How students can make a budget and reduce outgoings

Last updated: 28 December 2020   By Justin Schamotta

Students getting their first taste of financial freedom at university often find themselves overwhelmed, but budgeting can help get them back on track.

Any student can benefit from setting a realistic budget and sticking to it, preventing their money worries from mounting up.

As well as cutting the costs of unavoidable bills like broadband, rent and energy, students can also advantage of discounts and tricks to keep their everyday expenses down.

If a student falls into debt, university student support services should be the first port of call to help them improve their financial situation.

student budgeting
Credit: Motortion Films/

Budgeting for students

While budgeting may not be the most exciting word in the English language, it's one of the most important tools a student has when they're away at university.

Making a budget and sticking to it not only ensures a student's maintenance loan (and any other income) stretches far enough throughout the year, but it also limits the amount of anxiety and stress a student has to deal with.

Money worries can cause real problems for students. The National Student Money Survey 2020, published in September 2020, offered some stark figures:

  • 71% of students worry about making ends meet
  • 32% say their grades suffer as a result of money worries
  • 40% of students have difficulty with sleep due to money stress
  • 58% of students stressed about money say their mental health suffers
  • 36% of respondents who said they considered dropping out of university cited money worries, while 18% of those who had dropped out said it was due to money

Along with demonstrating the impact money worries can have on a student's life, there were also some other significant figures in the survey:

  • The average Maintenance Loan for students works out £223 less per month than their living costs
  • 74% of students rely on a part-time job
  • 10% have never budgeted

As a final point, 39% of students feel they were not made aware of funding options available to them such as grants.

We've got more information on funding options for university.

Why is student budgeting important?

As the figures above show, many students are worried about money and it affects their studies, health and more.

Budgeting can help a student take or regain control of their finances by making sure they understand where their money is going and where it needs to go.

However, just setting a budget in your mind or promising to stick to an arbitrary budget with no real analysis of how (or if) it's going to work isn't going to be an effective budgeting solution.

To create a good budget, we need to know how to make a budget that works.

How to make a student budget

Some students will be able to make themselves accountable to a budget whether it's written in a notebook or stored on an Excel spreadsheet. Others will need a bit more help.

Here are the steps to take to set a budget:

  1. Work out how much income you have. This could be from your Maintenance Loan, grants, bursaries, part-time work or savings. Remember the Maintenance Loan is paid in three lump sums during the academic year, so it needs to be budgeted out across the year.
  2. Estimate your outgoings. This includes essentials such as rent, food, bills, transport costs and study materials, but it also includes all those elements that aren't strictly vital: nights out, hobbies, clothes and haircuts, gym memberships, and subscription services to name a few.
  3. Take the budget on a term-by-term basis. So, work out how much income you have during a term then minus those essential expenses we mentioned above. Whatever figure you're left with should be divided by the number of weeks in the term. This final figure is how much money is available every week to spend.

By budgeting weekly rather than monthly, students hopefully won't fall into the trap of spending all their disposable income at the beginning of a month then struggling to live on tins of soup in the final days of a month or term.

Tools to help students budget

Many students will be dealing with bills and budgeting for the first time. While we go into more detail about how to lower outgoings later, it's worth remembering there are tools out there to help students manage their money.

Firstly, students should always open a student bank account as these come with features that may be useful including 0% interest overdrafts and sometimes discount cards or bonus offers. There's more about student bank accounts (including our top picks) in this guide.

Some student bank accounts will come with built-in budgeting and spending analysis tools. These can help students keep track of where their money is going and work out if they're going over budget.

It's true some apps are better than others, however, and digital-only banks such as Monzo and Starling allow customers to separate out their money into specific pots.

For anyone who has trouble budgeting or sticking to their budget, these advanced tools can help. The only problem is that these challenger banks don't yet offer student bank accounts.

There is a workaround though, and it might work out well for someone who feels sorely tempted by the money in their current account.

Have the Maintenance Loan and any other money paid into the student bank account set up with a high street bank while also setting up payment for essentials like rent, energy costs and mobile bills.

Leave the money budgeted for those in the student account then transfer whatever's left into a second account with Monzo, Starling or another digital bank with excellent app features. From there, it's easy to separate money into different pots for things such as:

  • Groceries
  • Nights out and eating out
  • Streaming services and entertainment
  • Hair and beauty
  • Clothes
  • Gym memberships
  • Travelling

Although groceries are definitely an essential, by putting them into the second account, it's easier to understand how much money is being spent on food. Making small changes to a food budget could result in more being available for other things, so it's worth thinking about groceries in conjunction with non-essential outgoings.

There's more on mobile only banking here.

If a student doesn't want a second bank account, opting for a prepaid card might be a good alternative.

Prepaid cards are debit cards loaded with a set amount of money which can be replenished, but there is no overdraft or ability to spend more than is on the card.

From a student's perspective, then, a prepaid card could offer a way of keeping non-essential spending away from essential spending.

By transferring the remainder of their income after essentials like rent and bills to the prepaid card, the student knows the amount available on the card is their budget for the rest of the week. They can even leave their normal debit card in a locked drawer in their room to avoid the temptation of using it.

This separates out the non-essential spend from the essential bills, meaning that if they dip into the ring-fenced money, it's going to be a conscious choice.

Learn more about the safety of prepaid cards.

How to stick to a student budget

Understanding how to develop a budget is one thing; sticking to a student budget can be another thing entirely.

We've already mentioned how additional bank accounts or prepaid cards could help, but bear in mind these points as well:

  1. Don't underestimate how much is spent on essentials such as food just to have more money available for fun things. Ultimately, you'll buy the food and spend the money on something else as well, putting you into the red. Better to overestimate grocery bills for the week and have some left over ahead of the next week.
  2. Plan a week's worth of meals to avoid having to go shopping multiple times.
  3. Don't be too harsh on yourself with fun stuff. Rationing it too much is more likely to make you dump your budget than allowing yourself a limited amount of unnecessary spending.
  4. If there's money left over at the end of the week or month, put it in a separate pot and keep it in case of emergencies.

Budgeting is unlikely to be anyone's favourite thing in the world but going to university with the intention to follow a budget will reduce the impact of money worries on your studies and health.

How to save on major student bills

Students have unavoidable bills to pay when they go off to university, whether they are living in university-owned accommodation or living off-campus in a privately rented house.

For every student, rent is the big one, and the National Student Money Survey 2020 shows the average monthly rent bill is £418, around 52% of the average monthly income of £795.

Often, students attend their first year and live in the accommodation recommended or allocated by their university. Beyond the first year, though, students can move into house shares with friends and strangers.

It's important to stick with an affordable house share, no matter what external pressure friends put on to go with a nicer house or a bigger one or one near a certain bar. If a student can't comfortably afford the rent, they definitely won't be going to that bar very often.

There are other positive decisions to be made on bills too. These can also help students trim their monthly outgoings. Here are two examples: broadband and fuel bills.

Search for cheaper student broadband

Broadband is a student essential, but it can be complicated to get hold of now that student-specific broadband deals are few and far between.

There are four major options:

  1. Traditional broadband contracts
  2. Rolling fixed line broadband
  3. Home 4G or 5G broadband
  4. Mobile broadband

We've got more detail on each of these in our full guide, but they have pros and cons that will need to be weighed up on a financial basis to check if they fit into your budget.

Check broadband deals to see the speeds and pricing on offer.

Switch for cheaper energy bills

Energy supply is a household decision but switching to a cheaper tariff could save money for everyone, so it's worth looking into.

We've covered energy bills and tips for students more fully in this guide. Students in house shares should remember:

  1. One responsible person will need to be appointed as bill payer
  2. Fixed term tariffs are cheaper but often come with exit fees
  3. Checking energy usage around the house can save money

If students do decide to switch energy supplier, they can compare cheap tariffs using our comparison tool.

Saving money on everyday student essentials

As well as saving money on the big unavoidable bills, there are also small changes students can make every day to reduce their outgoings.

These are our favourites:

  1. Reduce spending on food by doing your shopping in the early evening when supermarkets have put discount or clearance stickers on food.
  2. Switch to supermarket branded products in place of popular brands.
  3. Keep an eye out for discount stickers on other essentials and luxuries too, such as clothes, hair products and stationery. Stock up while those are on offer.
  4. Get a railcard if you spend time travelling on the trains. This saves 1/3 off every train journey, so it's well worth the £30 upfront cost.
  5. If your university town is bike-friendly, ditch the public transport and get a bike at the beginning of term instead.
  6. Rid yourself of any services you're not using such as gyms, streaming services and app subscriptions.
  7. Buy course materials second-hand using online marketplaces or university stalls.

Plus, there are brilliant student discounts available in many shops if you look carefully enough. Some will offer 10% discount on production of a valid student ID while others are registered with student discount behemoth TOTUM.

For £14.99 per year, you can get full access to TOTUM's range of offers covering everything from supermarket deals through to spa treats and discounts on popular electronics. Just like the railcard, it should pay for itself quickly.

Always be on the lookout for student discount notifications on shop windows and in stores. You might be surprised where they pop up, and no one turns their nose up at a 15% discount.

What should students do if they fall into debt?

With all this talk of student budgeting, it's important to remember that not everyone gets it right first time. Equally, something may happen that throws the best budget in the world out of the window.

If a student falls into debt, it's vital to acknowledge it and then start to deal with it as soon as possible. Here are some things to keep in mind:

  1. Even if it's painful, keep up to date with your finances and be honest with yourself about the scale of your problems.
  2. Draw up a financial statement showing all income and expenditure that has led you to this point.
  3. Don't put off seeking help because this will likely make the problem worse.
  4. Prioritise debts such as rent arrears and utility bills.
  5. Find out what debt support is offered by your university.
  6. If needed, contact a specialist debt charity for guidance (see link below).
  7. Take control of your finances and set a realistic budget to get back on track.

There's more information about what to do if you can't pay all your bills or click here to find out where to seek help with debt.

Conclusion: be budget aware

Creating a realistic budget and, most importantly, sticking to it are two of the extra skills students will learn during their university life.

Along with being aware of how to make a budget and tips to reduce outgoings, it's also worthwhile remembering that it's never too late to try budgeting properly. Even for a student in debt, focusing on a budget (perhaps in conjunction with a debt adviser from student services) can help you get back on track.

University is often the first time students have been in charge of their own money, and the length of time between one Maintenance Loan payment and the next can feel very long.

A realistic budget will help any student take control of their finances, hopefully putting some of their money worries to sleep and letting students get a solid night's sleep themselves without money stress keeping them up.


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