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How to Budget

How to Budget

Everyone needs to learn to “live within their means”, and that ‘means’ (see what I did there?) that you should not spend more than the money coming in. In other words don’t spend more than you earn. If you do, you’ll become very unhappy, worrying about how to cover the debts you owe. Just to be clear, a debt is money you owe to someone/something that has to be repaid. In the worst case scenario, you can end up in jail, or be forced to declare bankruptcy at the extreme end of the scale.

Obviously everyone has a different amount of money coming in. As a teenager, this may just be pocket money or money for doing chores from parents, and maybe some from a Saturday job.  Your outgoings on food, housing and utilities such as water will be probably be almost nothing at this point in your life.

Later, if you become a student, your income may come from student loan, a parental contribution, and a part time job. The difference is that now, you will need to pay out quite a bit. For the first year you may be in student accommodation – some catered, some self-catering, but all have the rest of your bills like electricity and gas included in the price.  Average prices range from about £3000 to £5000 for the academic year. On top of that, you must add food, if you know how to cook! Don’t rely on takeaway this will be far more expensive. You may also want to add in travel (to and from university/home/visiting friends elsewhere, local buses or costs of running your own car), holidays, “going out” money, materials and books for your course, mobile phone bills, toiletries, clothes and any other spending. That adds up to a lot, so don’t spend all your loan at the start of term!

If struggling, the best way to sort yourself out is to use a budgeting app or a paper note book to see where you can cut back. You may find you are spending a horrifying amount on unnecessary takeaways or coffees, or downloading games. 

The following year you normally live off campus in shared student housing. That means that instead of the student housing from the university, you pay a private landlord your share of the rent (usually for the full 12 months even if you’re only there 9 months) plus a share of a deposit to protect the landlord against all of you doing damage to their house or furniture. If you don’t damage the house, you will get the deposit back. But from now on, you and your friends are also responsible for bills such as gas, electricity, water, TV licence, and sometimes broadband, depending on arrangements with the landlord.  Now you have reached the full level of adult responsibility! Hooray!

On leaving university, you will probably still be in a shared house. But now you have a full time job, and the horror of tax, National Insurance, pension and student loan payments are taken from your pay before you get it. In fact, everyone is liable for tax and National Insurance, if they earn under £10,000 a year. If you earn more, you have to budget with what you have left, after the deductions have been made. Adulthood isn’t all fun and games, is it?

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