Budgeting

Budgeting is one of the most important things you can do with your money. If you don’t have a clearly set out, workable and realistic budget, you could easily end up in debt, or having to skip meals because you spent the money on something else. But if you keep a written record of how much money you’re getting per month, and how much of it you can spend on books, how much on nights out, how much on food, etc., and as long as you stick to it, you will greatly reduce your financial stresses.
You don’t have to keep a monthly budget; you might want to make it weekly, fortnightly, or whatever. But let’s say for example that your budget will be a monthly one. This means you first calculate how much money you receive per month. Let’s say you earn £400 from your part-time job, you receive £500 in student loans, and a parent sends an extra £100 a month to help out. That £1000 needs to be subdivided into categories to make sure that you don’t overspend in any area.
Let’s start with the most important things, e.g. it costs you £425 a month for rent, so you need to set that money aside for that purpose. A sensible amount to set aside for books and other resources for your work might be £200. For food, you could give yourself £160, and for travel £40. You could give yourself £40 a month for going out, and another £40 for spending on clothes, music, etc. This leaves £95 to spend on other things. There could be a charity that you like to give to, so that could be £15 a month. Perhaps there’s a magazine you’re subscribed to which is another £15. Finally, there is £65 left, which could be split into £35 for savings: this money shouldn’t be spent, but set aside so that when you finish university you have some money saved up; and the remaining £30 could be emergency money, in case for example you have to spend more than you thought you would have to one month on text books. If you manage to spend all this money, then you might have to dip into the savings fund.
So, you might want to have a notebook in which you set out your budget like this, recording each transaction so you know how much money you have left in that account:

May 2009
In --> £1000
Rent --> £425
Books --> £200
Food, etc. --> £160
Travel --> £40
Going Out --> £40
Personal Spending --> £40
Charity --> £15
Magazine Subscription --> 15
Savings --> £35
Emergency Money --> £30

Date Item Category Amount (£) Balance (£)
1st Rent Paid Rent 425 0
Books for Course Books 78.90 121.10
2nd Food Shopping Food 30.89 129.11
DVDs from HMV PS 12 28
Hat “ 1.99 26.01
Pizza Food 2.99 126.12
Drinks at Pub Going Out 3 37
Oyster Card top up Travel 20 20

You get the idea. You may have your own ideas about what categories to have and what the format of your budget should be, but as long as you hold on to the basic ideas of having a set amount for each category per week or month, and not going over your budget in any area, you should find that this greatly helps you.
And if you have any money left over in any category at the end of the month, you could either add your new monthly allocation onto it, or transfer what’s left into your savings category. For example, if you had £8 left in the ‘personal spending’ fund, you could either add the next month’s £40 onto it to make £48, or add the £8 to your savings and just have £40 in personal spending. Or say you spent slightly too much money on going out so that by the end of the month, the figure in that fund was -5.25, the next month’s ‘going out’ fund would be £34.75.

So for June 2009, your budget might look like this:

In --> £1000
Rent --> £425
Books --> £179
Food, etc. --> 160.05
Travel --> £40
Going Out --> £34.75
Personal Spending --> £40
Charity --> £15
Magazine Subscription --> £15
Savings --> £78
Emergency Money --> £60