Stepping into the world of work once you’ve left university is exciting. But alongside new working hours, expanding your skills and developing your career, you may want to look at how you can manage your finances effectively.
How to manage your money when you start working
1. Check your student account
Once you’ve graduated from university, your student current account may change to a graduate account.
Graduate accounts generally have different overdraft facilities and there may be charges for using them. The arranged overdraft limit may also be less than on your student account, depending on who you bank with.
If you have an HSBC Student Bank Account, it’ll automatically be transferred to an HSBC Graduate Bank Account on your graduation date. You’ll get a letter beforehand telling you about the changes to your account and the key difference is that your overdraft may no longer be interest free. This means there may be charges for using your overdraft.
Explore more: Overdrafts explained
If you’re unsure about any changes to your student account, speak to your bank as they may be able to help.
2. Plan a budget
When you start getting paid, try sitting down and working out a budget. Take into account your travel to and from work, any bills and rent you need to pay and any other necessities. Anything you can save, move into your savings right away so you’re not tempted to spend it.
Explore more: Spending your income
3. Kick off your savings
If you’ve just started your first job, saving for the future might be the last thing on your mind. If this is the case, you’re not alone. Over half (53%) of 22-29 year olds in the UK have nothing in an Individual Savings Account (ISA), or a savings account, according to the Office for National Statistics (ONS).
The reasons why vary from person to person, but starting your saving efforts in your 20s can help you reach any savings goals you have now, or later in life. There are plenty of reasons to start saving, like treating yourself to a well-earned holiday, or buying a property.
4. Pay tax on your earnings
Depending on the amount you earn when you start working, it’s likely you’ll need to start paying tax. You should receive a tax code from the Government. This will be used by your employer to work out how much tax you need to pay.
Tax bands and the personal allowance limit may change each year. You should receive a letter before the end of the financial year that lets you know what your tax code will be in the next financial year. It’s important to check this is correct – if you’re unsure, contact the tax office.
If you’re self-employed, you’ll need to register this with HMRC. You’ll need to pay income tax on your business profits, but you should still receive the same personal allowance as if you were employed by someone else. You’ll also need to pay National Insurance.
Corporation tax may come into play if you’re running a private limited company, or a limited liability partnership. You can find out more about paying tax when you’re self-employed on GOV.UK.
5. Repaying your student loan
You’ll usually need to pay back your tuition fees, maintenance loans and postgraduate loans if you have them. To start paying back your student loan, you’ll need to earn over a certain amount. This threshold will be determined by when you started your course.
Repayments will be taken automatically from your pay at the same time as your tax contributions. If you’ve left university before the end of your course, you’ll still need to repay any money you borrowed.
You can make voluntary repayments on your student loan, or pay it off in one lump sum. There’s no penalty for doing so.
If you’re self-employed, you’ll need to fill in the student loan section of your tax return if you’re due to start paying back your loan.
6. Adding to your pension pot
If you’re eligible, you should be automatically enrolled onto a workplace pension scheme. You can choose to opt out, but you'll lose your employer’s contribution and tax relief from the Government.
To be eligible for auto-enrolment onto a workplace pension scheme, you'll need to:
- work in the UK
- be 22 years old or over, but under State Pension age
- earn over £10,000 per year
- not be in a suitable workplace pension scheme already
Contributing to your pension early can help you start building up money to enjoy your retirement.
7. Check your P60
At the end of the tax year, you’ll receive a P60 from your employer. This will show the tax you’ve paid during the last financial year. If you have more than one job, you’ll receive a P60 for each.
You’ll need your P60 for a number of reasons, including:
- to claim back any overpaid tax
- apply for tax credits
- for proof of income if you’re applying for a loan or mortgage1
Once you’ve started your first job, it can be useful to set yourself some goals – whether it’s savings goals, career goals, or just things you want to achieve.
Find out more about how to set – and achieve - your goals.
This article provides general information and does not take into account the financial situation of the reader. For this reason, it must not be relied on as financial advice. All accounts are subject to terms and conditions.