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Learning how to budget is crucial if you want to stay in control of your money. By creating a budget, you can ensure that your outgoings don't exceed your incomings…
Budgeting allows you to organise your finances and achieve 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 flat or a well-earned holiday.
Why should I budget?
Budgeting makes it easier to see areas of your life where you could potentially save money. It also, perhaps most importantly, helps to prevent you from running up a debt that you will have to pay back with interest.
How do I create a budget?
- Write everything 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, get a part-time or holiday job, as this is essential if you are to stay afloat financially.
Top tips for budgeting
- 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 by 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 receive 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 at GOV.UK - Benefits
Recording your outgoings
Remember to fill in either weekly or monthly figures on your budget sheet, whichever one suits you best, but 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)
Remember, when you are out and thinking of buying something, ask yourself whether it is something you need or something you want. 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.
Written by Graduate Prospects, the University of Roehampton and MoneySupermarket.com