Part three in my 2007 financial planning series.
I was drinking with some friends and someone suggested we go all out. One of our crew lamented a cash crisis situation. Not a problem, exclaimed another friend, you can extend your overdraft over the phone, right now, sitting here in this bar, drunk!
This is an example of bad financial planning, and I cannot recommend it much less than taking a roller coaster ride on the stock exchange with two thousand Zimbabwe dollars.
Okay, a night in doing personal accounts is not a scintillating exercise. However, it is vitally important to keep track of your money digits. This can be as little effort as reading your monthly statements and checking your balance every time you withdraw. Scanning these numbers will give you a basic awareness of where your money’s going and what spending pattern you can keep up. If things are getting tight, start withdrawing a certain amount each week and sticking to it. Don’t be tempted to take your card out, or to buy things online thinking that it’s not ‘real’ money. A number’s a number, and it’ll decrease whether you like it or not.
The best advice budgeting advice: try not to go into your overdraft. Banks can seem generous and it’s useful to have an interest-free overdraft to dip into during those personal ‘Northern Rock’ moments, but it’s not there to be lived out of.
I used to be petrified of ending up in the red, while a lot of students I knew casually talked about the hundreds of pounds they owed. When I ended up more in debt than I planned (and I use plan in a loose sense, because – confession - I didn’t plan at all) I understood the feeling of ‘overdraft underwhelm’. Being three hundred pounds into your overdraft is absolutely terrifying. Being £600 down isn’t really that much different, hey, it’s still the hundreds, right? But keep on spending, and you discover that being £1200 overdrawn doesn’t feel any different either, until you graduate and the bank wants their money back.
That might seem far off, but I am warning you from the future. I celebrated graduating this year with ten thousand pounds of student loan, minus twelve hundred pounds in my account and an I-O-U to the bank of mum and dad for a grand. I went over my overdraft once, missed some credit card payments, and now have to keep up with council tax bills (this one’s a real bugger) and self-finance a part-time post-grad. I paid off the credit card, but I’ll be living out of my overdraft for some time yet. I’m not one of the worst off, but I’ve left the splendour of spontaneous student life and believe me, I sorely miss it.
Make sure you know how much you have until the next SAAS pay day. Pretending not to know how much you don’t have is plain dangerous, and having a ‘fuck it’ moment like my friend will make your overdraft rise exponentially. Be honest! If you can’t control yourself, get your bank statements sent home instead of to your term address. They’ll be out of sight, out of mind, and right in the lap of your parents. And there’s nothing more frightening than that.
Hello all, my name is Miss NoMoneyPenny, and I’m your off-beat, out of tune financial advisor. I’m here to guide you kicking and screaming through your time as a sensible, thrifty student. Seeing as it’s Freshers’ Week, and you’ve got a whole host of other worries, such as what to wear out tonight, how to get off with the hot girl in the block across from you, and how the hell to find your lecture halls, I’m not going to talk about the boring stuff such as budgets and bank accounts. Hoorah.
I hope you’re sitting back and enjoying yourself so far, because the truth is, you’ve never been in such a good position, especially if you’re Scottish. The government has been so kind as to pay your tuition fees, offer you a nifty loan tied to inflation, and if you’re especially lucky, hand over a student bursary (this is actually a grant, and it’s worth applying for through SAAS to see if you get anything – hey, it’s free money!). And pending Mr Salmond being able to sweet talk the rest of Parliament, you’ll probably get through Uni without being stung by a two grand charge at the end of it.
So, life is sweet, and so is your money. And lots of companies have started to realise student buying power. That’s why you’ll probably suddenly find yourself absolutely irresistible to all sorts of branding and PR staff, especially while trying to wander up and down campus. A word of warning though – it’s not you those sweet, semi-naked PR girls want, it’s your money.
The student card is a passport to all sorts of cut-price goodies, and it’s definitely worth scoping out the best deals amongst all the flashy flyers you’ll have thrust at you. Some student offers worth mentioning are: Topshop and its sister brands (the discount, NOT the store card), Apple (iPods and Macbooks, not fruit), local greengrocer's (fruit, not iPods and Macbooks), the Student Railcard and the International Student Identity Card (ISIC). Even if somewhere doesn’t advertise a student discount do ask if they provide one, especially if you’re buying something pricey (like a computer) and especially if you’re paying with cash. Companies want brand loyalty as much as they want a quick sale, so often they’ll do anything to keep you sweet.
Don’t get taken in by every student offer available, because there are some that aren’t quite all they promise to be. I’m not just talking about the clubs in town that brag about bouncy castles, D-list celebs and fantastic (though illegal) drinks promos and then fail to deliver on the ‘bonanza’ (though they are bloody annoying). I’m talking about credit cards and store cards.
Credit card and money companies cottoned on to the fact that students love free stuff and they’ll take any old shit if they think it’s a good deal. A ConMe Credit Card with 85% APR? No thanks. What about if we throw in a free box of Candy Floss Makers we’ve had in the back store room for the past decade? Oh, well now you mention it…
Part two in my 2007 financial planning series.
Most of us like shopping. Some of us are darned good at it. Back dans le jour, when yuppyism was rife, it was imperative to be able to show off the trendiest brands and most expensive items to establish one’s status. Those who rode the wave of capitalist success were the icons of the Maggie era. This century is different. There is kudos for a good bargain. In the economy bumper-pack generation, we are Primark’s children. One in twenty adults on the brink of bankruptcy, daytime TV jampacked with adverts for consolidated loans, whole economies in trouble because of massive unsecured debts - there’s almost a pride in poverty these days, as long as you’re poor with style.
And that’s why it’s difficult being a student, because the old ‘Young Ones’ stereotype just doesn’t ring true anymore, and a Glasgow resident spends the second highest amount of money on average on clothes in the UK (it must be true, I read it in the Metro). Fact – we’re that good at shopping. But did you ever think to shop for money?
You need a student bank account. No arguments. That’s what they’re there for. But they’re a product, not a service, and the banks are vying for your custom and loyalty like any other business. Chances are, your local bank succeeded. It’s nearby, you had your kiddie saver account with them, and you’ll probably stay with them for life. That’s fair enough, but you could probably get yourself a much better deal. You just need to do a bit of bargain hunting.
Like I said before, you’re not looking for the fun stuff, so don’t be swayed by gimmicks. It’s like shopping for the perfect pair of jeans. The embroidery and details might be nice extras, but you’re looking for the best cut you can get. If you’re in the money and for some reason have few outgoing expenses, you want a high rate of interest. If not, you want the largest interest-free overdraft possible, with the least repercussions for going over it. Don’t worry about the graduate deals yet.
This year, Martin Lewis from MoneySavingExpert.com recommends HBOS, RBS and Natwest for student accounts and if there’s one thing you should take from this article, it’s to visit MoneySavingExpert.com. I can’t emphasise that one enough. But Lewis also recommends that you shop around, that you forget about money monogamy and tart about. Student deals change all the time so keep up to date. Even if you’re not a new student, and even if you have an overdraft, you can still switch student accounts. I must add however – do not, absolutely do not, open up more than one student account. You can open multiple bank accounts, but you cannot have more than one student overdraft.
Next issue I’ll argue that you should aim to finance your time at University without ever needing an overdraft, but even if you never actually need to use it, you need one to remain prepared, and it’s worth negotiating the biggest allowance available with your bank if you don’t automatically get it. Pay attention to what you’re being offered.
Martin Lewis expounds an interesting suggestion for student financing, which I wish I had tried, but secretly know I would have failed at. ‘Deficit banking’ involves moving your savings and as much of your overdraft as possible into a high interest savings account and living out of the bottom of your overdraft, transferring money from your savings as necessary. I will neither recommend nor discourage this, but I will suggest that this involves more careful planning and precarious financial balancing than most young people are prepared for (I’d love to hear from you if you’ve done this though).
Without patronising my readership, I’m aiming to give advice for watching your pennies without any effort. I know that very few students seem to want to be counting their beans and discussing percentages, but it’s worth it to ask your mates what deal they’re getting from the bank, and to find out which one’s guilty of fleecing students. Ask your bank questions now, before they start asking you questions, and you’ll be laughing all the way to the bank.
