The beginner’s guide to budgeting as a student
‘They say I got to learn but nobody’s here to teach me.’ Never were the words of Coolio more relevant than when I decided to apply them to student budgeting.
Everybody tells you to manage your money at uni. But very few of them are willing to explain how. Budgeting really isn’t hard, so let’s get into it.
Here are the nine steps of budgeting in all their straightforward glory.
1) Work out what comes in
Your maintenance loan is probably the bulk of your incomings. But two thirds of UK students say they also have a part-time job, and more than 80% borrow regularly from their parents.
How much is coming in each month?
Put these figures into a spreadsheet and use the SUM function to total them up.
2) Calculate what goes out
This will take a while at first. But stick with it. What goes on your list will depend on your lifestyle, and all that matters is that you’re honest and comprehensive.
Some things to consider:
- Bills (gas, electricity, water)
- Contents insurance
- Mobile phone contract
- Credit card or loan payments
- Gym membership
- Netflix / Amazon Prime subscriptions
- TV licence
- Food shopping (anything you prepare at home)
- Eating out (breakfast and lunch items)
- Alcohol (anything for at-home drinking)
- Toiletries (hand wash, loo roll, tampons, condoms, painkillers)
- Household products (tin foil, kitchen roll, cleaning products, bin bags)
- Transport (buses, trains, taxis, car insurance, petrol, MOT, roadside recovery)
- Entertainment (cinema, theatre, club entry)
- Books (textbooks and fiction)
- Stationery (including any printing costs)
Use your banking app to look back at last month’s spending. Over a month, how much do you spend each month on these things? This will be easier to do in the future if you start keeping your receipts. For now, you’ll need to use your best guess for some things.
What’s the grand total for all your outgoings? Again, total them up in your spreadsheet.
3) Look at the difference between ins and outs
Use the SUM function again to subtract your total outs from your total ins.
What’s the difference between your two totals?
If you’ve got a minus figure, that’ll become a problem quite soon. But fear not, this is exactly why you’ve decided to get interested in your finances.
Carry on to steps 4, 5, and 6.
4) Split what goes out into ‘needs’ and ‘wants’
Now we get to the real point of budgeting. What are you spending because you need to? And what are you buying because you want to?
For now, think of needs as things you must buy to live, and wants as luxuries that make life more enjoyable - but aren’t essential.
5) Cut back on wants first
Next to your expected column, add a new column entitled ‘aim’. Go through your wants, line by line, and start cutting back on these little luxuries.
Spending £40 a month on shop-bought coffees? Aim to spend £25. Alcohol costing you £50 a month? Aim to cut your consumption to £30 instead.
Small lifestyle adjustments like this - where you treat yourself less frequently - are vital to making your numbers add up.
6) Record your actual spending each month
The third column to add to your list is ‘actual’. Over the next month, keep track of everything you spend against each category. How? However you like.
Keep a pen-and-paper spending diary and note every purchase. Do that in a spreadsheet instead. Start asking for receipts and log everything at the end of the day. Use an app that will do all this digitally.
However you do it, you’ll start to see whether your spending aims are realistic or not. You’ll also see where your willpower needs turning up a notch.
Read more: 6 Brilliant budgeting apps for students
7) Adjust your budgets for reality
After a couple of months hitting your targets, start lowering the figures in your expected column to reflect your new spending habits.
You’ll start to feel a massive sense of satisfaction as the gap between your total incomings and outgoings is closed. Eventually, you’ll start having cash left over each month.
8) Target your needs to go next-level
If you’ve cut as many luxuries as you can and the books still aren’t balanced, have a look at your needs.
- If you’re renting a room in a shared house, could you find a cheaper alternative?
- If you’re paying for bills, could you get a better deal on gas and electric?
- If you’ve got credit card debt, could you move it to a 0%-interest card?
- Are you buying branded food when there’s a supermarket own-brand alternative?
- Do you need all that data or would a cheaper phone contract work?
Take a look at your incomings too. Could you fit another shift in at work without eating into study time? Could you give yourself a one-off boost by selling unwanted things on eBay?
Once your new skills start to work, you’ll become more interested in value for money and more determined to wring every drop of it from every purchase.
9) Commit to this for six months
Give yourself a chance. Budgeting is a skill to learn, and that doesn’t happen overnight. It takes practice. Make this your new hobby and commit to it for at least six months.
Is it interesting? Probably not interesting enough to talk about at parties. But it’s interesting in the context of your life. Sharp financial skills will make the trip of a lifetime possible, and an emergency fund a reality.
Learning to separate needs from wants, and prioritise the two, will full-on change your life.