Financial Tips for People in Their 20s

There’s no doubt that graduates in the UK can face a significant financial burden when they leave higher education in their 20s, particularly if they’re in a position to start repaying their loans virtually immediately.

Currently, an estimated £20 billion is loaned out to around 1.5 million students in England each year, with the value of outstanding loans peaking at £182 billion in March 2022.

But what steps can you take to manage and optimise your finances in this respect? Here are some tips to keep in mind:

Define Your Future Financial Goals

Not every graduate has been created equal, which means that each one will have a different outlook in terms of their career prospects, objectives and financial goals.

So, it’s important to define your short, medium and long-term financial goals if you’re to manage your money effectively, while prioritising these also leads to more informed and structured decision making.

For example, you may want to travel immediately after graduating, but also have an objective to buy a home within in the next five years. Understanding this and the associated costs help to determine the viability of these goals and their timelines, while making you aware of any compromises or trade offs that need to be made.

Without this type of outlook, you may overspend or over indulge while travelling, making it difficult to fund the purchase of a property for a considerable period of time.

Create a Budget and Plan, Plan, Plan

Budgeting is also key to money management, especially if you take this discipline seriously and strive to create accurate records and deal in pence rather than pounds.

With a budget, you’ll accurately outlay your weekly or monthly income (depending on the structure of your earnings and finances), before incorporating your outgoings to gain a clear insight into your current financial standing.

This will also reveal how much disposable and discretionary income you have to spend each week or month, which enables you to operate within your means and tailor your spending to suit your income.

This can lead to long-term savings over time, while making it far easier to make informed purchasing decision (and commit to less impulse buys).

Create Savings and an Emergency Fund

This will also help you to commit a percentage of your regular disposable income savings, and in an ideal world you’ll be able retain a minimum 10% of this capital.

This can accumulate quickly over time, creating a burgeoning savings fund and potentially establishing an emergency fund for those pesky and unexpected rainy days.

If you have a fixed amount each month to commit to savings, you may also want to consider seeking out more rewarding vehicles and investments. This will require you to work closely with wealth managers, who can create a savings and investment plan based on your capital holdings, appetite for risk and wider financial circumstances.

It’s never too early to start this type of savings plan, particularly as returns can be compounded over time to deliver increasingly impressive returns.

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