Finances - Living and Working in Lincolnshire

Financial Jargon

When considering your finances there are a variety of new terms to learn and understand.

View our Glossary of Key Terms to decipher some of the more difficult jargon concerning finances.

Food for thought

Things to consider

Salary

Not all your salary is money straight into your pocket – you will be faced with unavoidable deductions, even before you pay your rent and living costs!

Some things to keep in mind when looking for your first job are:

Some things to keep in mind when looking for your first job are:
What is my career progression going to be like?
Will there be the opportunity for personal or professional development?
Will I enjoy the role?

No amount of money will make up for a job that you don’t enjoy, so keep in mind the other factors that contribute to your career decisions.

The average graduate starting salary varies massively based on location, but it’s important to remember that the cost of living also increases alongside this. Make sure you consider the cost of living in the area before you make any moves, just because your wage might be higher it doesn’t always mean you’ll have more money! Your purchasing power is higher in some parts of the country than in others – for example, £10 will go further in Lincoln than it would in London. With this in mind, try not to set your salary expectations too high, there’s more to a job than the money you make.

Compulsory Deductions

Not all your salary is money straight into your pocket – you will be faced with unavoidable deductions, even before you pay your rent and living costs!

Income Tax

Income tax is a deduction you receive on your income based on how much you earn. It’s used to help provide funding for public services such as the NHS, education, and the welfare system, as well as investment in public projects, such as roads, rail, and housing.

Everyone is entitled to a personal allowance each year, which is a set amount of money you can earn before you begin paying tax. To see the current tax brackets, click here.

National Insurance

National insurance is a compulsory contribution that goes towards state assistance for those that are sick, retired, or unemployed. You are entitled to a personal allowance before you begin paying national insurance, however, your national insurance contributions are calculated for each pay period (this could be weekly, monthly, or something else entirely based on your employer).

To see the current National Insurance brackets, click here.

Pension

A pension is a pot of money you pay into over time to support your retirement. This might be something you aren’t too worried about yet, but it’s important to consider how you might begin building up your pension once you start working full-time to support yourself in the future.

There are three types of pension:

State pension is paid by the government and your eligibility depends on how many years you have made national insurance contributions for.
Company pensions, sometimes called workplace pensions, are paid directly out of your salary. Your contributions are often met with further contributions by your employer, which is of huge benefit in the long run.
Personal pensions are typically used by those who are self-employed and so can’t access workplace pensions. This is set up completely off your own back so have a think about if this will be of benefit to you.

Both company pensions and personal pensions are invested with the aim of increasing the amount you retire with – which means the earlier you start saving, the more your pension fund will grow through the years!

Disposable Income

Despite what the name might suggest, your disposable income isn’t quite disposable yet. It’s what you have left after your compulsory deductions and is the money you use to pay living costs – such as rent or mortgage payments, utility bills, and council tax.

Rent vs Mortgage

One of the biggest processes that you might face after graduating is tackling your living situation. Typically, you have two options based on your situation – renting or securing a mortgage. Which is best for you?

It is important to note that everyone’s situation is different – what may be a good idea for one individual might not necessarily be a good idea for you. Make sure to do your research!

Mortgage Pros and Cons

Mortgage Pros	Mortgage Cons
Your mortgage repayments are typically cheaper than renting.	There are up-front costs to starting a mortgage, including stamp duty and mortgage fees, as well as a deposit (usually around 5-10% of the property’s value).
You fully own your home at the end of the mortgage’s term, so you don’t need anyone’s permission to have pets or redecorate.	Due to their complexity, the process of securing a mortgage can be time consuming.
You can make a profit if house prices rise, and any changes or improvements can also increase its value.	You are responsible for the maintenance and repairs of your home.

Renting Pros and Cons

Renting Pros	Renting Cons
Finding a property to rent is usually quicker than buying a house.	Renting is often more expensive than monthly mortgage repayments.
Maintenance for rented properties is covered in your tenancy agreement so you won’t have to pay for this yourself.	Your landlord owns the property and so you must abide by their rules (they may even ask you to move!)
There are fewer ‘hidden costs’ with renting than securing a mortgage.	As a tenant, you are only paying to live rather than paying towards an asset as you would in a mortgage.

This table covers some of the main pros and cons of renting or securing a mortgage. However, this isn’t a definitive list. This is an important decision that can impact you later down the line, so be sure to consider all your options – especially if you are settling into your career and think you may be staying where you are for a while!

Utilities & bills

Utilities include gas, electric, water, broadband, and telephone. When staying in student accommodation, your rent is often all-inclusive – meaning it covers all your bills. When you move out, you’ll likely have to cover your utility costs yourself. These vary based on your location and usage. Why not compare the average bills for different locations around the UK in our Cost of Living Calculator tool.

Council Tax

As a student, you are exempt from paying council tax, though once you graduate this will change. Your council tax is a bill paid to your local council, which varies based on the value of your property. It contributes to local services such as waste disposal, parks, education, emergency services, and many others. Whether you’re a homeowner or a private tenant you are responsible for paying council tax and missing just one payment may mean you have to pay the whole year up-front – so be sure to stay on top of your payments!

Find out about moving and Council Tax here
(source: Gov.uk)

Discretionary Income

Discretionary income is the amount of money you have remaining after you have paid all your essential living expenses. You can use this money to save, invest, or spend. This is your ‘play money’ which you can spend on the things you love!

How much of it you have each month depends not only on how much you earn but where you live too. For example, you’d likely have much more discretionary income in a town with a low cost of living than in a city with a much higher one. You can read more about how the cost of living varies around the country and what your essential outgoings might be on our Cost of Living Calculator.

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Financial tips and support

When considering your finances there are a variety of new terms to learn and understand.

Things to consider

Salary

Not all your salary is money straight into your pocket – you will be faced with unavoidable deductions, even before you pay your rent and living costs!

Compulsory Deductions

Not all your salary is money straight into your pocket – you will be faced with unavoidable deductions, even before you pay your rent and living costs!

Disposable Income

Despite what the name might suggest, your disposable income isn’t quite disposable yet. It’s what you have left after your compulsory deductions and is the money you use to pay living costs – such as rent or mortgage payments, utility bills, and council tax.

Discretionary Income

Discretionary income is the amount of money you have remaining after you have paid all your essential living expenses. You can use this money to save, invest, or spend. This is your ‘play money’ which you can spend on the things you love!