Budgeting

What it is

A budget is a plan to help you live within your means. It provides a track of income and expenditure and, if used wisely, will prevent financial problems now and in the future. Once you learn how to budget effectively you will feel safer, happier and less anxious. We have included an example of a simple but effective student budget to get you started.

There are two obvious facts that are worth stating:

  • If expenses are greater than income then you embark on a debt spiral
  • If income is greater than expenses then you able to save

Anyone is able to move from the first situation to the second irrespective of income level. Two things are certain however:

  • The longer you stay in the first situation, the longer it will take to get out of it.
  • If you can’t move from the first situation to the second on a small income, you won’t be able to do it on a large one either.

Simple Budget

  • List income (monthly)
    • Wages or salary
    • Loan
    • Grant
  • List priority payments (monthly)
    • Rent
    • Mortgage
    • Fees
    • Bills

Take one from the other and this gives you a disposable income, which can be spent on everything else. Of course if the payments are higher than the income then you already have a problem, you are in a debt spiral. You need to either decrease your priority payments, or more likely, increase your income.

  • The simple budget is better than nothing!
  • But it is inefficient as there are too few categories.
  • Because you have not listed all of your outgoings it may actually encourage you to spend money, which you do not really have.

Money Saving Budget

  • There are many more categories
  • Although it is impossible to budget for every scenario you should try to include as much detail as possible in order to avoid surprise expenses.
  • Set up an emergency fund as part of your budget to cover those surprises.
  • Ensure that you budget for the fun stuff! Not only will it make the budget more realistic it might even make the process more enjoyable!

Example

  • List Income (Annual)
    • Student loan
    • Grant or bursary (If not taken directly off of fees)
    • Sponsorship
    • Scholarship
    • Parents contribution
    • Job income
    • Savings
    • Bank Overdraft facility


  • List Necessary Expenditure (Annual)
    • Tuition fees
    • Accommodation
    • Contents insurance
    • Travel
    • Laundry
    • Toiletries
    • Stationery
    • Minimum debt repayments
    • Food
    • Utilities (Gas, Water, Electric)
    • Emergency fund (about 5% – 10% of total necessary expenditure)


  • Calculate the difference. Once again, if expenses are higher than income, either income needs to rise or expenditure needs to fall. The difference is the amount that can be spent of luxury expenditure annually. That is:
  • List Luxury Expenditure (Annual)
    • Clothing
    • Leisure (Write down a per week figure then multiply by weeks in school year)
    • Mobile phone
    • Treats
    • Cards and Presents (Birthdays and Christmas)
    • Travel during holidays

This is an example of how a student budget might look.

You must now ensure that at worst income = total expenditure.

If you need to raise more income you could try:

  • An extra job – perhaps only a couple of shifts per week would make a big difference
  • An internal job at University or College.
  • Remember if you are working you are not just earning you are not spending either!
  • Sell some unwanted items.

Also watch for:

  • Student discounts – especially in shops local to the University or College.
  • Credit card or bank account offers.
  • Take care not to use a cash machine that charges. These are normally the ones found in convenience stores or petrol stations.
  • A Pay As You Go phone deal may be more cost effective than a contract.

Once or twice through the year you will need to pay an annual bill or pay for a big item such as car insurance. Provided that you know that it is coming up you should spread the cost over the course of the year. If we take car insurance as an example, it might be worth making a ‘car fund’ whereby you budget each month for 1/12 of the annual insurance and road fund license. You can leave this money in your bank account or even open a savings account to deposit the money in. Just make sure that you can get the money back out when you need it with no penalty charges.

If one month you have an unusually high expense in one particular category try to offset it by decreasing you expense in another category. Build in a little flexibility and don’t beat yourself up if you don’t nail it first time!

  • Don’t think that ‘I’m over budget this month but it’s ok – I’ll pay it back next month’ – You won’t!
    • This is the first step onto a debt spiral that can end up going out of control.
    • Act immediately – reduce spending or increase earnings

If you have problems:

  • Face reality!
    • Cut back on debt – pay off the highest APR debt first and just meet the minimum payment on cheaper debt.
    • When the highest APR debt is paid off move onto the next highest and so on.
    • If you can’t cope – seek help and advice. You are not alone!
  • Don’t get discouraged
    • Check your budget each month and fine tune it.

Budgeting does work. It takes common sense and discipline but provided you follow the steps outlined above you will manage better and actually feel better for the experience.

Wize Tips

  • Look at past spending patterns using bank and credit card statements before you write your budget.
  • Make a comprehensive list of income and necessary expenditure.
  • Be realistic!
  • Budget for an emergency fund to pay for unexpected costs.
  • The income that is left over can be used for luxury expenditure.
  • Don’t forget to budget for fun stuff.
  • Break down the cost of big annual payments into smaller monthly pieces.
  • Don’t think you will catch up a ‘one off’ overspend – you won’t.
  • If the sums don’t add up then increase income or cut some expenditure straight away.
  • Fine tune the budget if necessary.