Financial Health - Managing Money
Whether you get your money from a student loan, bursaries, a scholarship, a part-time job, or your parents once you’ve got some money you need to know how to make it last.
If you are struggling with money there are a number of things you can do that might make a difference.
Working out your costs - Budgeting:
So first things first, you need to work out how much you’ve got and how much you’ve going need throughout the year. Make a list of the costs you know you’re going to have, usually this will include things like rent, household bills, and travel to and from uni (if this is by car remember to add your tax and rough MOT costs too). Once you know these costs you can start to work out how much you have left to spend on food, clothes, hobbies and a social life.
For help with budgeting you can download a budget sheet here that we have borrowed from Martin Lewis's Money Tips - thank you Martin!
If the amounts aren’t adding up too well and you do not have a part-time job already you might want to consider visiting the Employment Service which is part of the Careers Service on level 5 of Livingstone Tower. They advertise student friendly jobs which will help you earn some extra cash. You can also look for jobs in local newspapers, or check windows for 'staff wanted' signs.
Having a job is very common amongst students these days. However, it is worth remembering that you are here to get a degree. If you find you are having to work too many hours to make enough money, or your employer is giving you too many hours (or hours that don't fit in with your studies), you might want think about looking for another job or support from elsewhere.
Student finance is minimal, and for many students struggling financially or getting into some debt are accepted facts of student life. However, it is still a good idea to minimise, as far as possible, the amount of debt you take on while studying. Getting into debt is stressful, and can be an added pressure that you don't need.
If you want some information about the types of credit available, the pitfalls of each, or which may work best for you, or if you need some advice on dealing with existing debts, then read on...
Which Student Bank account is best?
Tricky question, banks often change their deals on student bank accounts so it’s best to shop around first. There are plenty of comparison website that will help you make an informed choice about which bank account is best for you. Two websites to try are Money supermarket and Money Saving Expert
Student bank accounts can vary but most offer an overdraft facility that will be interest -free for the duration of your course. You can often increase your overdraft limit each year. Sometimes this is done automatically, whether you ask the bank to do so or not.
While shopping around for a student bank account can get you some great freebies, one of the most helpful things to consider will be for how long after you graduate the overdraft will remain interest-free, and what the interest rate will be when the interest-free period ends. This can vary, and having only a year to pay off what may easily by then be £5,000 of overdraft, or else be hit with a huge monthly interest payment, will not be a welcome introduction to graduate life.
This is also a good reason to remember that an overdraft is debt, albeit a very cheap debt while you are studying. Try to keep your overdraft as small as possible, and not to think of it as extra income. However, it is still a cheaper way of balancing your budget than credit or store cards.
BEWARE: Don’t go over your Overdraft limit!
Whilst your overdraft might be interest free whilst you study, going over the agreed limit might incur charges. When you signed you for your student bank account, your bank should have given you information on how much these charges are. If you no longer have this information, you can usually find them on the back of your statements or on the banks website.
Credit cards are a useful and well-regulated way to ensure you have access to money. They are also have other benefits for buying online, as they give added protection against fraud compared to using your debit card. Credit cards can be a cheap form of credit if you do your research and choose a card that has the best features for you (e.g. interest free balance transfer, or low interest on spending). However, if you take your eye off the ball and overspend, or miss a payment due to problems with your student loan or other income, the penalties can be serious. If you are looking for a credit card, Martin Lewis' Money Saving Expert website lists the best deals, as well as the do's and don’ts of credit card use.
BEWARE: Know your limits
It’s tempting to treat credit cards as an extra source of income but unlike earned income, you have always have to pay it back and usually with interest. To work out just how long it would take you to pay off that new purchase, use this handy calculator.
As an example if you borrowed £500 on a credit card with an APR of 18.9% and only paid the minimum balance of £5, the debt would take 12 years and 8 months and cost £538 in interest……… Wow!! Or you could pay £30 a month in payments and it would take 3 years and 8 months to pay off and you’d only pay £77 in interest…..much better!
To get your head round interest rates, take a look at The Money Advice Service website which is full of really useful information.
Yes it’s tempting to get that initial 10% off your purchase when you take out the card or whatever their special offer is but after that, a store card is basically a credit card with a high interest rate. Remember that students quite often get 10% off anyway so unless you’re buying something really big a one off extra 10% discount may not be worth the trade-off of landing yourself with a debt to repay. If it is worth the extra, you probably want to cut the card up after that, and cancel your account with the credit company. Always keep the terms and conditions information you get given with the card, so you know how to cancel it!
The company you’ve taken the card out with will normally insist that your first purchase goes straight on the card, so you must remember to keep enough money left at the end of the month to pay the card off. As long as you pay off the card whenever the bill comes in you’re fine.
Some store cards allow you to take out a cash advance in the same way you can (but shouldn’t!!!) with credit cards. Do not do this! The interest rates on cash advances are much, much higher than for purchases, and create scary bills when they come through.
If you are having trouble paying off a store card, stop using it immediately and cut up the card. You won't be able to close your account until you've paid off the debt, but it will let you plan how to do that without increasing the problem. For more advice on managing debt, call in to the Advice Hub and speak to Nicola.
Credit doesn't only include store cards and credit cards. Mobile phones on monthly contracts, utility bills for your home, and your landline, internet and TV package are all types of credit. It's a term that basically covers any bill that you get for a service you have already used. If you have a store or credit card, or if the bills for your flat are under your name, then you need to know the long term penalties if you do not keep up payment, make late payments or fail to pay at all.
In the UK, there are companies called Credit Reference Agencies that keep a database of information about how you manage your credit agreements. The main ones are Experian (link) and Equifax (link). Any company that you have a credit agreement with will send information to one or more of these agencies about whether you are keeping to the terms of your agreement (e.g making your minimum payments, or paying your utility bills on time). When you apply to anyone for further credit (e.g. a new phone contract or an internet connection) they check your credit file for information on whether you are the kind of person they want to lend to.
There is no such thing as 'credit blacklisting' - no creditor can indicate that you should never be extended credit, by anyone - but if you have missed payments, or have a high outstanding balance on several credit accounts, this can make it unlikely that other agencies will see you as a suitable risk. Having a poor credit rating can have serious consequences, for example you may be refused a mortgage (when you get around to needing one!), or only be offered credit at a high interest rate, making credit more expensive for you.
Repairing a bad credit history is possible, but can take a long time (several years), so it is better not to damage it in the first place, if you can avoid it. You have the legal right to check that the files held on you by the credit reference agencies are correct, and to make amendments if there is wrong information.
You can easily find out what your credit score is by signing up to Experian or Equifax for a free 30 day trial. Just remember to cancel before the 30 days or you will be charged each month for the service!
Money Saving Expert has more information on credit ratings, and how you can get hold of your credit files.
Unable to pay?
If you’ve got yourself into trouble don’t bury your head in the sand. Come to the Advice Hub and we will see what your options are. Companies would rather have a regular smaller payment than no payment at all and be forced to take legal action against you. It is much easier to get a reasonable agreement with your creditors at an early stage, rather than when they are threatening court action.
There may be other problems you have to address, too - you may need to accept that being a student means you have to make certain cut backs and can’t always just buy whatever you want or do whatever you want. Putting together a budget, which shows your income and necessary expenditure each month, can help to illustrate exactly what you have left over for entertainment and luxuries. Money Saving Expert has a good budget planner tool to help you do this. If you are going to have to get into debt to make ends meet, knowing how much you will need to borrow will help you to get the cheapest credit you can, and to manage your debt so that you don't miss repayments.
If you manage your money as well as you can while you're studying, then when you graduate you'll be in a much better position to buy a flat or house, or travel the world, or something generally more exciting than blowing your money in the shops and bars of Glasgow.
For more debt advice online go to http://www.moneysupermarket.com/current-accounts/student-bank-accounts/) and Money Saving Expert (http://www.moneysavingexpert.com/students/Student-bank-account)