Financial help for your first job after graduation

Taking stock
Many new graduates start out under some financial strain. As a student, you may have taken out a student loan, borrowed money from your family, or made full use of your overdraft facility. Whatever your experience, your first job after graduation is an opportunity to begin repaying the investment you’ve made in your education.

So, if you're about to start work or you're in a job already, take responsibility for your situation by working out just what debts you need to clear. Once you know your income and outgoings, you can set up a manageable repayment schedule while covering everyday costs such as food, rent, bills and travel.

Your income explained
Job adverts may quote an impressive annual income. Before you apply, do you know what this really means each week or month? It's vital to be aware that 'gross' salary refers to the sum before deductions like National Insurance, income tax and pension contribution, while 'net' income is the amount left afterwards. Unless you can work overtime or earn a bonus, this is what you'll have to live off until the next payday.

Also find out where you stand with holiday and sick pay. These can vary from job to job, and may not kick in until you've completed a probationary period. Your employer may also make contributions to your pension and offer other benefits such as gym membership or life insurance. Don't be shy to ask. It'll show you're switched on about your welfare.

Understanding your outgoings
Once you know your net income and any extras you might receive throughout the year, the next step is to work out how much will be going out.

Work-related outgoings:

• Work out your monthly travel costs, including all your work journeys. Some companies offer schemes that pay your annual travel expenses up front. You then pay the company back in monthly instalments, so it's like having an interest-free loan. This is worth considering if you pay a lot of money on public transport each month.
• Set yourself a daily lunch allowance and calculate your monthly food spending.
• Do you need to invest in new work clothes? This may be a one-off cost, or you could put aside a small amount each month so you can go shopping for work clothes every now and again.
• If you're contributing to a pension or life-insurance scheme at work, check whether the contributions are deducted from your salary before you’re paid. If not, you may need to budget for them.

• A lot depends on your circumstances. If you're living at home, for example, consider how much you should contribute to the housekeeping. If you're living independently, your rent has to be a priority payment.
• Make a list of all your utility bills like gas, electricity, phone and internet.
• Don't forget about bigger, less frequent bills such as TV licence, car tax and MOT.
• You can't afford to go without food, of course, so factor that in.
• Do you have any regular loan repayments, such as a student loan, to consider
• Don't forget any hobbies and interests that cost money.
• Work out how much you spend on a typical night out and budget for a few nights out each month. Any extra will have to come out of what's left.

Now you've drawn up your basic monthly budget, so you can be confident that what's left is yours to save or spend as you please. It's worth adding 10% to your expected outgoings – this way you'll be more prepared if you're faced with surprise extra costs. If you don't spend it, you'll already be part of the way towards saving for a new car or holiday.

Managing your debt
Graduating with a debt to repay may seem like a necessary evil. The good news is that the interest rate on money borrowed from The Student Loans Company is very low in comparison to other loans. Also, you only start repaying the loan when you’re earning a certain amount each year, so check the threshold and consider deferring your payments if you're not earning enough.

If you left student life with an overdraft, most high-street banks will allow you to convert this into a graduate loan. The terms and conditions vary from bank to bank, but the overdraft is usually converted into a moderate-to-low-interest loan when you're earning regular money. Shop around. Compare the different Annual Percentage Rates (APRs) and the terms and conditions of the loans on offer, and find the best deal for you.

If you have credit-card debts, it often makes sense financially to switch these to a lower-interest loan too. Often the APR on a loan will be lower than the cost of repayments on your credit card.

Your financial future
Your first job will bring many changes in your life. The money you earn will give you more independence, as long as you're switched on from the start. By focusing on repaying your debts and living within your means, you'll soon find your feet financially.

Once things settle down, at work and in your bank account, you can consider saving and investing. Your first job may boost your spending power, but knowing that you have some set aside will also give you peace of mind.