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Budgeting is simply the act of working out how much money you’ve got coming in (income) and then as accurately as possible figuring out how much you have to pay out (expenditure) on fixed costs such as rent, bills and so on to then come up with how much you’ve got left to spend on everything else (disposable income).

In simple maths terms basic budgeting looks like this:

CalculatingDisposableIncome.jpg, Calculating Disposable Income (Income - Fixed costs = Disposable income)

Budgets can be calculated over a variety of time periods, such as a month, term or even a whole year. Most students have very fixed incomes made up from their Maintenance Loan or Grant, plus whatever they may get in the way of parental support or from a part-time job, so calculating income is usually pretty easy.

The trick comes when trying to figure out your expenditure, breaking it down into the fixed costs that are known (for example rent is a ‘known fixed cost’), those fixed costs that are estimated (such as utility bills which can be guessed at based on how much was paid in the previous year) and then essential costs but based on educated guesswork. How much you think you are going to spend on food per month would be an example of an essential cost, as would travel to and from campus.

It’s also important to be strict with yourself about what are and what are not ‘essential’ costs. Whatever is left over after covering your essential costs what you are going to have left to pay for everything else (i.e. out of your disposable income). Yes, this means socialising! Here are examples of the kind of expenditure you may have and whether they are likely to be fixed or not:

Fixed costs (either because they are set in advance or are contractual etc)Essential but non-fixed costs (as you need to spend on them but the amount may vary)Non-essential non-fixed costs (because they fluctuate and you could survive without them)

Rent or mortgage

Utility bills (electric/gas/water etc.)


Childcare costs

Mobile phone and/or landline (if on a contract)

TV license (yes – you do need one!)




Books/course costs

Clothes & toiletries etc.

Socialising (Going out to pubs/clubs, cinema etc.)



Take-aways/leisure spending

Gym membership

These examples are not hard and fast, for example it can be argued that a mobile phone isn’t strictly speaking essential and there’s no mention of the costs of running a car which for one individual may be essential but for others would be considered an expensive luxury.

Everyone is different, the important thing is to as best you can take full stock of your personal income and expenditure - being as honest as possible - and seeing if it leaves you with any money left over. If it does then it’s a case of making that remaining disposable income last (i.e. not overspending). However if after drawing up your budget you have more money going out than you have coming in then you only have two responsible alternatives: either

  • Increase your income (take steps to bring more money in); or
  • Reduce your expenditure (cut back on your spending).

It can be hard to track the small everyday expenditure (such as cups of coffee, sandwiches, car parking and so on) so here are a couple of tips to help.

1) Pay cash: Debit cards are very easy to use for even small purchases nowadays and you can spend money through them without ever really noticing the total impact on your bank balance. So take out a fixed lump sum of cash (£10, £20) each week and commit to only using that cash for your ‘impulse’ spends on a day to day basis. You’ll rapidly realise how quickly you’re burning through your disposable income!

2) Cut back: Why pay for coffee when you’ve got a thermos flask or for sandwiches from a shop when you can take in a packed lunch? The simplest way to manage impulse spending is to stop it altogether, or reduce it to an absolute minimum. Changing habits can be challenging but the savings can be rewarding. You can get an idea of how much money you will spend over your lifetime on impulse buys (such as a weekly magazine) by using the Money Saving Expert ‘Demotivator’ if you’re ready to face up to some home truths!

To get some practical resources to help with budgeting please see the Budgeting Resources page.

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