Planning your post-university future
Finance might be the last thing on your mind when you have your student loan and parents to fall back on throughout your time at university. Assignments and dissertation will most likely be top of your priorities, and financial planning for after you graduate will most likely be bottom of the list.
It always feels like a long time away, but that time will come and before you know it your circumstances and needs will have changed. For example, putting money aside for a home or car might be a top priority.
Your financial goals will be unique to you, and with careful financial planning you can meet them within a realistic timescale. Here, personal pension provider, True Potential Investor, share their tips for managing your financial goals.
Identify your goals
Depending on your circumstances, your goals will vary. You might need a car to help with your daily commute, or you might be desperate for a home of your own – whatever your goal is, you’ll want to make sure it’s realistic and affordable.
Categorising your goals based on timescales is also handy. Holidays, a car or a home can be a short-term goal, whereas putting money aside for your pension will be a long-term goal.
That’s right, your pension – whilst it might seem like a lifetime until you retire, planning early is key to ensuring you live comfortably during retirement. A recent Tackling The Savings Gap Q3 2016 report by True Potential found that you’ll need an average of £23,000 per year in retirement to live comfortably. However, the UK is on course to receive just £6,000 a year in retirement — does it still seem too soon to consider your pension fund?
Quantify your goals
If you want to achieve your goals by a certain time, you’ll need to quantify your goals to make sure you don’t fall behind with them. Establish how much you will need to put aside per month to achieve your goal. Again, be realistic, you don’t want to over commit and get yourself into a sticky situation when it comes to your other finances.
Create a budget
The amount you can put away per month is dependent on your current monthly outgoings. You need to paint a true picture of your financial situation before you establish how much you can afford to put aside each month.
Don’t forget about irregular expenses, such as one-off insurance payments or maintenance costs. ‘Out of sight, out of mind’ does not apply here; be truthful about your expenses to create a budget that will work for you.
You can also consider cutting back so that you aren’t adding too much strain on your other finances. Are there any unnecessary expenses? Cutting back on these can also help you reach your goals sooner.
Invest your money right
The final step is to choose the right method to invest your money – if you want to put money aside and generate interest on your money in a tax-efficient product then an Individual Savings Account (ISA) might be for you.
Stocks and Shares ISAs are one option if you’re looking to invest a significant amount, as the amount you contribute is invested in bonds, property or stocks and shares. This means you could get out more than you pay in, although there is a level of risk involved.
Ultimately, always choose the most suitable saving or investing option for you based on what you’re saving for, the level of return you’ll receive and the associated risk.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Tax rules can change at any time.