Budgeting and money management
Budgeting can give you a good picture of your overall money situation, help reduce unnecessary spending and help minimise any future debt. Effective budgeting should assist you to control your finances and, if necessary, can show your bank manager that you have the ability to organise your finances.
What is a budget?
A budget is a plan to show how much money you have or expect to have (income) and how much you will need, or be able to spend (expenditure).
Budgeting involves calculating how much income you have, how long it needs to last for and what costs you have to meet.
Four things to remember when budgeting:
- Work out your priorities
- Maximise your income
- Minimise your expenditure
- Be realistic, but try to stick to it!
How to budget
Below are some suggestions about creating a budget:
- Calculate your income (include Maintenance loan, bursaries, grants, part-time work, parental contributions or other definite income) and divide into weekly/ monthly/ academic yearly amounts, depending on your personal circumstances. Consider that you may receive some income in termly instalments such as the loan and some in weekly or monthly instalments such as income from a part-time job or NHS Student Bursary. Only list money that you are certain that you will receive.
- Deduct your 'fixed' expenditure such as rent/mortgage or TV licence.
- Work out your priority 'variable' expenditure (food and toiletries, travel, course costs, utility bills - if you are not staying in Halls of Residence, childcare etc) and deduct.
- What you have left could be used for non-priority costs (socialising, luxuries, emergencies etc). If you have a deficit, consider ways to economise or investigate ways of maximising your income.
- Make sure that you occasionally test your budget. Over a week or two, keep a record of your actual expenditure and see whether this matches your budget.
- Try to be honest; you need to include the extras such as coffees at University, birthday presents, phone credit top-ups, magazines etc or you won't stick to it.
- Be aware that you may need extra money at the beginning of the academic year (books and course equipment, insurance etc) or at the end (house deposits, travel home etc).
- Plan for the unexpected by trying to keep some money aside for emergencies.
- Keep a filing system of bank statements (if you bank online, you should be able to download copies), receipts, loan details etc and check these regularly. This will help you to identify regular and occasional spending patterns and to revise your budget, if needed.
- Consider setting up standing orders/direct debits as this can help you with planning your budget as well as ensuring that you do not miss payment dates.
- Remember that everyone needs to relax and have fun so allow yourself some money for entertainment, but ration it - you do not have to be out every night!
- Review your budget when your circumstances change (e.g. moving from Halls to a shared house, during the summer vacation, etc).