Budgeting and Financial Health

What should I know about budgeting and financial health?

Budgeting 

First things first, you need to work out how much you’ve got and how much you’re going need throughout the year. Make a list of the firm costs you know you’re going to have. Usually this will include things like rent, household bills, and travel to and from uni (if this is by car then remember to add your insurance, tax and rough MOT costs too if you are responsible for all of these). Once you know these costs you can start to work out how much you have left to spend on food, clothes, hobbies and socialising. For help with budgeting you can download a budget sheet from Save the Student.

Save the Student Budget Sheet

Student bank accounts and overdrafts

Banks often change their deals on student bank accounts year to year, so it’s best advice to shop around when deciding who you want to open an account with. There are plenty of comparison websites that will help you make an informed choice about which bank account is best for you, including Compare the Market and Money Supermarket. 

Bank account services can vary but most offer an overdraft facility that will usually be interest-free for the duration of your course; this should be used carefully as it is still classed as a debt owed to your bank even though there are not usually firm stipulations on repayment schedules as with other debts. You should check the terms and conditions, but overdrafts can act as a buffer if you have bills or payments coming out of your account but haven’t received your loan or been paid yet.

While shopping around for a student bank account can get you some great freebies, one of the most helpful things to consider will be for how long after you graduate the overdraft will remain interest-free and what the interest rate will be when the interest-free period ends. Knowing this will help you plan your finances once you are no longer a student.

Whilst your overdraft might be interest free whilst you study, going over the agreed limit might incur charges. When you signed up for your student bank account, your bank should have given you information on how much these charges are. If you no longer have this information, you can usually find it on the back of your statements or on the bank's website.

Credit cards

Credit cards can be a useful and well-regulated way to ensure you can make purchases. They are also have other benefits for buying online as they give added protection against fraud compared to using your debit card. Credit cards can be a secure form of credit if you do your research and choose a card that has the best features for you (e.g. interest free balance transfer or low interest on spending). However, overspending or mising a payment due to problems with your student loan or other income might find you hit by a late payment charge and it can have an impact on your credit score which can cause problems down the line if you are looking to secure credit for a major purchase like a car or mortgage. 

It’s tempting to treat credit cards as an extra source of income, but you always have to pay it back and usually with interest. For example, if you borrowed £500 on a credit card with an Annual Percentage Rate of 18.9% and paid the minimum repayment of £10 monthly, the debt would take 7 years and 6 months to repay and cost £399 in interest on top of the £500 you borrowed. Having a plan for how you will repay credit card spending will help make this feel more manageable. 

Credit score

Your credit score doesn't only include store cards and credit cards. Mobile phones on monthly contracts, utility bills for your home, and your internet and TV package are all types of credit. It's a term that basically covers any bill that you get for a service you have already used.

In the UK, there are companies called credit reference agencies that keep a database of information about how you manage your credit agreements. The main ones are Experian and Equifax. Any company that you have a credit agreement with will send information to one or more of these agencies about whether you are keeping to the terms of your agreement (e.g. making your minimum payments or paying your utility bills on time). When you apply to anyone for further credit they check your credit file for information to help them decide whether to lend to you. You have the legal right to check that the files held on you by the credit reference agencies are correct, and to make amendments if there is wrong information.

Debt

If you find that you’re struggling to keep up with payments or have accrued any debt, talk to someone to see what your options are. There are specialists who work with people who have found themselves in debt for all sorts of reasons and are there to help you move forward. Companies would rather have a regular smaller payment than no payment at all and be forced to take legal action against you. It is much easier to get a reasonable and manageable agreement with your creditors at an early stage rather than letting charges accumulate. 

What is the process for accessing budgeting and financial health support?

Where possible, planning your budget for the year ahead, knowing what your income will be and your expenditures will be a great step towards keeping financial stress under control. Apply for your student funding by the deadline (for UK funding bodies such as SAAS this is usually around the end of June for the upcoming financial year) and plan a budget in advance. There’s lots of budgeting sheets available online and a good student-focused one available on the Save the Student website. Remember to include things like paying tuition fees if you need to, utility bills, insurance, food, subscriptions to services like Spotify and Netflix… anything you pay out regularly should be accounted for. 

How can the Advice Hub help me with budgeting and financial health?

Our advisers can help talk you through standard expenditure that you might expect to pay as a student and help you complete budget planners. We can advise you on accessing financial support from University funds such as the Discretionary Fund if you find yourself in financial crisis. We can also signpost you for specialist support on money management and debt if this is something you’re looking for.

Useful Resources

Save the Student Budget Sheet

Money Helper – the cost of borrowing

Money Supermarket – credit calculator

StepChange Debt Charity