avoided if at all possible. Lloyds TSB charges interest of 29.8%, and apply fees of £30 per day (max £90 pm). A better deal can be found at HSBC, charging its standard interest rate of 14.8% and applying no fees.
   
8. Don't fall for freebies
   Although you're older, wiser and much more grounded with your finances after years of studying, that doesn't mean that you won't be offered incentives to open a graduate account. It's important that you're not lured in simply based on incentives or freebies, because high charges may start to eat in to your initial gains. Some of these incentives include discounts on shopping, driving lessons, mobile phones and CDs.
   
9. Save as much as possible
   Once you have tackled your debts and started to put your finances in order, you should start to save. Always start with a Cash ISA savings account first, because all of the interest earned is shielded from the taxman.
   
10. Get a foot on the property ladder
    Getting that first step on the property ladder is a goal for lots of graduates. There are now a few 85% - 90% mortgage products available (where you only need 10-15% deposit), but these can be very expensive commitments. With a lump sum deposit you'll save thousands of pounds in interest payments and pay off your mortgage faster.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at anytime.