Graduation marks a monumental transition in your life. One minute you’re lingering in your formative student stage, enjoying all its challenges and deciding who you want to be, and the next you’re a fully-fledged adult at the start of a long career. It can be thrilling and terrifying, often in equal measure, and inspire you to focus solely on the present moment.
It’s entirely sensible to focus mostly on the present moment, of course: you’d like to hit the ground running and develop your skills quickly while still having some fun. But that’s not all you should do. In addition, you should carve out some time to spend planning your financial future. Given that the retirement age keeps rising and COVID-19 is still causing economic uncertainty, it’s ill-advised to assume that financial stability is inevitable provided you succeed professionally.
So what should you focus on with your financial planning? Well, while you don’t need to get too granular with your calculations, you should think about the specific things you should keep funded. Maintain them (until they’re needed) and you’ll be able to enjoy post-graduation life with much less stress. Here are five specific funds that warrant your urgent attention:
Image credit: Marco Verch
A house deposit
Even if you haven’t dreamed of owning a home, renting indefinitely is something to be avoided because the money you put into it doesn’t earn you anything in the long run. If you get on the property ladder, though, every mortgage payment brings you one step closer to owning property debt-free — an excellent position to be in. And the first step is to build up a house deposit.
Think about what size of home you’d like to buy, then plan to save 10% of the average value of such a home in your desired area. If you can save more for your deposit, do so, but 10% is a good place to start (according to Propertymark) because that’s what most mortgage lenders require. Remember: the sooner you stop renting and start putting your money towards assets, the better.
Insurance isn’t very fun or interesting, but it is extremely important, and the cost of ignoring it can be catastrophic. Things will inevitably go wrong, after all. No matter how fortunate you are, you’ll eventually have something stolen, or run into serious issues with your health that prevent you from working and earning money. Insurance is vital for these things.
Once you’ve been able to buy property, home insurance will be key, but something that everyone should invest in is life insurance. It’s particularly urgent if you have a family or plan on raising kids one day. What kind of legacy do you want to leave behind? Thinking about this around graduation might seem silly, but tomorrow is never guaranteed. Take a look online at your options (you can easily get a quote from the Post Office) and make a decision.
Retirement keeps getting harder for so many people, and it’s the young people who suffer the most. There are kids today who may never be able to retire if things keep getting worse. Due to this, you can’t rely on the pension schemes arranged by your future employers if you want to retire at a reasonable age and have enough money to live the life you want to live.
Look around to see what other pension funds you can start investing in. The good thing about this is that you don’t actually need to pay that much for it to be worthwhile. Just pay what you can, even if it’s a few pounds each month. That money will add up — but if you can pay significantly more, then do so. Just be sure that you only invest money you know you can do without for decades to come.
Varied legal fees
You’ll probably need to pay for legal assistance at least once in your life, and it could happen at several points. When you’re buying a house, for instance, you’ll need a solicitor to handle the process (Money Helper has a good guide to this). And if you want to do something interesting with the property you’ve purchased, you might want a lawyer to help you draw up a request to submit to your local council.
This can be your smallest fund, realistically, because legal action is reasonably uncommon for most. But if you can find money that you don’t need for anything else (including your other financial commitments), then earmark if for legal issues just in case,
Last in the list, because it’s fairly vague, there’s always value in saving money, even if you’re not putting it aside for anything in particular. You can still spend money on things you don’t need (it’s one of the core joys of life, obviously), but keep in mind that life is full of unexpected financial demands. What if a friend runs into dire straits and needs support, for instance? You won’t have to help them, but if you have emergency savings then you’ll have that option.
In short, then, you should save as much as you can, and aim to spend money in pragmatic ways. Form good habits at this stage in your life and you’ll have a big advantage over those of your peers who are still spending recklessly and living purely in the moment.