To ask what financial advice you would give a new graduate?

[namechange5965]

I am in my 20s and just finished university and hoping to get a graduate job soon. I grew up poor so the idea of having savings or being able to buy a house was something I had never really thought about until now. I know next to nothing about how to manage finances and it is something I can't really ask my parents.

I was wondering what kind of financial advice you would give to your adult DC when they are in their early to mid 20s just starting adulthood? How much should they be saving? What kind of amount in savings should they be aiming for if they want to buy a house?

I'm feeling a bit anxious as all of my friends from university have quite significant savings despite us all being new graduates and a few have parents who have got house deposits saved already for them. I feel quite behind and anxious that my adulthood is already not off to the best start which I know is silly... I also feel guilty as my attitude with money so far has not been great. Having money is new and I spend it on things I shouldn't (e.g. expensive makeup when I could make do with cheaper brands). I think because it has been so novel for me I have been spending it on the kinds of things I feel like I missed out on as a teenager. But I am putting my foot down now and aiming to be more sensible.

I know this is quite a broad and unspecific question and I apologise.

Save a percentage of your wage every month.

1. Pension. If you start paying in at the beginning if your career you will never see it as something optional, it will be a bill like NI or PAYE. Increase it a little every time you get a pay rise.

1. YNAB. Read up and implement.

1. Save up a house deposit as quick as you can! Regular savings are really important and also mean you’ve always got a new rental deposit on hand, or can grab that once-in-a-lifetime opportunity if it comes along.

Pension! Also save as much as you can in an ISA. See an independent financial adviser.

Does the graduate job you are going for have good career prospects?
I'm also from a low socioeconomic background, and I went to uni late (I did my degree in the evenings around work, graduated at 30). I'm about to start the Civil Service Fast Stream, to train as an accountant (but there are lots of other tracks on the scheme).
I got stuck/hit a ceiling trying to work my way up in other jobs in the past so I'm hoping that getting a professional qualification will be the route to financial security. I chose the civil service scheme as the pension scheme is excellent and there is more job security and better maternity pay than a lot of private sector organisations.

Two bank accounts - I have a “spending” account that I transfer my monthly food/going out/ fun money into.

It’s easy to keep track of the balance. And if towards the end of the month there is little left then I have to eat beans on toast!

I also have lots of little piggy bank accounts - holiday/ car expenses/ prof. Expenses that I shovel money into each month so that when the annual bills are due (eg. Car service/MOT) I already have the cash.

Been doing this since I graduated almost 20yrs ago.

Once a year I review these accounts & if I’ve oversaved I chuck it into my mortgage.

As per others I try to save any salary increases and have a monthly savings standing order set up.

I also bought my first flat in a pretty crappy part of town. But this gave me a capital boost to move to a better place. I had colleagues over the same time period who rented in a nicer area as they “couldn’t afford to buy” who were very put out when I bought a lovely flat in their area after several years of living in grimsville as they still couldn’t afford to buy.
Property is so much more expensive now but I would always try to get your own place.

More generally:-

Never ASSUME anything and The Devil is in the detail.

Check, double check and triple check everything to do with money, whether it's a job offer, car lease, house rental lease, current account package, ISA, mobile phone contract or tradesmens' estimates for house repairs.

I've know people who've completely misunderstood car leasing and thought the car would be there's at the end of 3 years - they've been aghast that they either have to hand it back or "buy" it for a few thousand pounds balloon payment.

Likewise people having house repairs/improvements who got an estimate for say "£5,000 and VAT" thinking it was including VAT but then presented with a £6,000 bill.

Like I say, never assume and always check, double check the detail.

Yes to paying into pensions, but be aware that the money is locked away, usually until you're 55 years old. You can usually invest in the same stocks/shares/funds via an ISA and still benefit from the same investment returns/increases, etc. It has to be a balance between what you can safely lock away for 30 years and what you may need to get your hands on before then. A balanced "porfolio" of savings/investments is best - some immediate access cash in a bank account, some longer term bank savings (monthly savings or 1/2/3 year fixed term account), some in as ISA, and some in pensions.

Start a pension, save as much as possible, work as many hours as you can, have a small amount for socialising/fun things and stick to it. Get enough together for a house deposit and some rainy day money before having children.

I've know people who've completely misunderstood car leasing and thought the car would be there's at the end of 3 years - they've been aghast that they either have to hand it back or "buy" it for a few thousand pounds balloon payment

There's a sad face story in the news today about a woman who fell for this. Genuinely thought 3 years at £190 pm would buy her a 4x4 that was then hers. Claims she had no idea about the near ten grand balloon payment.

Oh and put serious consideration into all the big things, look at loan rates etc, dont just get one because they're offering. On buying a house in the future, consider if it's practical, so if a recession happened would it be okay if you had to live there long term etc?

I know its already been mentioned but I cannot stress the importance of a rainy day fund enough. I was awful with money up until quite recently but I had amassed enough savings not to be kept awake when I lost 100% of my income when the pandemic hit.
I was extremely lucky to be able to do that though I've lived hand to mouth previously so its not very easy for many to save.

Pension. Pension. Pension. I think 1 or 2 others may have mentioned this too!

Have fun. The memories of the care free 20s are special in their own way. So do have money for treats that you like. They are also an important investment for mentally getting you through the crappy adult ing bits of being in your 40s and 50s.

Pal up with a few people 5-10 years older than you and ask their advice.

Buying earlier rather than later is good. But remember you could buy in a much cheaper area and rent it out whilst still renting yourself. Gets you on the property ladder.

I was advised years ago on thirds- third for bills, third for spends and third to save but housing costs are considerably higher now, so I would say get your bills out of the way then save half spend half.

Always opt in to workplace pension. You get tax relief on it so it’s an efficient way of saving.

Long term aim to save 6 months worth of salary saved as cash so if you lose your job you’ve got a buffer. Interest rates are fairly poor for savings just now so maybe consider premium bonds as they are accessible and you may win something.
Stocks and share ISAs are likely to give much higher returns but there’s a riskof losing on them if badly invested

The money saving expert website is fantastic and the forum is good as there’re lots of knowledgable people on there. They are quite straight talking sometimes but you’ll get sensible advice. Also sign up to weekly newsletter to get the bargains.

I don’t want to sound negative and I have no idea what your degree is in but a number of young people I know graduated either last year or this year and are really struggling to find graduate jobs. Most have settled for any job they can get as they need to pay their bills. They are back in the supermarkets and bars they worked in whilst students or during holidays whilst looking so that at least they don’t have blanks on their cv’s and they can pay their rent.
My advice would be any job is better than no job and everytime you want to treat yourself to that make up pallet, pair of shoes or handbag work out how many hours you have to work to pay for it. 90% of treat purchases won’t look so attractive if you know you have to work for 8 hours to buy it.

You are (hopefully) going to shortly be better off than you've ever been before. So you've proved to yourself you can live on less. Do Not just up your spending up to this new level. You'll get used to it, it won't make you happy and you'll have pissed it all away. I am a believer in finding your 'level' of spending. So you learn what is your level of expenditure on different things. Food, for example gives me pleasure, so I buy nice food. I'll pay a tenner for a fancy cocktail or two with friends, but I won't blow £100 on a night out just drinking.

Work out what makes you happy and where it's okay for you to 'waste' money. The key thing is it's different for different people. So your friend spends it on a fancy skiing holiday, another on a nice car, you on meals out. What you don't want to all do is convince yourself that the others are better off because of the car/holiday/eating out. You can't have them all. It's so easy to see the expensive one offs that people do and think that they are people's normal.

@namechange5965 - your friends have significant savings ~ how much are you talking?

Like others have said:

-Learn how to do budget - use a spreadsheet or mobile apps. Read this
www.moneysavingexpert.com/banking/budget-planning/

-open a savings account and make a weekly/monthly standing order from your weekly/monthly wages into that account = paying yourself first. I would suggest The Lifetime Isa as you get 25% bonus on top of your savings+interest (we bought a house using Help to Buy Isa which is similar, albeit this scheme is now scrapped)
www.moneysavingexpert.com/savings/lifetime-isas/

• get a cashback and reward credit card (always pay off balance at the end of the month); you will get 0.5-2% back on every purchase + will help you build your credit history. As an example, Natwest reward credit card - if you also change your current account to reward account, there are no fees!

www.moneysavingexpert.com/credit-cards/best-credit-card-rewards/ personal.natwest.com/personal/credit-cards/reward-credit-card.html

• Get Tesco clubcard (you get points that you can turn into vouchers) and do not hesitate to use coupons;

-Plan your meals for a week ahead, buy store brands, cook batches and freeze them, do not buy ready meals, take your own lunch to work. See this website for tips (more at the bottom of the page)
www.bbcgoodfood.com/howto/guide/12-ways-cut-your-food-costs

-Buy things outright after saving up - do not fall into store credit trap; this includes getting a new shiny phone on contract - buy a phone and then get a contract/sim to pay no more than £5 a month;

-Pension! I wish I knew this before as well - start paying into your retirement pot from day 1!!

Read this website www.moneysavingexpert.com A lot of excellent articles and money saving tips.

Best of luck! And don't forget to have some money left for fun too :)

Keep track of your credit file. Sign up to one of the credit file companies
Do not act as a guarantor for ANYONE, even family members
If possible, stay at home ( family) and save
Rent a flat in a cheap area and as another poster said, when you are able, buy a house anywhere.
Don’t lend money that you can’t afford
Don’t date a spendthrift

Always save "Something" a month. In my first job, I put £50 away out of my paycheck immediately when I got paid and then had a little bit of a cushion when I needed it.

Learn how much things cost and what you need to buy per week. Learn how to cook /batch meals to give yourself cheap but nutritious meals.

When you're getting set up, look at the prices of everything (gas/electric/internet) and make sure you're aware of the "full" cost. I'd also recommend be smart with your money/outgoings.

In my first graduate job, I was told to have a "block" wardrobe. This was 5-6 quality clothing items that would work with the other things. So, nice white shirt, black trousers, black blazer, "smart" top etc. Then, you can mix and match outfits and the cost to accessorise it will be much cheaper than 7x individual outfits.

Income insurance - you never know what is round the corner - friend of mine was badly smashed up by a drunk driver at 27 can't work full time even now.

I ended up with severe PND and lost my career - my income stream was insured so we are not on the bones of our arses over it.

When buying on credit, calculate the total repayment before you buy. Say, a "bargain" car for £5,000 on HP/Loan - it may "only" be £175 per month, but over 3 years that's a whopping £6,300 you pay for it. Would it look such a "bargain" if it had £6,300 written on the windscreen?

Or a store card used to buy a new handbag for £100, which you pay off at the minimum monthly payment of £5 which takes 3 years to clear meaning your total payments were £180. Would you have paid £180 for it if you'd had money in your purse?

If you want to be comfortable in life, the decisions you make are at least as important as how you manage money.

Chase those promotions and seek to move up the ladder quickly in the early years of your career. Change companies reasonably regularly - this is how you get decent pay rises.

But money into property early (unless the market looks overheated).

If you’re committing to a partner, make sure they have a similar ethos to you re finances.

Don’t have children until you can comfortably afford them and can demand some flexibility in work when you return.

Don’t take a big career break when you have kids. Get back in the game and stay full time or very close to full time when you get back.

When you do buy, get 2 bedrooms so that you can rent one out.

My advice is ask for a payrise or a job change every three years and invest in developing skills that are specialist, rare and able to be performed in a flexible way (ie from anywhere, at any time). Saving and investing will help, but financial freedom comes from being highly paid and completely flexible. This is particularly the case when you have children.

Fun and career progression are your only priorities in your twenties.