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A Student's Guide to Financial Security


Money and lack of financial security can cause a lot of issues, leaking into every aspect of life, as we navigate how best to spend our money. It's no news that financial security is almost non-existent for students and most especially for those who aren't taught basic money handling skills at a young age. I can definitely attest to the fact that getting to the stage of being financially secure takes years, a lot of trial and error and getting into financial trouble so that you know what mistakes to never make again. I was terrible with money when I was younger, spending frivolously, constantly worried that I didn't have enough at the end of the month to pay for my phone bill etc. and looking back, I'm glad to have fumbled the bag earlier rather than now! In this blog post, I'm going to give you the best tips and advice that I've gained over the past couple of years (an evolution from my previous blog post on Budgeting), to become financially savvy! I'm not a financial adviser of any sort, just a student trying her best, therefore what I mention are things that are working for me now with the expectation to learn and grow as I get older.

What do I mean by being financially secure?

Financial security does not mean that you have to be earning an above-average income (of course it would help) but rather, being somewhat secure in knowing exactly where your money is going to as soon as you get it. Even if you don't have a huge financial responsibility, it's important to understand how best to utilise your money, so that when you get to a point when you have to adult and responsibilities are flooding in, you're already in a position to know how to allocate your income. We unfortunately live in a capitalist society in which the government doesn't take too kindly to the working class and if anything, almost penalise individuals for earning less. To avoid the vicious cycle of being completely dependant on terrible loans, credit cards and ruining our credit score along the way, we need to know where our money HAS to be spent and where we can cut back.

Budgeting

First and foremost, budgeting is the most important skill when it comes to money management. A budget is essential, it's completely personal and depends on your needs. Budgets are also absolutely dependent on your lifestyle not on your income. What do I mean? Basically, people usually fall into the trap that because they get a promotion and therefore more money, that they now have more money to spend. Why spend more money when you have been getting by with a lower wage instead of saving this money or paying off debts you owe? A higher income should only equal a higher budget when your lifestyle has now changed, i.e. you now become a home owner/rent and bills increase, you have a new child to look after, you upgrade your car, you relocate etc. To form a budget, you have to understand what is committed spending and what is luxury/non-essential spending. Committed spending usually includes and is not limited to: rent, bills, transport, food shopping, childcare, phone bill, debt repayments, personal care. Luxury/non-essential spending usually includes but not limited to: subscriptions, gym membership, shopping allowances, personal care etc. Note that I've included personal care in both as there are some aspects that are essential and some that are more of a luxury. Here's an example of how I set up my budget for 1 month.



To create your own, look at your bank statements from the past 3 months and look for repeating payments and put them on an excel sheet or a piece of paper. Once you have worked out where your money needs to go to, subtract this amount from your monthly income which should ideally leave you in a positive balance. Depending on whether this positive balance is higher or lower than expected, analyse your spending and start to make adjustments where needed.


I bank with Monzo now, so if your bank allows you, make use of the pots function so that when your monthly wage comes into your account, you're able to allocate the money needed for 'bills', 'groceries' etc. in order to keep your money separate so you don't dip! See below for an example. Another good tip is to have 2 accounts, one which your money comes into/bills come out of and another for your weekly/monthly spending budget.


Saving

Saving is what allows you to purchase items that are worth more than your monthly income. To be able to save, you must be in a positive balance after all of your monthly income is allocated into committed/non-committed spending. Being able to save is something that unfortunately not everyone can do depending on their circumstances, even if they have budgeted their money properly. Working out your budget will effectively let you know how much you can put towards saving and during this process, some further adjusting to your budget may need to happen. Some people save in their current account and it works for them. I don't recommend this as it can lead you to dip into your savings when you don't have to and you also don't get the benefits of earning interest on your savings amount when it's sitting in your current account. There are different variations of Internet Savings Accounts (ISAs). I bank with Monzo and BoS/Halifax so I'll breakdown what I use below. Easy Access Savings Pot ISA (Monzo) This type of ISA allows you to earn interest on your savings balance, so you gain more money over time. I really like that in this ISA, you can access your interest earnings at the end of every month instead of some that only deposit your interest after a year. As I was planning to go travelling this year, this pot is titled my 'travelling fund' and I've kept it like this as I don't have anything else to save up for in the short-term and the money can be used for future holidays. I used to deposit £400/month and now I deposit around £100 a month as my circumstances have changed. Help to Buy ISA (Halifax) The HTB ISA was a government scheme to help first time buyers get onto the property ladder in the UK. It allows you to save up to a maximum of £200 every month to a maximum total of £12,000 before closing your account. The government then add 25% of your balance on top (£3000 free money for a balance of £12,000) only if you use the balance to put a deposit on a house. If you decide not to use the money for a house, you don't get the 25% extra but what you save is yours. I deposit £200 a month and as I'm not looking to buy a house for the next 4-5 years, hopefully I'll reach the maximum balance to make the most use out of the 25% boost from the government. Unfortunately the HTB ISA available anymore but the Lifetime ISA is similar (and better if you earn more money) or there are other schemes such as the Help to Buy Scheme that may be better for you. If you're looking to be a home owner in future and don't have any savings towards a deposit, I highly recommend seeking out government schemes etc. as the property market is a joke!! Coin Jar Pot (Monzo) Emergency funds are crucial as you never know when you need to spend a large sum of money unexpectedly. My coin jar combines money for emergencies and some personal care services (nails, eyelashes, hair appointments etc.). When Christmas and other people's birthdays are coming up, I'll plan a few months in advance and deposit my budget for their presents in this savings pot to keep it aside my current account balance. So how do I do this? Round Ups: on Monzo I utilise their 'Round Ups' function to save pennies on every transaction above £1. So, if I spend £3.81, 19p gets directed automatically to my coin jar and £4 comes out of my current account balance. Since August 2019, I've saved £115 just from round ups! IFTTT app: This app is great and can be paired with Monzo if you bank with them. I currently use their 'Winter Weather Savings Challenge' which allows me to save 50p (the amount can be changed) every time the temperature in my location drops below 10 degrees. Such a fun way to save and adds up so much with little effort! £1 a day Challenge: I have set up a scheduled payment in Monzo to deposit £1 a day to this pot. Another brilliant way to keep yourself accountable and makes saving easy when it seems so small. Of course, this can be personalised and instead of everyday, you can set up a payment once a month for £30. The money that's left in my current account after budgeting and saving can be used as and when needed for dinners/drinks/miscellaneous purchases. If I have some money left over at the end of the month (after spending and saving), I usually deposit the rest of the money into my coin jar. Tips for saving 1. Save within your means - If it's £10 or £100 a month, it’s all beneficial. 2. Work on self-awareness - If you know you’re likely to dip in and out, create a savings account that's difficult to access money. 3. Understand your short-term and your long-term goals in advance to allow you plenty of time to save for a particular item, i.e. if you're looking to go on holiday in 3 months, how much do you need to save to make up the total before booking?

Credit Score/Pensions


Before asking for a substantial loan it's imperative to consider your credit score which can be easily calculated online. Your credit score is what determines how good you are at repaying the money that's borrowed to you. You can build up a credit score through making timely payments for phone bills/gym memberships and most importantly through credit cards. Even though I understand how they work, I've not been able to get a credit card yet due to still being a student, so I don't have many tips to give apart from:

  1. Don't be late on repayments.

  2. Make sure you understand exactly what the terms are on your credit card and how much interest you'll be paying on top of your repayments if you're late.

  3. Try to always have the money that you're looking to borrow in your account so you don't worry about being late or if you can actually repay it.

  4. No money is free and what you borrow isn't yours!

As I'm not technically employed and receive a stipend, I'm not entitled a government pension, therefore in the new year, I'm looking to open up a private pension and deposit around £20-£50 a month for the next 4 years which I'll then increase when I get my first full time job after my PhD. The earlier you start planning for your future the better! I'll keep you updated on my search and if you have any recommendations of private pension schemes/companies, please let me know!

And that's it - my guide to start becoming financially secure! Hopefully these tips have been useful and will help you in managing your money no matter what circumstance you're in. Good luck and let me know if you start incorporating these tips, how you're getting on and if you have any for me, I'm always happy to learn! Make sure to subscribe for even more content from An Abundance of Melanin, connect with me on Instagram and check out my last blog post!

Until next time,

D x

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