From student grant to full-time salary – A guide to budgeting and saving
Many students can add an extra zero to their monthly income when they transition from being a student to working full-time. But how do you put together a budget and savings plan when your income and expenses change so significantly?
How do you make a budget based on your new financial reality?
It can be a bit overwhelming when you see your first pay check, which will look quite different from the monthly grant you’re used to receiving from the government. However, the extra money won’t necessarily make it easier to save.
“The easiest thing in the world is to increase consumption once you have more money in our account,” says Nicolai Herbert Mammen, branch director at Lån & Spar.
He stresses that of course you should buy what you want and need, but he highlights the importance of giving yourself the economic latitude to fulfil your dreams.
“If you want to buy a property, the bank will look at your consumption and one thing’s for sure, if you’re spending DKK 20,000 a month on clothes, that’ll undermine your ability to borrow or save money”.
The branch director believes there should be room for spontaneous purchases, but there are also ways to control consumption.
“You can have what we call a pocket-money account, where you transfer an amount each month that you’re free to spend as you wish,” says Nicolai Herbert Mammen.
Make a budget and get an overview of your expenses
The first step in saving up is to make a budget. Nicolai Herbert Mammen says that you can ask your bank adviser to help you draw up a savings plan, and any plan will include preparing a sustainable budget. Even though you suddenly have more money, you may also have some debt after being a student, for example after purchasing a flat or car. If you have several debt items, you will also have several possible fluctuations in your budget.
Make a budget and save up
1. Remains after expenses: Start by identifying all your sources of income, including salary, sideline jobs or other revenue. Then get an overview of all your expenses, including bills, loans, food, entertainment, etc. This will give you an overview of how much money you have left each month.
2. Identify fixed expenses: Identify your fixed expenses such as rent, membership fees, unemployment insurance fund contributions, phone bills, loan repayments, etc. These costs are usually predictable and do not change from month to month.
3. Track your variable expenses: Track your variable expenses, e.g. food, entertainment, social events or shopping. These costs can vary much more, and you may have to pay a bit more attention to them in your budget.
4. Set your targets: Define your financial targets, e.g. buy a home, pay off debt, take a big vacation, or something else entirely. This can help you allocate and prioritise the money in your budget.
5. Make a realistic budget: Start by basing your budget on your fixed income and fixed costs. Make sure you allow for variable expenses and the prioritisation of your financial goals. Be realistic and clear about where your money goes.
6. Adjust and follow up: It is important to adjust your budget on a regular basis, particularly when there are changes in your financial situation, both with regard to expenses and income. Monitor your budget and make adjustments where necessary so that you stay on track.
7. Save up and invest: Allocate some of your income to savings and investment. Building up savings can help create a financial buffer.
8. Use budgeting tools: There are many online tools that can help you allocate and prioritise your budget. These tools can streamline the process and help you keep a close eye on your budget. Another option is to talk to your bank adviser, who can also help you.
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Build good habits
Budgeting and saving aren’t the sexiest words to hear when you’ve just completed your studies and can look forward to a higher income. Of course, you should be allowed to enjoy your new wealth. But savings and budgeting aren’t just about establishing a financial buffer. They’re also about establishing good habits that will benefit you throughout your life.
Understanding how you spend your money and how much you can put aside each month will help you create a solid basis for your financial future. And Nicolai Herbert Mammen has one final reason why having money in the bank is a good idea: You get interest of 5% on up to DKK 50,000 at Lån & Spar.
“The way things are at the moment, you’ll earn money on the money you have deposited in the bank. You’ll earn DKK 2,500 every year just by having DKK 50,000 in your savings account,” concludes Nicolai Herbert Mammen.
And you can add that money to your budget. Perhaps that money will offset the cost of your phone bill? Good luck!
