The What! and Why? of Budgeting
Budgeting is simply creating a spending plan for your money. This ensures that you will have enough money to meet all your costs, whether, daily, monthly, or yearly. If you can stick to your spending plan, this will help avoid overspending and running the risk of getting into debt, reduce anxiety and stress about being able to pay for things, and allow you to focus your attention on other areas of your life.
Whether this is your first time creating a budget, or you are returning to study and need to readjust your budget in line with student life, knowing where to start can be the hardest part. Take a couple of minutes and watch this Personal Finance 101 video for tips on getting started.
Calculating your income
So now you have an idea of what you need to do, next step is getting prepared to draw up your own personalised budget. Try using a printable template or online budget planner or just plain old fashioned pen and paper.
- First thing you want to figure out is how much money you have coming in. The most common income for students would be:
- Student funding, whether this is your student loan paid in 3 times a year, or your monthly nursing bursary.
- Part-time wages, paid weekly, fortnightly, or monthly
- Some students also receive Universal Credit / Child Tax Credits / Personal Independence Payments / Housing Benefit
- Parental/Familial support - this may not be money coming through, but it's important to acknowledge even a bag of groceries, or a few hours free childcare frees up money for other bills/activities.
- To help make sense of your income, it's important to look at your money in the same terms, for example, you receive three instalments of student finance per year, and this totals £3630... but how much does that equate to each week or month? Most people find that drawing up a monthly budget is easier as larger bills, such as rent, childcare or car payments come out once per month.
- Let's get converting that income into a monthly figure:
- weekly payments, multiply by 52, then divide by 12
- fortnightly payments, multiply by 26, then divide by 12
- bi-monthly payments, multiply by 24, then divide by 12
- 4 weekly payments, multiply by 13, then divide by 12
Calculating your outgoings
- Now you have your total monthly income calculated, it's time to look at your outgoings. Your expenses can change when coming to university. You may have additional travel costs, require materials or books for your course, or need to pay for additional childcare.
- This is probably the best time to log into your online banking. Have a think about your current living expenses that will continue throughout your duration of study, then have a think about allowances you need to make to cover study costs. If you are unsure of some of the costs involved, check out your course page for information on 'additional mandatory costs'.
- Make a note of all your essential expenses, including a little for savings where possible. There is no limit to how much you should save, however, ensure you are covering all your expenses first, before squirrelling your money away. For some, there may be very little funds available to save, however, saving as little as £5 per month sets the wheels in motion for good saving habits.
- When dealing with expenses that vary week to week, take note of the highest amount this could be, or set yourself a limit, for example, allowing £120 per month for groceries. Setting limits like this will help you control how much you spend on certain items, and encourage you to shop smart, looking for deals/bargains in local supermarkets and discount stores.
- If you have a number of expenses that only go out once a year, add up the total you expect to spend (it's worth overestimating these), and divide by 12. This is the amount you need to set aside each month in order to make these payments without eating into other areas of your budget.
- Once all your essential spends are recorded, do a quick calculation to see if you have any funds leftover for those non-essential items/activities. If you find your expenses are more than your income, revisit your spending and look for ways to cut back on some spends, or increase your income.
- If you have exhausted all other avenues, and are facing financial difficulties, visit our financial hardship fund section for more information on how to apply, including other non-UU supports. Please note that awards are one-off payments and cannot substitute a regular income.
Reviewing your budget
So you have your budget drawn up, what's next? This is where you need to keep a track of your spending. As each bill leaves your account, tick it off as being paid, or if you have transferred your paper budget onto a spreadsheet, highlight it in green, for example, as paid. Keep an eye on your account to ensure you are not missing any payments, or overspending in one area of your budget, which will leave you short paying for something else. Once the month is over, move any leftover funds into a savings account and copy over your budget for the new month ahead.
To help manage the money going in and out of your account, it might be worth setting up a second account. This could mean having one account for all your bills to come out of (rent, mobile phone, childcare, etc.) the other being for your daily travel, groceries and entertainment. The important thing to do is remember that everyone is different, so do what works best for you.
Living with housemates? Sharing household bills with others can be a tricky area to manage, however, the first thing you all need to do, is commit to pay your share. This may mean when the electric card needs topped up, everyone pays£5 or£10 towards it.
Never open a joint bank account with your housemates as this will financially link you to them, and should they have a poor credit rating, this will negatively impact your own. For more information on Credit ratings, please visit our banking section.
Planning for unanticipated costs
These expenses cannot be predicted, but can be planned for should they arise.
They are not: Rent, car insurance, field trips, travel costs, materials for your course and normal everyday living expenses.
They could be: Car or household repairs, medical bills, replacement of items due to theft.
In preparing for unanticipated costs, you need to set aside a little each month or from each student finance payment, for the unexpected. Check out 5 ways to tackle unexpected costs.
Review your budget regularly and keep making adjustments to live without overspending:
- If you are living away from home for the first time, make sure you are fully aware of all the expenses this involves, such as rent, travel, groceries, utility bills and academic costs.
- If you are returning to study after working full-time, you will need to review your spending and draw up a budget based on your new income.
- In most cases, students have to readjust their lifestyle for the duration of their study to prevent overspending.