There are 72,751 students doing their Leaving Certificate this summer and who have applied to the CAO for their preferred college courses. Students rarely assume responsibility for their own finances until completion of their 3rd level education. Up to that point, they are allowed a certain flexibility – they have the rest of their lives to find goals – and thinking of personal finance is a topic for another time. Graduation usually means the start of their first job and seizing control of their financial destiny. It is at this time they then need to set solid financial goals. But it is no harm however to consider now what lies ahead and what these students can keep in the back of their minds. To keep it simple, here are my top five tips :
1. Create a Budget. This is not a scary exercise but should be a liberating pleasure knowing you can control your financial future. Budgeting isn’t a one-time wonder but should be done every year, Regular reviews ensure you keep your finances in check and keep on track with your goals. Before starting your budget, examine all your financial documents and commitments. Once you know how much is going out, it is easy to work out how much you have left over or not at the end of each month. Exceeding expenditure means you have to cut costs earn more or prioritise what’s important. You might just have to forego that summer holiday next year. Once completed, you can then set long-term financial goals and review at the end of each year. The main goal ? Live within the budget guidelines you set for yourself.
2. Save Up an Emergency Fund. You should have totally accessible cash account – a Rainy Day Fund (RDF) – for three very good reasons :
a. Emergencies – your mobile is stolen and you did n’t insure it !
b. Sudden loss of income – you lose your first job and it takes another 3 months to find your next employment .
c. Investment opportunity – buying an Aladdin’s lamp for half nothing.
A fully funded emergency fund should be between 3 and 6 months of your net annual income. You should always have a certain minimum ( c. € 1,000 ) before you repay any debt and never use savings to regularly supplement debt repayments ( you will eventually run out ) Also a regular (monthly) saver account should be set up that could provide for holidays, Christmas presents etc
3. Invest in Yourself. Depending on your career and life goals, you could invest in yourself by going back to 3rd level for post-graduate courses or get a new degree, being entrepreneurial and starting your own business, or just getting a new job. Other ways to invest in yourself include building skills ( public speaking courses, playing an instrument ? ), joining networking groups (especially online ) or doing something of a charitable nature with no expectation of any reward.
4. Build Credit. Ireland has not yet followed the US system of credit scoring but it is important we understand Big Brother is out there monitoring us. If you think no one cares about you, try missing a couple of payments ! The Irish Credit Bureau and the new government Credit Agency records every financial transaction, so one missed payment and it’s there for 5 years, a judgment and it’s there for life. If you build a solid foundation of paying your rent on time every month, keeping current accounts in order, regularly saving, you will give prospective creditors ample evidence of your financial ability and integrity.
5. Be Financially Responsible. Paying your bills on time, living within your means and reducing debt should all be top priority when handling your finances. If you are in a hole now and trying to climb out of debt from financial irresponsibility, just try to do better each month. As they say, the first thing you have to do when in a hole is stop digging. Financial responsibility affects every aspect of your life; if you are not taking care of your money, then chances are you are suffering in other areas such as your relationships and/or career. The ultimate goal to go for is making your finances a priority and getting them in order.
Good luck with your exams and your continuing studies thereafter – the rest of your life is a doddle !