5 budgeting mistakes students make (and how to avoid them)

Good financial planning isn’t about how much money you have. It’s about the habits you build. We asked Dr Lakshmy Subramanian, Course Director for the Banking, Economics and Finance MSc, about the budgeting mistakes she sees postgraduate students make most often, and how to avoid them.

In the second of our student financing advice blogs our goal is to let you know the most common errors students make when planning to undertake postgraduate study and how to prepare for the best when it comes to managing your money.

1. Not having an emergency fund

“This is by far the biggest one.”

Unexpected expenses are inevitable. A family emergency, an urgent flight home, a laptop failure or a medical expense can create significant stress if there’s no financial safety net. How large your emergency fund needs to be will depend on your circumstances, whether that’s two, three or six months of living expenses.

“An emergency fund isn’t about expecting bad things to happen. It’s about protecting yourself if they do.”

How to avoid it: Build a dedicated emergency fund before you arrive, and treat it as untouchable unless something genuinely unexpected happens.

2. Letting lifestyle inflation creep in

This one might be less comfortable to hear: daily coffees, takeaways, dining out and going out all add up. Unlike price inflation, lifestyle inflation is silent. It doesn’t announce itself, it just quietly increases what you spend.

“I’m not saying don’t have fun. I’m not saying don’t explore the new country you’re entering into, or network to make friends. But be a bit more mindful of how that is affecting your expenses.”

It’s worth being just as mindful of subscriptions and new hobbies picked up after arriving in a new country. Regularly checking whether they’re still genuinely adding value is a useful habit.

How to avoid it: Keep enjoying your new surroundings, but check in on your spending regularly rather than letting small, frequent purchases go unnoticed.

3. Not tracking spending regularly

“You cannot manage what you don’t measure.”

Tracking spending once a month isn’t enough. Your financial position can look very different at the start of the month compared to the end. A weekly check-in tends to be the most realistic habit for most students, whether that’s a budgeting app, another tool, or simply journalling expenses.

How to avoid it: Review your spending weekly, or daily if you can manage it, using whatever method actually works for you and that you’ll stick to.

4. Overestimating how much part-time work you can take on

Many students planning to work part-time alongside their studies are overly optimistic about how much they can realistically balance.

“When you are here for your degree, the focus is on the degree primarily… most students tend to overestimate that part, and then it hits them as a shock that it’s not that easy.”

Work fatigue is real. Working long hours while attending lectures and meeting assignment deadlines is more demanding than it sounds, and it can lead to tiredness, missed deadlines, and added stress.

How to avoid it: Be realistic from the outset about how many hours you can commit to work without it undermining your degree, which is the reason you’re here.

5. Treating every expense as equally important

Not all spending is equal, but it’s easy to lose sight of that distinction once you’re settled into a new routine.

“There’s a difference between what you need and what you want. If you are true to yourself as to what your needs are and what your wants are, that will build in a bit more financial discipline.”

This also applies to term breaks, which students often take far too lightly. Lakshmy suggested setting a daily spending cap for trips, and travelling in groups where you can, to help spread costs.

How to avoid it: Separate your needs from your wants explicitly when budgeting and set spending limits in advance for lower-priority periods like term breaks.

Watch out for the next blog in this four part series in which we explain how to plan for exchange rates, banking and secure financial planning!

Download our tailored budget sheet

We worked closely with Lakshmy to develop a comprehensive budget planner that is available to download and use. It provides practical guidance on making informed financial decisions, tracking expenditure and building effective saving habits.