17 Dec 2023 | 2 minutes to read
If you’re relatively new in your career, you should never let what’s going on in the wider world stop you from looking at the things you can control, that will ultimately help secure your best level of financial wellbeing. For younger people there are probably two financial priorities that will preoccupy them as they start building their careers: paying off debt and buying a house.
For anyone who attended university in the last 15 years, emerging with student debt is a likely scenario. The temptation to reduce this debt might be strong, but it’s worth remembering that student loans function more like a graduate tax – you won’t be asked to repay them unless you’re earning over a certain threshold, and they are written off entirely after a certain period of time.
However, more recent and future graduates face quite a different environment. The likelihood of interest rate increases means it will take longer for their loans to be paid off. Moreover, changes to the student loans system in England, announced earlier this year, may mean loans will only be written off after 40 years, with lower- and middle-earning graduates paying more towards their loan over their lifetime as a result of the changes. Other more expensive forms of debt should take priority. Credit card debt and overdrafts are probably the most common, and it’s understandable that people emerge from their university experience with some of this. After all, who wants to miss out on those post-exam celebrations? But it’s certainly worth getting these debts under control as soon as you can.
Financial planning and management is vital to buy what is probably the most expensive purchase most people will make: a home.
There have been reams written about the increasing difficulty of buying a house in the UK. But the solution is not simply to cut down on your avocado toast or latte consumption, as some may glibly suggest. The truth is more prosaic - house prices have grown hugely in recent years, and not just in London. Saving for a suitably large deposit is no mean feat, and there are no easy solutions.
Luckily, there are some useful options. The Lifetime ISA adds a 25% bonus to your deposit savings, up to a maximum of £4,000. This means that for every £4,000 you save a year, the government will top it up by £1,000. Another option for those struggling to buy a home is Shared Ownership, whereby you purchase a share of a properly (e.g. 35%) and pay rent on the rest. It’s a useful way of getting a foot on the ladder, but worth remembering that Shared Ownership homes tend to be new builds, which can be more expensive than older properties.
To find out more or if you have any questions about financial planning, contact us to find out how we can help.
Please note that any tax benefits will depend on your personal tax position and rules are subject to change. The value of investments can go down as well as up, and you may get back less than you invested.
Before you invest, make sure you feel comfortable with the level of risk you take. Investments aim to grow your money, but they might lose it too.