11 A budget for living away from home
In the next activity you get your first chance to try out the ‘living away from home’ facility on the budgeting app.
Earlier you explored a basic budget for living at home. Now you work with a detailed living-away-from-home budget.
The first difference is that this budget works on an annual rather than a monthly basis. This is in part because you’re now dealing with much larger sums of money, such as your maintenance loan for an entire term plus the next vacation, or your deposit for a year’s accommodation. Any poor decision making can have more drastic consequences. Using just a monthly budget when such large figures are at stake can risk overstating how well or how badly off you are. As a general rule you need to be careful when building spending that occurs irregularly (like the cost of holidays) into a monthly budget. An annual budget, encompassing a full academic year, gives you a full picture of your financial position.
The budget grid enables a fairly forensic analysis of the current year’s financial flows (Year 1) with the option of adding summary financial forecasts for the next two years (Years 2 and 3).
It can be used for anyone living away from their family home – not just students (although only students will have cash flows relating to student loans in their budgets). The year is divided into either terms or quarters to suit your circumstances. As a full-time student you are not liable to certain costs in the budget grid, for example Council Tax. Depending on your accommodation arrangements other costs such as water charges might not be payable either.
Expenditure is divided between essential spending (B) and non-essential spending (C), to provide a focus if there’s a need to make economies.
Pay attention to the net position at the bottom of the grid (income less expenditure).
If there’s an excess of expenditure over income a plan should be in place to meet the shortfall. This could mean:
- increasing income – say by working more hours part-time
- making spending cuts (focus on Section C spending)
- drawing on existing savings (if you have some)
- drawing on your bank account overdraft facility (but make sure your overdraft is authorised)
- having a fallback if none of the above options are available or if the overdraft option is prohibitively expensive (‘Bank of Mum & Dad’?).
Activity 4 Your detailed budget grid
Have a go at filling in the budget grid. You can either add your answers directly into the table or download the Word version of the detailed budget grid.
|Autumn term or Quarter 1||Spring term or Quarter 2||Summer term or Quarter 3||Summer vacation or Quarter 4||Year 2||Year 3|
|Balance from previous period|
|Earnings (after deductions like tax)|
|Support from parents|
|Other income (e.g. grants and bursaries)|
|Total income (A)|
|Deposits for future accommodation|
|Council Tax & water charges|
|Utilities (e.g. gas and electricity)|
|Total essential spending (B)|
|Total other spending (C)|
Outturn (= balance for start of next period)
A minus (B+C)