BUSINESS WITH CONFIDENCE icaew.com Budgeting – personal finance for students Rebecca Benneyworth MBE BSc FCA

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Budgeting means…. Making sure you have enough money to do what you intend. E.g. how much for an afternoon out at the cinema? – Tickets – Popcorn – Bus home OR find out what you can do with the money you have.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Everyone needs to budget Including the Government. There is no such thing as an infinite supply of money. Wealthy people budget but with bigger numbers and probably more luxuries!

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Example – A birthday party Fixed budget from Mum and Dad. How many people? What shall we do? Calculate a budget after finding out some facts.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 A trip to the spa? Treatments? Lunch How many? Transport? Stay overnight?

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Paintballing? Cost per person? Transport Cost of paintballs? Refreshments?

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 The steps to budgeting Fact find. Decisions. Review. Compare with actual. Better budget next time!

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Student budget Your income will be loans from the Government and maybe help from parents – plus a job? Essential spending must come first. Your basic needs: – Rent – Light and heat – Food – Transport? – Phone? (Is this essential or optional?)

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Planning expenditure Not much left now….. This is called ‘disposable income’ or ‘discretionary spend’. Spend it on things you like – not things you need. You may wish to budget for this. But it is often ‘what is left after essentials’.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Discretionary spend

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Budgeting Very hard to do at first. You will always forget something. You will improve each time you do it. Comparing ‘What I spent’ with ‘What I thought I would spend’ is the most important bit – Improves your budget. – Makes you think before you spend.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Making a personal budget Get together the basic information first. How much is your income? When does it arrive? – Once a term? – Weekly pay packet? What expenses do you need to budget for? – Essential. – Discretionary.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Start with an overview For example - My first term at university. Budget for a period that is matched by your fixed income. A term by term budget is better and allows you to revise after term 1. – And learn from your mistakes!

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Put down your expected expenses Basic living expenses. – Rent. – Heat and light. – Food. Course expenses. – Travel to university. – Textbooks. – Other essential equipment – lab coats, stationery.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Estimating expenditure Be as accurate as you can. Don’t deliberately overestimate ‘to be on the safe side.’ – This affects spending behaviour. – You are aware of the ‘cushion’ and tend to overspend. Try weekly estimates for food / travel. – Then multiply up to a term.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 What it looks like TERM 1 BUDGET£ Income – help from parents1,200 Income – student maintenance loan800 Income – wages from part time job (10 weeks)500 Total income2,500 Rent (includes light and heat) (£100 per week)1,000 Food (estimate £35 per week x 10 weeks)350 Mobile phone (£25 per month x 4 months)100 Text books and stationery500 Travel to campus (estimate £15 per week x 10 weeks)150 Total essential spend2,100 Available for discretionary spend400

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Now review it I have chosen to live off campus as the rent is cheaper. My fees are covered by my loan in respect of fees I cannot manage without my job as it leaves me unable to meet essentials. I seem to have £40 a week to spend on my social life! Excellent!

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 End of term 1 Money was a real struggle. Only managed to work for 6 weeks. Forgot to budget for transport to work. Food cost more than I expected. – I frequently can’t be bothered to cook. I couldn’t manage without a laptop. I got carried away with socialising.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Compare actual with budget TERM 1 BUDGETACTUALBUDGET Income – parents1,200 Income – student loan800 Income – wages Total income2,3002,500 Rent and TV licence1,1451,000 Food Mobile phone Text books and laptop Travel to campus and work Total essential spend2,8632,100 Available for discretionary spend

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Discretionary spend term 1 Social spend £620 Clothes £250 Total overdraft Term 1 = £1,000 (maximum) Borrowed extra £500 from Mum and Dad. – Had £87 left – but it cost £60 to get home at the end of term.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Ideas for term 2 I had better cut back. – Laptop wont need to be bought again. – TV licence is only once a year. The job was not a good idea. – After travel the extra income was minimal. – Will take bus to work at student union but only 3 nights per week. – No extra travelling costs.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Ideas for term 2 Buy a second hand bicycle to save travel costs. – Moving accommodation is not an option – I have signed up for 1 year. – Nearer to campus will be more expensive so probably would not save any money. My mobile bills were more than I expected – I will need to be aware and look for ‘deals’.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Term 2 – informed by the past TERM 2 BUDGET Income – help from parents1,200 Income – student loan800 Income – bar work at university500 Total income2,500 Rent (includes light and heat)1,000 Food (estimate based on term 1)500 Mobile phone150 Text books and stationery (most purchased now)50 Repay term 1 loan250 Total essential spend1,950 Available for discretionary spend550

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Review plans for term 2 Mum and Dad want the loan repaid by the end of the academic year. Working at the university will be a social life with no spending. Think how to make my money go further – stop buying sandwiches out, think about phone use. Thrift shops for clothes.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 Budgeting – summary Set as realistic a budget as you can. Keep a detailed record of what you spend so that you can compare with budget. Review at end of term and use this to inform your next budget.

BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2013 One last thing! Be aware of large bills due in full at the start of term or year. Cashflow difficulty – income has not arrived yet if it comes in weekly. – On paper it worked. – In practice it doesn’t! – Can you pay by weekly instalments?

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