Money : Budgeting

One sure fire way to keep on top of your money and your bank manager happy is to learn how to budget. Nicky Reid, senior money doctor at Roehampton University gives us her tips on how to successfully budget.

Understanding the importance of budgeting is crucial for successful financial planning. It's the only way to stay in control of your money. It will allow you to plan your finances and reach your money goals, whether they're as basic as having money left at the end of the month or being able to save for a deposit on a shared flat or a well-earned holiday. Preparing your personal budget will allow you to see how much money you have coming in and where it goes.

Why should a student budget?

While it might seem like a waste of time there are good reasons to budget, the main one being that it will give you an accurate picture of your financial situation. It will also allow you to identify where you could save money. Budgeting can also show you and anyone else (such as your parents or your bank manager) that you are handling your money sensibly. Ultimately, being aware of your financial situation will prevent you from running up a debt that you will have to pay back with interest.

How should a student budget?

• Write it down - Keeping track of what you spend will allow you to see where every penny goes.
• Spread your money - If you take out a loan, spread it across a period of time rather than spending it all at once.
• Be sensible - Think about looking after your needs for tomorrow rather than living for the day. Having a roof over your head is more important than looking good, so rent comes before that new pair of jeans.
• Maximise your income - Firstly cut your spending on luxury items or non essentials. Secondly, see if you can save on your essential supplies, like gas and electricity. Companies like uSwitch can help you compare prices on gas and electricity, home phone and broadband. Thirdly, studies permitting try and get a part time or holiday job as this is essential if you are to stay afloat.

Top tips for budgeting - The Big Four

• Be honest - Allow for coffee, text messages and nights out. Don’t forget the unforeseen costs like; birthdays, Christmas and unexpected travel home.
• Prioritise - It’s important to put enough money aside for the essentials, like rent, food, gas and electricity.
• Be disciplined - Stick to your budget. Take a shopping list to the supermarket and resist items you don’t need. Try not to make impulsive purchases and do not take out credit cards or store cards.
• Increase your earnings - That means that you are taking all the opportunities available to you to maximise your income. Investigate how much tax you pay. Reduce the amount of tax making sure your tax code is correct and checking that you are claiming any tax credits you are due and claim any benefits available. You should start by checking that you are receiving all the tax and welfare benefits that you are entitled to. Information about benefit entitlement can be obtained from your local Citizens Advice Bureau  or local authority welfare rights office. Information about how to claim can be found on the Benefits Agency website.
  

Remember weekly or monthly

Remember to fill in either weekly or monthly figures on your budget sheet, whichever one suits you best. Don’t mix the two.

To change weekly figures to monthly figures
Weekly figure x 52 (weeks) divided by 12 (months)

To change monthly figures to weekly figures
Monthly figure x 12 (months) divided by 52 (weeks)

To change four weekly figures to monthly figures
Four weekly figure x 13 (payments) divided by 12 (months)

Just remember, when you are out and thinking of buying something, ask yourself whether it is something you need or something you just want. What you might need tomorrow will be more important than what you might want today. Try waiting a week or two before you buy it to see if it actually was an impulse purchase.

Find out how to budget with a spreadsheet.