Money. Everyone has it. Everyone needs it. But not many people are comfortable talking about it. While at school we learn everything from how to calculate the cosine of an angle to a detailed history of the British monarchy, we are rarely given the tools to navigate our financial lives. Even in PSHE, where we (hopefully) receive guidance on health, wellbeing and relationships, we are seldom helped with our financial health and relationship with money. And yet, like it or not, personal finance creeps into every aspect of our daily lives – a sense of financial security and control have multiple knock on effects including on our mental health.
I have always felt a need to have control over my life – friends can attest to the importance of the (overly?) detailed colour coded calendars that govern my days- so it made logical sense for me when I took over the management of my savings account at 16 to start finding out more about how this whole finance thing worked. Quite some time has passed since then, and I still feel that there’s more to figure out – student accounts were a whole new beast to deal with when prepping for university. But as Cher Horowitz would put it, financial knowledge gives me a sense of control in a world full of chaos.
At this stage, it’s important to note that I am not a financial advisor, so please don’t take my world as gospel – this column should hopefully help you become more financially literate by taking responsibility and control over such an important aspect of your life.
What’s your number?
Some great advice I recently got from a travel blogger, Jo Franco, was to work out your monthly survival number. This is the minimum amount of money you need to get through the month without extraneous spending on unnecessary items – as long as you have this amount available each month, you know you’re going to be fine even if you have to forgo those late night trips to Hassans.
On a blank spreadsheet put all your necessary expenses in one column (such as credit card payments, rent, utilities, essential groceries, phone bill). This is your number! Of course this varies from month to month and person to person. I personally have two different ones as my outgoings are different in vac compared to term time, so figure out what works best for your situation.
In the next column put in your incoming money – this system works slightly better if you have a steady monthly income but otherwise you can use the monthly average income you’re going to have over the year from paychecks and maintenance loans. Work out the difference between the two columns – this is the amount you have available for savings and other spending decisions.
Importantly, remember that your overdraft is not free money! Eventually you will have to pay anything you borrow back, either over time as your account transitions from a student account to a full current account or immediately if you ever want to switch banks.
Budgeting
Budgeting is such a dreary word, there are very few people who can get truly hyped about the prospect of budgeting. I mean, what’s the point of having money if you can’t even spend it?
The way I like to think about it is, you need to spend (and save) in a way that not only makes the current you happy but will also make the future you happy. This of course depends on your priorities; if you know you are saving to pay for a future degree or to go on that once in a lifetime trip or just to pay off some credit card debt then making smart decisions about in-the-moment spending is key to achieving those future financial goals.
I personally use a spreadsheet to track my spending as it is often split over different cards or paid in cash and I like the simplicity of it, but it is very basic and everything you spend has to be input manually.
Luckily, there are lots of great apps available to help track your spending automatically and in well constructed, visually appealing ways.
Over the last few years there has been a new trend in personal finance: open banking. As of January 2018, all banks and building societies in the UK have made their customer data accessible to regulated and licensed third parties. This has opened a major new avenue in financial analysis.
Emma is my favourite of all the various financial analysis tools that I’ve tried, but a close second is Yolt. These apps allow you to see all of your accounts in one convenient location, set a weekly or monthly budget, track (and cancel) subscriptions and it auto-categorises your expenses for you to see a high level overview of where your money is going. Perfect for some financial spring cleaning.
Just note you can’t transfer money in or out of the accounts via these apps, you will need to go to your bank’s secure portal to do this or use something else like PayPal. You also can’t note down what you spent cash on, it’ll just log when you take cash out with your card – so if you spend a lot in cash you won’t get any analytics. Side note: I hate cash with a vengeance, so I’m loving this cashless society transition. I also learnt during a game of Trivial Pursuit the other day that almost every British note is contaminated with cocaine…the more you know I guess.
Hopefully some or all of this helps you figure out the best way to budget for your personal situation – try out different methods and see what works!
And most importantly: know what you have, know what you need and know your goals.
Sarina Chandaria is a second-year Geography student at Christ Church college.