How to get into the budgeting habit and not be crippled by a maxed-out overdraft when you graduate.
Graduates say that one of the worst things about student financing is their overdraft when they graduate. This is because it gobbles every pound they own so they canâ€™t afford to attend job interviews. If youâ€™re on or over your overdraft limit, the cash machine wonâ€™t spit notes out for you to buy a suit or train ticket.
Student finance stops when you finish university and banks charge interest on your overdraft: â€œFour years after graduating, I am still practically living in my overdraft. I pay interest on it nowâ€¦ I feel like I will never be fully out of my overdraft,â€Â says Louisa,Â a graduate from Greenwich University London.
Â Â Here is how to take control of your finances from day one and not get caught in the â€˜Overdraft Trapâ€™Â
Start budgeting to find out how much money you can spend after paying for your living costs. Each term, work out your Weekly Spending:
Income Ã· (number of weeks in that term)
Costs Ã· (number of weeks in that term)
= Your Weekly Spending
- Income is the total money that you have coming in for that term – from student finance, your parents (if you are lucky enough) and part-time work etc.
- Costs are everything you need to pay for that term; rent, food and transport etc.
- The number of weeks in that term includes any holiday period before the following term begins and your student financing payment next comes in.
If your Weekly Spending is a positive number, that is how much you can spend each week without getting into debt. Stick to your budgeted Costs and you should be fine.
If your Weekly Spending is a negative number, you do not have enough money for your Costs â€“ you have a â€˜shortfallâ€™. You need to cut your Costs and maybe increase your Income.Â Reduce your Costs by cutting back: for example, spend less on â€˜luxuriesâ€™ like take-aways; borrow library books instead of buying them and use student discounts. Recalculate your Weekly Spending using your cutback Costs.
Reduce your Costs by cutting back: for example, spend less on â€˜luxuriesâ€™ like take-aways; borrow library books instead of buying them and use student discounts. Recalculate your Weekly Spending using your cutback Costs.
If your Weekly Spending is still negative, you need more money to cover the shortfall. Most students get a part-time for this. Add the earnings from your job to your Income figure. Recalculate your Weekly Spending with your earnings included in your Income. When your Weekly Spending is a positive number, you are fine provided you stick to your cutback Costs and earn the amount in your budget.
Student-financing money lands in your current bank account as one large amount; resist a shopping spree. Consider transferring it into a new account and arrange weekly payments from the new account into your current account, in the amount you have budgeted for. This will help control your Costs. It is straightforward opening accounts and doing transfers online.
Check your finances regularly, at least every two or three weeks. If you can see youâ€™re running out of money at the end of the year, get a summer job and build reserves for the academic year ahead.
Follow these tips and before you know it, youâ€™ll be budget savvy. Calculating your Weekly Spending will become second nature and youâ€™ll be ready for interviews when you graduate instead of trapped by an expensive overdraft.