Budgeting

First, you will need to make a list of all the different sources of income you have in the year. This includes your student loan(s), grants, bursaries, sponsorships or scholarships, support from your parents or guardians, salary from a job or dividends you receive.

Next to each source of income, make a note of how much money you receive in a fixed timeframe, e.g., every month, week, term or year. If you have an annual figure and a monthly figure, divide your annual figure by 12 to get your monthly portion.

Generally, making a monthly budget is easiest as you can either multiply weekly income to get a monthly figure, and/or divide annual figures by 12 to get a monthly figure.

For example:

Student Loan = £3000 per term

£3000 ÷ 4 = £750 per month

Parental Support = £100 per month

Grant = £300 per year

£300 ÷ 12 = £25 per month

Job = £150 per month

Add all of your sources of income up. For our example this would be, £1025.

Now you have an idea of how much you will have coming in, the next step is to understand where your money will be going.

Now, you will need to make a list of your spending.

You can choose how to do this. One approach would be to make a list of categories for, then go through your digital or physical bank statements for at least two months, to add up how much you are spending in each category for month #1 and #2. Then, add up the figure for each category and divide by 2, to get your average monthly spend for each category.

For example, you can use the categories:

Bills

Groceries

Travel

Health & Wellbeing

Sports

Going Out

Shopping

Subscriptions

Eating Out

This is not a complete list, and you can create your own categories if you have expenses that aren’t covered by these.

It is best to go through the last few months of your accounts to spot patterns your spending.

This task will take up most of your time, but it is one of the most important steps to get the best out of your budget.

Remember, be honest with yourself about your spending and account for every transaction.

You should now have two figures; income and spending per month.

The next step is to understand what expenses are essential for you, and what are your wants. Of course, you shouldn’t cut everything which isn’t essential - as your hobbies, fun and treats make you enjoy your life but this is an opportunity to see what is a priority for you and what you can do on a budget.

Generally, essentials include your bills, groceries and public transport travel; whilst your non-essentials include eating out, shopping and alcohol. Things like your hobbies, sports or subscriptions are also non-essentials but are usually a priority for many. This is your opportunity to see what expenses significantly improve your life and what expenses could be removed and you wouldn’t miss this much.

Once you’ve gone through this, you will have a list of your essential spending categories and your non-essentials. You could also do this in three; essential, helpful and nice to have.

This will help you figure out how much money to allocate into each category in the next step; to see how you can meet your essential expenses, save on that which you enjoy and impose limits on your excess/luxury spending.

Generally, a 50/30/20 rule is seen as best practice when budgeting your income;

• 50% is allocated to needs

• 30% is allocated to wants / non-essentials

• 20% is allocated to savings, or paying off debt

If your essential expenses exceed this split you can adjust and move around allocations:

• Take a close look at your categories. Some of the items you’ve indicated as needs may actually be wants, or vice versa.

• Reduce how much you spend on needs; Look for better rate on your phone plan, rent or groceries.

• Reduce how much you spend on non-essentials; try to look for cheaper options for sports, limit how often you eat out and take advantage of student-only deals – see our Saving Tips for more advice on this.

If you still are struggling to afford essential expenses alongside your non-essentials, you can subtract (Your Monthly Income – Essential Monthly Expenses). Then, with the amount leftover, you can allocate this across your non-essentials and savings/debt repayments.

This method won’t suit everyone, so take a look around to see if there are alternative approaches you like better.

Once you’ve done all of the above, you will have your budget; an allocated amount for each category of spending per week/month/year.

Now, the aim is to stay within your budget! Maintaining your budget is made easier by mobile banking apps that let you keep an eye on your everyday spending. Most banks allow you to set spending limits and track the categories of your transactions.

It’s good check in on how much you have spent every few days or weekly to see if you are on track, as well as accounting for upcoming expenses and adjusting your current spending to make sure you stay within budget.

Expenses are variable and your income will likely fluctuate depending on the weather, season or occasion, like Christmas shopping or summer festivals. You should expect your budget to change a little as time goes by.