10 things about work, life and money every graduate should know

"And now, to give the graduate address, Dr. Martin Lewis." How strange to hear that prefix to my name. Yesterday I was chuffed (and when I first heard, shocked) to receive an honorary doctorate, in Business Administration, from my hometown university of Chester. As part of it, I addressed the graduates to give them my take on life, career and money – so I thought it worth jotting down here too.

I was asked to give ‘inspiring’ tips. I addressed them to fresh graduates entering the working world for the first time (though I’m aware some were mature students or career changers). As normal, I speak by simply writing five or six words on a piece of paper beforehand and freewheeling, so this is far from an accurate copy of what I said. I’ve just bashed it out quickly on the train back, but I hope it gives a flavour.

PS. Very obviously I don’t intend to use the Dr. title in the real world, but it was fun to hear it once.

1. It’s about the skills you gain more than the jobs you’ve done.   

When I was lost without a clue of what to do, as my year as General Secretary of the LSE student’s union was ending, I went to speak to the school’s then Director (what LSE calls its Vice-Chancellor) for advice. What on earth should I do when I left? His advice was quite simple: it doesn’t matter too much right now, get the best job you can and focus on acquiring skills and making the best of it.

Looking back, he was right. While that help doesn’t work for those going into law or medicine, for many others it does. This portfolio approach to work is becoming a modern norm, so you have to think differently about how it works.  

When I look back at all the jobs I’ve done, each has taught me something. From selling caravan awnings at 18, which greatly improved my communication skills and taught me techniques I’ve since reversed to help consumers; to working in financial PR when I graduated, which boosted my writing, my understanding of the media, the corporate world, and finance.

Each element gives you something more, a new skill; collect them, take them with you. Everything adds up.

2. If you’re self-employed, a third of what you earn isn’t yours.

Everyone should be taught this. While those who work for companies get paid by the payroll with the tax automatically taken off – thus everything that goes into your bank account is your money – the self-employed and freelance usually get paid before tax. 

So for every £100 you earn, put £30ish straight into a separate bank account (preferably a top savings account) and never consider it your cash. See more on this in my ‘A warning to freelancers and the self-employed everywhere’ blog.

3. Don’t be afraid to change path.

In work years, I’m now 18 years old – coming of age. After university you’re a new-born in the world of work. Until you’re really in a career, you can’t really understand what makes you tick.

So hopefully it’ll go well, you’ll be happy and content with your choice. After a couple of years, you’ll have a real feel about whether its right for you. If not, don’t feel locked in. Make a plan, and if you forgive the phrase, ditch and switch.

I left City PR at the age of 25. It was a good job but it wasn’t right for me. So I decided to leave before I was paid too much and felt trapped. My family couldn’t believe it and didn’t approve that I was giving up a job I was succeeding in to go back to study (a postgrad in broadcast journalism); yet I knew it was the best thing for me and thankfully it worked out. 

So even in your choice of work, be prepared to try before you buy.

4. A bank’s job is to sell to you.   

Let me hypnotise you for a second. When you walk into a bank and see the word ‘advisor’, in your head, replace it with ‘salesperson’. Banks sell. 

When they offer you a product, it definitely means it’s good for them, it doesn’t automatically mean it’s good for you. Just look at the PPI scandal – £18 billion paid back of money wrongly taken from people by lies and mis-selling. 

So while it’s good to communicate with your bank, take its ‘advice’ with a pinch of salt and do your own reading, research and make your own decision.

5. Don’t repay student loans quicker than you need to.

Current graduates who started in 2010 are only charged 1.5% interest on their loans. This is less than the rate of inflation, so in real terms the debt is shrinking. 

More importantly though, is that many of you will need mortgages or even car loans in the next few years. They are far more expensive than the student loan – and unlike student loans they still need repaying if you lose your income – so paying it off with spare cash now only to borrow it back later at a much higher rate is a bad move. 

For more info and for graduates from other times, see Should I Repay My Student Loan?

6. Be proud. Many people knock higher education, or will say these days a degree isn’t worth it. Yet be proud, the bigger picture is you’ve worked hard to be members of a special club. You’re a university graduate. Congratulations. Even I’d suggest you can go out and have a little celebration tonight.

Not only that, but while we often have a dim view of the UK, in relative terms this is still one of the world’s richest and most tolerant societies.  

Take a step back and count your blessings – you have an opportunity many in the country and elsewhere in the world are denied. 

Yet with this privilege there comes a responsibility – to yourself, your society, your community, country and the wider world. So do what you can to improve the lot of you and yours, but think wider too.

7. Beware borrowing, but ignore "neither a borrower nor a lender be".

In our modern world you will usually need to borrow. Most of you already will have what we call a loan because of getting your degree, and to own a home at some stage you’ll likely get a mortgage. Thus the grandparental wisdom of "neither a borrower nor a lender be" is outdated.

More important is to understand when and how to borrow. If it’s planned-for and budgeted-for expenditure on something that builds your assets (a car, a home, even a kitchen) then it can be rational. If it’s willy-nilly, borrowing to continually fill the gaps in your income, that’s a problem.

While the economy is hopefully recovering, there is still a lag on personal incomes. It will be tempting to use credit to fill this gap – try to avoid it at all costs. If you can’t ensure you do it the right way, beware payday loans, and high cost credit. 

And finally, if you don’t know how you’ll repay borrowing, you can’t afford it – no matter how much you feel you need it.

For more, play the Good Debt, Bad Debt game.

8. Make ‘em fight for your business.   

We live in a competitive consumer economy. Your business is valuable to companies, don’t let them take you for granted. 

Whether it’s haggling to make your mobile phone provider or Sky TV give you a better deal at renewal (see Call Centre Haggling), comparing prices for the best energy tariff or train ticket, or even choice of where you regularly go for your pint or a sandwich.

Ensure your custom is valued. If not, tell them, ask for better, or go elsewhere.

Those were the eight tips I gave in the time I had, but I had to make it up to 10, so here’s a couple more I’m throwing in (see, that haggling is paying off already).

9. You don’t have a right to take goods back if they’re not faulty.

Don’t assume goods are returnable when you buy them.  

Legally you only have a right to return faulty goods, so if you buy the wrong size, colour or it doesn’t fit when you thought it would – sorry, you’ve no rights. Some stores will allow you to return items, but they don’t have to unless they’ve a published returns policy stating it.

The exception is goods bought online, in catalogues or on the phone. Then you have a seven-day, no-fault right of return. Download the Consumer Rights Wallet Factsheet to be fully tooled up.

10. Accept uncertainty – there’s not always a right answer.   

It’s very easy when you’ve been through school, college and university to assume everything must have an answer. Yet there isn’t. We all need to learn to embrace uncertainty. 

This is something many people struggle with both logically and emotionally (including me). It’s a great cause of anxiety.

Whether the question is…

• Should I marry him/her?
• Should I change my job?
• Should I get that car loan?
• Should I go for a fixed or discount mortgage?
• Should I save for a bigger deposit to get a better mortgage deal to buy a house?

Without a crystal ball, there is no right answer. All you can do is weigh the upside against the downside. Plan for the worst, hope for the best.  

And remember, if it does go against you, that doesn’t mean you made the wrong decision. You did what you could with the knowledge you had – don’t beat yourself up about it – understand it’s just part of life.

Congratulations to all those going through graduation ceremonies across the country.

Financial education on the national curriculum – the work starts here

Just a quick personal note. After years of campaigning, pushing an e-petition to get a debate in the Commons, working with Justin Tomlinson MP and the All Party Group to bully ministers (thanks to Liz Truss for listening) to get financial education on the national curriculum in England, today feels like a step change.

I’m off to speak at the Pfeg centre of excellence conference to the first generation of teachers who’ll teach financial education as part of the compulsory curriculum. To finally be doing something practical rather than political on this is a delight. (Hurrah!)

From next September, the subject will be taught as ‘financial numeracy’ as part of maths and ‘attitudes to money and debt’ as part of citizenship.

Both are compulsory subjects, meaning every child in every school that has to follow the curriculum will start to understand how the competitive consumer economy they’ll be launched into works.

This isn’t the end of the campaign, though. It’s just the end of the first step.

There are still around 50% of schools which don’t follow the curriculum. Now it’s important that parents, teachers and pupils in those schools speak to headteachers about why this is so important, and should be taught in their school.

Related info and past blogs

• It’s official: Financial education compulsory in schools
• MPs say vulnerable under-25s need more help
• Three money lessons I’ll teach my daughter
• Do your kids go to an academy school? I’ve a job for you
• Not even a mention, Mr Gove?

'I'm not fixing because there'll be a huge rise when it ends'

This is false, but very common logic. Even as I came off air at Daybreak this week, the lovely Gwen (who sorts out making sure all the mics are correct) told me she couldn’t persuade her mum to save money and lock in on a fix because of this. 

I’ll be honest. I’m befuddled by how common this is. Today, I got a tweet from @malcmorton, saying: "Even if I fix my energy prices, won’t I have one hell of a jolt when the deal expires?"

So I want to explain why avoiding fixing due to this is a false logic. I hope in return, those who fear it will tell me if it allays their worry, or if I’m missing the point.

It’s fixing season

When prices are moving (we’ve now had four of the big six announce price hikes; the others will follow within the next few months – EDF’s "we won’t hike this year" promise is likely just a short delay), doing a normal comparison is problematic, as you move out of the frying pan and into the fire.

Instead, the key is to compare and see if you can grab the cheapest fix possible. The aim’s to pay less than you are now and lock in at the lowest price. (See Cheap Energy for full info and Cheap Energy Club’s Top Fixes Comparison to go for it.)

Many, especially those on standard tariffs at current prices, will typically pay up to £200/year less on the cheapest fixes – never mind after any price hike. If you have to pay a lot more than post-hike prices to fix, then I would think very carefully before fixing.

Better still, if you pick a deal without exit penalties – then if the situation does change (see my Will the PM lower energy bills? blog), you’re free to move elsewhere.

The rate shock worry

I believe the problem some are having with this is that once the cheap rate ends, you’ll be slammed by an almighty cost hike – and this "rate shock" in a year or three’s time when the fix ends could mean mammoth and unaffordable bills.

Yet this negates the fact that actually you save during the fix, and after the fix ends, you’re just moving back to standard prices (in fact, energy firms are being mandated to move you to their cheapest standard deals when the fix ends), so are no worse off. If there are cheaper tariffs then, you can just switch again.

To help, I’ve done a very rough illustrative table below (it’s to explain the point – please don’t see it as a prediction) of the price moves for someone on a standard tariff fixing to the CHEAPEST possible fix right now.

Now, looking at this illustration, there are a few things it clearly shows.

• There will be a rate shock. When the fix ends, most people will be moved onto a standard tariff based on whatever the current prices are at the time. So, at that point, it’s likely there will be a big hike in what you pay.
• You will be paying that same rate anyway. While it’s a pay jump, you’re unlikely to be paying more than if you didn’t switch. It only seems like a big price rise because you’ve saved in the meantime. Plus, when your fix ends, you should be comparing tariffs again to find a new cheap one, which may be able to mitigate some of that shock.
• You will make massive savings meanwhile. Standard tariffs are rising substantially from November with four big companies, and the rest are likely to follow.  Many on standard tariffs moving to a cheap fix will see their bills fall. The savings over 18 months on a short fix could easily be £400 (or, obviously, more if prices rise again – or less if they fall).

While I understand the psychological worry of the rate shock, to be willing to sacrifice saving in the short term because of it, is poor financial logic.

Perhaps one solution to help smooth the worries is to put aside some cash from the short-term saving (say, £150 a year in the above example) for the following two years to cover the rate jump.

Farewell to the Bush

On Friday we packed the crates (well, I was out filming, but you get the drift) and prepared to move MSE Towers. It’s been in Shepherd’s Bush all its life – for the last nine and a half years, that’s been in the Shepherds Building. It’s a bittersweet feeling – we’re off to nice, new, more cost-effective and central premises, but it’s bye-bye Shepherd’s Bush.

My association with the Bush started in 1997. After I finished my broadcast journalism postgrad at Cardiff Journalism School, I got a job as a producer/reporter for Radio 5′s business programmes, excitingly at BBC TV Centre in Shepherd’s Bush (anyone old enough to remember Roy Castle’s Record Breakers will remember the iconic "horseshoe" where so many record attempts were made).

As the job included night shifts (9pm to 9am) and earlies (3am to 1pm), I wanted to live as close to the job as possible. So finding a place in Shepherd’s Bush was a must.

By 2000, I was working as the Money Saving Expert for Simply Money TV, went freelance in 2001, and set up MoneySavingExpert.com in 2003 – based in my Shepherd’s Bush home’s living room.

As things progressed, Brendan became the first MSE team member, joining as a one-day-a-week webmaster working from his living room, while I stayed in mine. He was soon full-time, and then MSE Andrea joined, and it was time for an office. As I was the boss, why not keep the commute short and make it in Shepherd’s Bush?

Brendan found the Shepherds Building, a six-floor former tax office. The top three floors were occupied by TV super-indie Endemol (makers of Big Brother, The Voice and many others), the rest rented into a mix of office sizes. Thus, ‘MSE Towers’ was born.

While we had a cubby-hole office, the best bit of the building was that on the ground floor there was a large coffee bar which we could hold meetings in – it was exclusive to building tenants, making the whole thing feel much more plush than you’d first think.

As the site expanded, we moved room, again, and again, and again. I’ve tried to count and I’m not quite sure, but I think we moved nine times in all. By last Friday, we had one large room with 40 people in, and a smaller one next door with 10 in, and even they were creaking at the seams.

Then, a few months ago, the building bosses imperiously proposed to turn our office into shower blocks as part of a new conference facility. So as we were served notice, it was time to leave. Not the worst thing in the world. That lovely bar facility is long gone, killing the atmosphere of the building, and we were over-cramped anyway.

The new MSE Towers is nicer, a good fit, and better-located for the rest of my work – but I must admit a melancholy feel. After 16 years of living or working there, my association with Shepherd’s Bush is at an end, with perhaps the only exception being the odd trip back to Westfield.

Chapter closed.  

Related info:

• The History of MoneySavingExpert.com
• Martin’s Biography

Is fixing dangerous if the PM is going to cut energy costs?

The Prime Minister is suggesting taking some of the green measures enforced on energy firms out of bills. If, and it’s a big if, all other things remain the same, that will mean energy bills are cut. Though don’t read that as me saying everyone will save money – these measures will likely need to be paid for another way, such as through general taxation.

While this looks to be a policy made on the hoof, as it’s one from the incumbent government, it needs serious consideration as to whether it should impact current switching decisions.

Most specifically, how it impacts on those who are considering fixed direct debit tariffs (as cheap prepay fixes aren’t that cheap anyway), as by definition, locking in is a gamble on future prices. 

Fixing is still the right thing to consider

For the last two weeks, we’ve been urging everyone to compare to see if a fix is good for them (see the MSE Cheap Energy Club Top Fixes Comparison). That’s because with energy prices rises popping up by the day, doing any other comparison is futile, you’ll just likely move to a company that’ll soon hike. 

The only switch that works right now is one where you move to a fixed rate, so you get certainty it won’t just hike your price. (If I had my way, I’d legislate that whatever tariff you switch to, even variable tariffs, they can’t hike your price for the first six months.)

If comparing shows you can fix and save money, it’s a no-brainer – you cut your bills and get certainty they won’t rise. It’s a far trickier decision for those who’ll need to pay a premium over and above the post-hike prices to fix. Then it’s really far more about how much certainty matters to you than reading the markets.

Note: If you don’t understand fixing or need more help, read our Cheap Energy guide, which explains it in full.

What are the PM’s plans?

Currently, around 9% of energy bills – that’s £112 a year on a typical bill – is caused by green levies on energy firms. According to the Department of Energy and Climate Change, that’s due to rise to £190 by 2020 (though the percentage of a bill it makes up will be even larger, as they’ve factored in usage reductions).

This amount is made up of lots of smaller measures, from ensuring energy firms fork out to insulate houses for those on low incomes, to green energy generation. It’s being reported the Prime Minister won’t be able to cancel all of them, as some are enforced by EU legislation.

What would be the actual impact on energy bills?

Without any political change, it’s predicted that energy prices will rise 30%-40% over the next five years. This is due to changes to energy generation and efficiency measures, plus increases in wholesale prices. Though of course, in the short term, there’s always a chance of small falls (say 1-5%) if the wholesale price drops. 

Now let’s incorporate the PM’s plans into this. There’s a lot of conjecture about how much of the green energy levy he can actually cut. I’m not sure anyone (including the Government) truly knows yet.

So let’s make a back-of-the-envelope guess at a half, to three-quarters of it – or roughly 6% off an energy bill. That means had this been in place now, we’d still be having energy hikes, just smaller ones.

What does all this mean for fixing now?

This is all currently a wing and a prayer, a reactive policy indicated at Prime Minister’s Questions – so we’re a long way from understanding what they really want to do. So it’s something to factor in, but not base too much of your judgement on.

The biggest change for me is while I was already biased towards those who could fix cheaply finding a tariff with no exit penalties – now I’m even more strongly suggesting if you’re going to lock in, do it with a way to escape at no cost.

That means if prices did drop, you’ve saved, and you can shift if you’re no longer saving.

Again, to find a no exit penalty fix and see if you can save, use our Cheap Energy Club Top Fixes Comparison.