Managing money for your age and stage
To help you keep on top of your finances, here are some tips you can follow as you reach various milestones:
Getting a job
As soon as you start earning your own money, it’s a good time to get into the habit of budgeting.
You could do this by assessing your finances every payday and prioritising your spending for the following month. Before buying anything, work out how much money you’ll have left over once you have dealt with priorities such as paying bills. Think of any extra expenses you are likely to have and take these into account when you budget.
We’ve all given in to buying things we don’t need, but having a budget will help you resist the temptation to impulse buy. Monitoring where you spend your money each month can also help you identify patterns in your spending and work out where you could cut back.
It’s also a good idea to start saving as soon as you can, even if it’s only a small amount, because over time it will add up. As your earnings increase, you can also begin to set aside more money for future plans such as buying a house, or getting married.
Moving out of your parents’ house
Flying the nest has many advantages but paying bills is not one of them.
Account for bills in a budget. You want to get a reasonable budget down on paper to keep track of your potential outgoings. This will vary depending on your tenancy agreement, but once you’ve moved in, you could be expected to pay council tax, gas, electricity, water and service charges on top of your rent.
To help you avoid missed or late payments, it’s a good idea to set up a direct debit or standing order for your bills. You’ll be less likely to have nasty surprises – if an unexpected bill lands on your doorstep.
Buying a house
Buying your own home is likely to be one of the biggest financial commitments you’ll ever make. According to a survey by Halifax bank earlier this year, the average deposit paid by first-time buyers in the UK is currently £32,321. So you can see why it can take years to afford a place of your own. In fact, the average age of first-time buyers in the UK is 30 and in London it’s 32.
What’s more, taking out a mortgage can feel like a minefield, so it pays to do your research beforehand. You may also want to speak to a mortgage adviser, so you can make sure you are aware of the risks and benefits of different mortgage offers.
It is worth shopping around for a good mortgage deal. You may want to consider a fixed rate mortgage, so you won’t have any sudden changes in your mortgage payments. You could also look into whether making overpayments is a good option for you.
If you are having children, you’ll need to assess how it will affect your income.
There are statutory rules that allow mothers to take up to a year off work and to be paid for a period of time. You can find out how much financial help from the government you’ll be entitled to when you have children. The government offers maternity and paternity allowances, as well as help with childcare costs.
Your company also contributes and may pay more than the statutory minimum. If the package isn’t generous, calculate how much you’d need to save to cover any loss of income from you, or your partner, taking time off work.
There are also various children’s savings accounts you can open to start saving for their future. You could choose an account your child can start paying into, if they get pocket money for instance. This is a good way for them to start learning to look after their own finances.
If you have several pension pots, which may be the case if you’ve changed jobs a few times, then find out how much money you have accrued altogether and when you can access it. You also need to ensure that you have sufficient national insurance contributions to qualify for the state pension in full, or consider making top-ups.
Consider getting financial advice to explore your options and to help you plan your retirement as cost-effectively as possible, including setting a target date for when you want to start drawing from your pension.
The rules are simple: try not to spend more than you can afford, use debt prudently and do your research – or seek independent financial advice – before taking out a financial product. That way, you’ll be well-prepared for every age and stage.