Our kickstart guide for young professionals

The young professional journey is an exciting one – a time of hard work, growing expertise, and new achievements. But alongside these milestones come fresh financial landscapes to navigate, from tackling existing debt to making your first delve into the world of investing.

The early stages of a professional career are exciting, yet they can also be confusing. It’s often when peers begin to truly diverge in their life trajectories. One friend might be purchasing their first home, another climbing the career ladder at an exponential rate, while a third embarks on a fantastic role with high potential but a low entry-level salary. This naturally leads to the question where do you sit in that imaginary hierarchy of where you ‘should’ be?

There are lots of challenges which come with this stage in life, lingering student loans – aware that for most, they’re slowly building, not decreasing in the background – along with likely low salaries justified by the fact it’s for ‘experience’ and rent and bills which only seem to be heading in one direction. 

In conjunction with this, we’re young and are conflicted. We want to enjoy what we’re told are the ‘best years of our lives’ often with fewer long-term commitments – and with that comes spending money.

Time is your greatest asset

For many, the idea of investing at this stage of life can feel out of reach – either because financial pressures make it seem impossible to set aside anything meaningful, or because investing is still seen as something reserved for the wealthy, not ‘people like us’.

Yet, we need to remind ourselves of something crucial. At this stage, no matter our individual circumstances, there’s one asset we all share, one thing we can all be rich in time. And what is our greatest asset in investing? Well, exactly, time.

This guide aims to not only help plan and manage strategies for tackling and overcoming the common debt struggles we face at this stage of life, but also to help demystify the world of investing and show how even with limited initial capital, young professionals can utilise the power of time to build a secure financial future. 

Understand your debt to build a proper plan

From student loans and credit card balances to car payments, personal loans, and the ongoing costs of rent and housing, debt can feel overwhelming for many young professionals.

While it’s important to understand and pay attention to all the debts you have, what we first need to remind ourselves is that debt doesn’t automatically mean you are in a bad financial situation.

While counterintuitive, it can sometimes be more beneficial to allocate funds that would have gone to large repayments towards investments or other opportunities with potentially higher returns, effectively leveraging the debt. 

This is why it’s crucial to understand your debt and the interest rates you’re paying as it’ll help you to construct a plan into how to both prioritise your payments and if there are cases where it may be reasonable to deprioritise payments of specific debts. 

For example, if you have credit card debt, it’s usually wise to prioritise paying it off first. Credit cards are known for their high interest rates and are often considered a form of ‘bad debt’, making them more costly to carry over time.

On the other hand, you might have the liquidity to overpay your student loan – but that isn’t always the most strategic choice. If, for example, the interest rate is relatively low (often linked to your income) and the loan is subject to a fixed write-off period, it could make more sense to allocate those funds elsewhere. In this case, it may be better to use other means to yield a better return – for example investing into the world of Stocks and Shares. Checking your specific plan type for student loans will help you to prioritise and create a plan for tackling your debts.

Suggestion make a list of all your debts and details in terms of amount, interest rate, repayment thresholds. Determine a priority list and from here you can begin to develop a strategy in paying them off.

It varies from person to person and depends on your individual mindset, but for most people, it often comes down to one of two approaches – or a combination of both tackling debts in order of priority, or starting with the smallest balance to gain momentum. Once you have a repayment order, create a budget to manage your payments. A simple framework like the 50/30/20 rule (needs/wants/savings and debt) can be a helpful starting point.

Getting started in the investment world

Now, with a clearer understanding of debt management, we can look towards getting started in the investment world.

Ask any successful investor what they wish they’d done differently, and most will probably tell you the same thing they wish they’d started investing earlier. Sure, it’s easy to think “well, that’s easy for them to say now” – but starting early doesn’t mean starting big. You don’t need a fortune to begin, and it doesn’t have to be complicated either.

One of the most compelling reasons to start investing early is the magic of compounding. Imagine two friends, Rob and Bonnie, both invest £100 a month. Rob starts at age 25, while Bonnie waits until 35. Assuming an average annual return of 7%, by age 60, Rob’s pot could be worth significantly more at £192,600 than Bonnie’s sitting at a far lesser £121,300 – all because her money had an extra decade to earn returns on its returns. This snowball effect demonstrates how time amplifies your investment growth. However it should be noted that this is a simplified example. Actual investment returns are not guaranteed and may vary.

At the same time, cash sitting in a savings account is often quietly losing value due to inflation. Think of your morning coffee costing £3 today. In 20 years, due to rising prices, that same coffee could cost considerably more. This means the purchasing power of your uninvested cash erodes over time – it buys less in the future. Investing, even with modest returns, aims to outpace inflation, helping your money maintain and grow its real value over the long term.

The other biggest hurdle for young people getting on the investment ladder is that it’s ‘too complicated’ – there’s so much information out there and it’s hard to know where to begin. Our aim is to make investing simple, to remove the noise and help you to make it less complicated.

The final big hurdle that prevents young people from investing is believing it’s too risky. Investing does of course come with varying risk but often this belief stems from a misunderstanding of risk and focus on short-term market fluctuations. While the value of investments can go down as well as up, a long-term perspective and diversification are key to mitigating risk.

Our consultants are here to help you

The idea is that while negative periods in the market are inevitable, history shows they’ve been significantly outweighed by positive ones. A longer investment horizon gives riskier assets the time they need to potentially deliver higher returns – and crucially, allows for recovery from short-term market downturns along the way.

Yes, risk is inherent in investing, but it’s also linked to potential reward. Historically, asset classes with higher potential returns, like equities, have also carried more volatility. However, over the long term, this risk has generally been compensated with stronger growth.

Starting your investment journey can feel intimidating, but a managed portfolio, where professionals make decisions based on your risk profile, offers a reassuring and expert led entry point, freeing you from constant market monitoring. Our actively managed and globally diversified portfolios, available in a range of accounts with a minimum starting contribution of £500, provide a straightforward way to begin investing, tailored to your goals through a suitability assessment.

For personalised guidance and to navigate these initial steps with confidence, our expert investment consultants are available to help you create a plan aligned with your financial situation.

Remember that managing debt and starting to invest aren’t mutually exclusive. By strategically tackling your debts, you free up capital that can then be directed towards your investment goals. Even small, consistent contributions into an investment portfolio can compound significantly over time.

Capital is at risk. The value of investments can go down as well as up, and you may not get back what you invest. Investing is not suitable for everyone, and you should consider speaking to a qualified financial adviser before making any decisions.  While some individuals choose to retain low-interest debt to invest, this strategy is not suitable for everyone. You should carefully consider your personal financial situation and, if unsure, seek professional advice.