Student tips: working out a basic budget
Budgeting! It's not sexy, but it can save you from a lot of stress. It might be tempting to go crazy when that student loan hits your bank
account. But if you plan ahead, you can have a good time at the start of
term without worrying about running out later on. You don’t need to scribble down every transaction you make in a double entry ledger, but you do need to know what your income and expenses are likely to be and plan your spending accordingly.
To calculate a simple, back of the envelop budget, use this basic budget formula:
Weekly budget = (Termly income – termly expenses) / weeks in term
1 – Work out your income/available money
First of all you need to know how much money you’ve got coming in and when. How much is your student loan? How much overdraft do you have available? How much are your parents contributing (if anything)?
2 – Work out your essential expenses
Then you need to work out your outgoings. First of all work out the non-negotiables – fees, rent and bills. This is made easier if you’re in halls of residence because bills are likely to be included in your accommodation fees, so you know in advance exactly how much is going out and when. In your second and third year, you and your housemates will probably need to pay your bills yourselves. If you can pay a regular amount by direct debit, then this makes everything a lot simpler.
Then you need to make some sensible guesses about how much your living costs will be – groceries, stationery, books. These are things you need but can economise on if necessary (Lidl is the students’ friend!) Be strict about what you consider “essential”.
3 – Work out how much you’ve got left for everything else
Your remaining budget is Income minus Essential Expenditure, divided by the number of weeks it has to cover (there are usually 32 weeks in an academic year, but your money might have to cover the summer break as well). Viola! You now know how much you can spend on everything else. Divide it up between the different things you know you will want to spend it on: beer, nights out, Christmas and birthday presents, travel and so on.
4 – Keep some back for emergencies
Make sure you have a buffer – don’t max out your overdraft, keep at least a couple of hundred pounds available in case the unexpected happens, be that a forgotten bill, a broken computer or an emergency train ticket home.
What if you don’t have enough money?
If your expenses are already more than your income, or you’ve got 50p left for socialising for the entire term, you’ve got a problem. To solve it, you need to reduce the money you’re spending and/or increase the money you’re receiving. Can you reduce your bills by wearing a jumper and turning down the heating? Are all the things you consider essential really necessary, or can you do without that weekly bottle of wine?
Or you can get more money. Get a student job to make ends meet or to afford a few more non-essentials. Or you can beg your bank for a bigger overdraft or your parents for more money, but you’d prefer to be an independent adult, right?!
For more student money advice, check out the following: