Managing your money

Whether you have made a decision to go out to work, or have opted to continue studying, there will be things that you won't have had to think about paying for before.

This section acts as an introduction to the type of things that you might need to start thinking about.

Bank or Building Society Account

Most employers will pay you directly into your bank account on a fixed date or day every week or month.  If you don't already have an account of your own, you will need to open one.

Shop around before making a decision as there are many things to consider such as the interest rate, how easy it will be to access your money, and whether there are any incentives on offer at the time eg music vouchers or rail cards etc.

Budgeting

If you are supporting yourself for the first time (maybe you have left home or gone to college), you will need to pay for lots of things such as rent, bills and food.  It is a good idea to set up a budget from the beginning so that you can make sure that your money goes around well and so that you don't get into debt, and have some left to enjoy yourself with.

Outgoings

The first thing that you need to do is write a list of essential outgoings - this might include:

• Rent and household insurance
• Bills (electricity, gas, water, Council Tax, telephone, TV licence)
• Food and drink
• Mobile phone bill
• Leisure activities (eating out, going to the cinema or gym)
• Travel
• General repairs

Income

You then need to write a list of your income:

• Wages/salary
• Benefits
• Other (eg money from parents)

Now take your outgoings from your income.  If there isn't enough, you need to either find a way to reduce your costs or increase your income, possibly by a part-time job.  If there is any money left over, you should allocate a realistic sum for going out, buying clothes/books/music etc, then you could put some aside for savings.  This could be for a holiday, something special or maybe just a rainy day!

Credit Cards

When you are over 18 you can apply for a credit card.  You will be assessed to see if you will be able to afford to make repayments, and if the credit card company is confident that you can, they will issue you with a card.

Credit cards can be a useful short-term loan to pay for an item, but if you do not pay back the balance straightaway, you will pay interest.

Many people use credit cards to buy things that they cannot afford to pay back.  This is dangerous because you can get into debt and every month that you do not pay back the balance, the interest makes the amount you owe greater the following month.

If you do find yourself getting into debt, the best thing to do is to be honest with the lender and see if you can agree a lower repayment schedule, otherwise the debt will only continue to grow.

Income Tax

The money that you earn is taxed at a percentage, so that the more you earn the more you pay.  This normally comes directly out of your salary - you will see the transaction on your payslip (PAYE).

The money is then used to fund important services such as the police, NHS, defence and healthcare.

National Insurance

Once you reach your 16th birthday, you will be sent a National Insurace Card.  Keep this safe as you will need to use it when you apply for a job.

You will start to pay National Insurance once you earn £80 or more per week.  It will automatically be deducted from your salary by your employer.

National Insurance is normally deducted direct from your salary - you will see this transaction on your payslip.

Paying Bills

There are various ways of paying bills, but whichever way you choose, it is important to ensure that they are paid on time so that you don't get charged interest or get disconnected.

The best way to pay bills is directly from your bank account - this is called direct debit.  You will be sent a statement to see how much you owe and the money will automatically be taken from your account.  You can set this up with your bank or building society.

Another way to pay your bills is by post.  Never send cash as it could get lost or stolen - instead use a cheque or postal order.  If you want to spread the cost of your bills, you could buy stamps at the Post Office for things like a TV licence, gas or electricity.

Whatever method suits you best, make sure that you keep a record of bills and keep your bank/building society statements - you will need to refer to them in the future.

Savings

Once you have a steady income, it is a good idea to think about putting a small amount of it away each month.  This can be for things like a holiday, a big purchase or possibly a deposit on a car or house.

You can set up a special savings accounts which will offer a higher rate of interest, although be careful to find out if there is a notice period that you need to give if you want to withdraw your money.