Looking after your finances: a guide for NQTs
HG Managing Your Finances

NQT Blogs

Someone once said that if you take care of the pennies, the pounds will take care of themselves.

It’s not the most exciting advice, but if you haven’t already done so, this is the perfect time to develop really good habits that will help you look after your finances throughout your career.

This might be your first experience of the working world.

Welcome!

A word of warning, it’s not always easy and can take some getting used to - especially if you don’t feel as well off as you did as a student.

It’s not all bad though, and there are ways you can ease the transition and make sure the decisions you make are good ones.

Move on

Before you draw a line under your student existence, ensure your slate is clean. Have you paid your final bills? Outstanding balances can harm your credit rating and cause problems in the future.

On a more positive note, have you reclaimed the deposit you paid your landlord?

Now that you have graduated, you should find out what will happen to your current account. Some banks will change your account automatically. It’s important to find out what’s what – particularly if you’re used to taking advantage of your student overdraft. As a graduate, the amount you can borrow may not be the same, and you’ll need to understand what the new limit will be, when it will come into effect, and when you’ll be charged interest.

This change isn’t the end of the world! Graduate accounts still offer decent overdrafts. You’ll need to keep an eye on it, though, as the interest-free overdraft limit on graduate accounts tends to decrease as the years tick by.

Put down roots

When you move into new accommodation, one of the first things you should do is inform your local authority of your new address. Not only will you have the chance to vote, but you’ll also be in a better position regarding your credit score – also known as your 'credit rating'. This is important because it may affect your ability to take out a loan or finance agreement - and subsequently what you furnish your house with, or the car you drive.

Factors such as your age, employment status and existing financial commitments are used to formulate your score, and lenders will use this information when they assess your suitability for phone contracts, car finance, etc.

It’s free to check your credit rating with one of the reporting agencies:

Experian

Equifax

Life can seem easier with a decent credit rating: give yourself the best chance by ensuring you’re on the electoral register and keeping up to date with bills.

If you don’t have much credit history, or if what you do have is less than ideal, it might be worth considering a ‘credit builder’ card. Although you’ll pay a higher rate of interest than with regular credit cards, by paying off your bill on a credit builder card each month, you can prove your ability to handle credit and your rating will improve.

Student loans don't feature in your credit score. Lenders only know about them if they ask the question on application forms: This is mainly restricted to major transactions e.g. mortgages.

Live within your means

So – the countdown to the first payday has begun. Do you celebrate with an extravagant shopping trip, or a meal at a swanky restaurant?

The answer, of course, is no – you’ll do what the smart earners do and take control with a budget!

First, you need to make a note of your outgoings. Work out how much you spend on household bills, living costs, regular travel costs, presents for family and friends and leisure.

Pen and paper work fine for this, but you might find a spreadsheet or a budgeting app is better. Check to see if your bank has an app that works in real time and links directly to your account.

Budgeting might seem like hard work, but there are major benefits. You’ll be able to set money aside for holidays or a new car, and you’ll be improving your credit rating at the same time.

Make sure you’re paying into a pension scheme as soon as you can. Starting early will make a massive difference to the amount of money you have when you retire.

Understand your payslip

Your payslip will show:

  • the amount you have been paid before tax and other deductions – your gross pay,
  • deductions – what has been removed
  • net pay – what’s left!

You’ll also see that you have been allocated a tax code, usually starting with a number and ending with a letter. It is worth checking that you are on the correct tax code as it has a direct bearing on your net pay.

1250L is the tax code currently used for most people who have one job or pension.

Paying back student loans

Higher education can seem expensive – some graduates accumulate more than £30,000 of debt from loans and credit cards - and recent media estimates are closer to £50,000. If you’re worried about managing your debts, there are lots of sources of advice and help available.

The Money Advice Service is a good starting point, and Martin Lewis has a really positive approach to dealing with student debt. He’s keen to point out that when you start earning, you repay 9% of everything earned above £26,575 . If you earn less than that, you don't repay – AND – after 30 years (yes, that seems like a lifetime!) any remaining debt is wiped.

For more information about looking after your finances, take a look online:

The Money Advice Service

Gov.UK

Money Saving Expert