Saturday, 17 May 2014

Student budget management 101

Being a student is considered an important transitional stage, as during this period you have the opportunity to learn valuable skills that will be needed throughout your adult life. Budget planning is one of such skills, but unfortunately, it seems that many students fail at developing efficient money-management strategies. The good news is that you don't have to learn to manage your student budget through trial and error. To help you out with this, we have put together some useful tips and suggestions.

Student budgeting 101

When it comes to financial advice, one of the most common recommendations is 'stick to your budget'. But what exactly is your budget? And how can you go about figuring out how much can you spend? Firstly, find out your monthly income. This does not only refer to your student loan, but also includes any income that your earn from part-time jobs, money given to you by relatives, and any grants or bursaries that you may receive. One word of caution: do not fall into the common trap of counting your student overdraft as part of your budget, as this is a bad financial habit that can quickly get you into debt.

Once you know what your disposable income is, add up all your expenses. These should include rent, utility bills, groceries, tuition fees, transportation (or petrol if you drive a car), and mobile phone payments, but don't forget to add other expenses, such as the cost of household items (cleaning supplies, kitchen appliances, etc.), leisure and socialising, the cost of books and stationery, toiletries, and clothing.

It is also very important that you have a year-round perspective on your budget. In addition to calculating your monthly income and expenses, you should be keeping track of your expenses on a weekly, term-time, and annual basis. You can easily do this using an Excel spreadsheet or a budget planning app.

Student bank accounts

Having the right bank account can help you make the most of your student budget. Shopping around for the best deal available is essential, so you could start by using comparison sites. The main things that you should be looking at include who offers the most generous interest-free overdraft, whether there are any cash machine fees, the types of debit cards on offer, whether there is a branch on-campus (or free online banking), and whether the freebies offered are really useful. You probably don't need an MP3 player, whereas a free railcard is a great thing to have.

Managing your finances

Once you have worked out a budget and found a suitable bank account, it's time to put in practice some useful money-management strategies. The single most important thing that you can do is learning to prioritise. Get used to making a difference between wanting and needing, even if this seems a bit drastic at first. Keep track of everything you spend money on during one week and cross out any unnecessary items. Do you really need another pair of jeans? If you do, can you buy them cheaper, perhaps at a charity shop?

It also useful to add up the cost of those apparently small purchases over the course of a year. A beer or a coffee might only cost £2, but if you buy one every day, that comes to more than £700 a year. And try to leave your debit card at home, as paying with cash can help you get a better idea of how much you are really spending.

Lastly, although your expenses should never be above your income, you should try to get into the habit of saving a small amount every month. Any money that you put aside can be a lifesaver if you are faced with emergencies or with unexpectedly high bills, such as those resulting from rising electricity prices – to avoid these, make sure you shop around for better energy deals from smaller providers, such as Ovo Energy.

If you need further advice, check with your local student advice centre.

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