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Student budget spreadsheet: how to make your loan last

Photo by Amol Tyagi on Unsplash

It can be tricky to get a clear picture of your finances when you’re living away from home for the first time. This student budget spreadsheet will help you to make your student loan last and see where the money goes. It will help you for life…

I’ve spent the past few weeks talking to several hundred students on creative courses from locations all around the UK on the topic of how to make your loan last.

During the workshops, several students made the comment that they wish loans were paid-out in a more piecemeal fashion – a regular drip-feed on a weekly or monthly basis.

I think this is a fairly savvy point, which probably would help more students avoid the (inevitably) bad financial decisions we all make at some point during study. However, part of the point of higher-education is equipping you with the skills for life and, chief among them, critical thought and self-reflection.

In this sense, the loan is one of many, sometimes painful, learning curves that are part of that experience. It also strikes me that it’s not a bad rehearsal for life in the creative industries.

A dry run

Most creative workers are freelancers and most of us get paid in occasional lump sums, rather than the more steady incomes that would enable us to emulate a salary.

In this sense, making the three payments of a student loan last across the year, while topping it up with other forms of income (drawing on savings, part-time work, frantically selling your things etc.) is a pretty good emulation of the cash-flow peaks and troughs we encounter in creative work.

I’ve been using a student budget spreadsheet to illustrate to students how they might spread their loan out and get some clarity on their financial position throughout the year. I thought I would share it on here, too, along with a few pointers on how to use it, which is really the important bit.

Get the Creative Money student budget spreadsheet

(Opens as a Google spreadsheet)

Please note: You won’t be able to edit the master sheet on this link, so it’s important that you save a copy to your own Google account or download it for use with Excel before you try to edit it.

You’ll note there are three tabs: Spreading your loan, What have I got? and What do I need?

Step 1: Enter your annual maintenance loan

Start on the first tab (Spreading your loan) and enter your annual loan amount where indicated.

Student budget spreadsheet: your maintenance loan

When you enter this figure, the sheet does a very simple calculation to split the payment into three, indicating how much you will receive in payment each term.

It also divides your annual figure equally across either 9 or 12 months (depending on your selection in Box B7).

Choose 9 months if you expect to be relatively ‘bill-less’ over the summer period – for instance, you know you’re heading home and won’t need to supplement your income at that point.

If you’re planning on renting throughout summer, then go for 12.

The amount you have to contribute towards your living costs each month is then displayed in row 8: ‘Maintanence loan for term time (Oct-June)’.

This will prove useful later.

Step 2: Figure out what you have

Next, head to the What have I got? tab. This is where you take a snapshot of your financial position. This is best done once a month at the same time each month, e.g. the first of the month.

Student budget spreadsheet: your assets

Log anything you’re holding in your savings accounts, in cash, or other investments and things that hold some worth and could be converted to cash.

(As a rule, avoid listing your ‘stuff’, as selling your guitar etc. is usually a last resort).

Below you can list any debts you might hold, perhaps your overdraft, credit card and store credit.

Student budget spreadsheet: your debts

The sheet then deducts your assets (what you have) from your liabilities (debts/what you owe) and tells you what’s left.

This figure is known as your net worth, but is probably best thought of as ‘What have I got?’ hence the title…

Step 3: Enter your income and expenses (predict then review)

Now move to the What do I need? tab. This is where you capture the movement of your money in and out of your accounts for the month: your cash-flow.

Do not comb your statements line-by-line to do this. Use a budgeting app, which does the legwork for you and will automate the monthly totals for expense categories.

Your fixed expenses
Your Fixed Expenses won’t change much month-to-month.
Your variable expenses
Your Variable Expenses can be easily grouped and tracked using a budgeting app.

Once a month, open it up, drop the expense total from each of your main app categories into the relevant column on the ‘What do I need?’ tab and you’ll start to get a very clear picture of where your money is going (and how much of it is going there!) each month.

(You can of course use the apps themselves to compare monthly spending, but I find it’s clearer if you drop them on the sheet.)

Do the same thing with your income.

Your income

This is where that student loan calculation from Step 1 comes back in. The sheet pulls through your student loan portion for the month (calculated on the ‘Spreading your loan’ tab) and adds it at the top of the income column.

It’s not strictly ‘income’ but it can be thought of as such while you’re a student…

The sheet will tot up the categories to tell you your total expenses (Row 40: What do I need?) and then deduct your expenses from your income to show you your cashflow for the month (Row 43).

Your cashflow

If the figure is positive, you’re spending less than you’re bringing in, great!

If it’s negative (which it may well be during study) and continues to be, you’ll need to do something to either lower your expenses or raise your income, so take action!

Step 4: Tracking is the key to success

A lot of people will tell you that budgeting is the key to keeping your finances in shape as a student and beyond. But this is only true if you accept the reality of your expenses – and most people don’t.

More often than not we create a budget from numbers we’ve plucked from the sky. Our perception of these costs is often very different from the reality, which means we inevitably ‘break the budget’, tell ourselves off and then get demotivated and give up on it.

via GIPHY

Budgets should change. Don’t feel bad about it.

The secret to budgets (that is often not discussed) is this: Success with this stuff depends more on reflection than prediction. It is the tracking that makes the difference.

Budgets should change. It is not about chucking some numbers on a spreadsheet and hoping they’re right, it is accepting that it is a guide and it won’t ever be 100% right, then periodically checking and correcting your assumptions.

If you use an app to track your expenses and update the sheet once a month, you’ll have a much better sense of your real expenses. You can then use that information to make more realistic decisions about what to budget for the next month – and so on.

You don’t have to wait until the end of the month either. The apps often allow you to setup running totals.

For instance, you might set a limit of £100 a month for food shopping. Every time you check in on the app, it will tell you how far through that figure you are for the month – and you can adjust your spending accordingly.

Step 5: Repeat this once a month. Don’t spend ages on it.

via GIPHY

I always tell people not to spend a long time doing this.

It should be just a case of nipping through and dropping any totals from the 10 or so spending categories on your app into your sheet. Then the balances from the accounts on your ‘What have I got?’ tab.

If you’ve kept things tagged-up on the app throughout the month, this should take you a maximum of 10 minutes.

It doesn’t need to take a long time. In fact, it is much better if it doesn’t. You want this habit to stick, not become a chore.

Talking to yourself

Once you’ve pulled the info together, give yourself a moment to look over things on the sheet. Ask yourself the following questions:

  • Is there anything unexpected or surprising about the month’s spending? Why is that?
  • What was worth the money? (It made you genuinely happier, or had some considerable or lasting benefit)
  • What really wasn’t worth the money? (It was a waste, or had very short-lived benefits)
  • How does my spending compare to the previous month?
  • Is my ‘What have I got?’ number (Net worth) going up or down?

This should take you about another 10 minutes. But to be on the safe-side, let’s say the whole process should take you 30 minutes a month.

That’s just 30 minutes a month to get clarity on how much you have, where the money is going and whether you’re on a good course, or need to make some changes.

Don’t waste time agonising over decisions you’ve already made or getting forensic in your analysis of micro transactions. We’re looking at trends and overall direction here.

Spend just a little time putting these habits in place now and you’ll reap the benefits for the rest of your life.

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Finances for first-time freelancers: tax and self assessment

self assessment and tax for new freelancers
Photo by Tyler Franta on Unsplash

Newly self-employed? Self-assessment can seem confusing. Let’s try to simplify things…

Whether you’re a tour manager or vocalist, designer or dancer, it often seems that the one thing all new creative freelancers have in common is a sense of confusion around tax and self assessment.

When you first approach it, self-assessment can be frustrating, confusing and worrying. I always think this scene from Black Books nicely captures the unique anguish of the clash between your lovely, creative brain and your tax return.

It’s not surprising then that tax and, in particular self assessment, frequently pops up among the top concerns of new freelancers.

Starting out in the creative industries? Read: Getting ready to graduate? 5 tips for new creative workers

Seeking clarity

So what can we do to alleviate some of that panic and actually get some clarity on the self assessment process? Aside from experience, it comes down to three things…

  1. Knowing where to get your information. In the UK, this will be the gov.uk site. The content in this piece is based on that information and I’ve included direct links to all the source pages.
  2. Staying organised. Regularly organising and storing your receipts, invoices and relevant bills/statements is essential. It will help you to quickly and accurately complete your return, evidence your claims should you be audited and give you more time to anticipate and deal with any surprises arising from the self-assessment process. Keep it simple and frequent.
  3. Seeking advice from a qualified professional: namely a tax advisor or accountant. An accountant can cost around £200 a year (more in London) for a basic self-employed client and may well save you this in tax and admin each year alone. At that price, you will likely still need to track your own income and expenses, but they will complete the return and answer any questions you have. Many also find the peace of mind to be well worth the fee.

Below I outline some of the key things you’ll need to know to get going as a new self-employed creative worker. This is about getting clarity – it is not an exhaustive list, it’s just meant to help you get up and running.

However, before we go any further, because I am NOT a qualified professional such as an accountant or tax advisor, I have to offer the following disclaimer, please read it.

DISCLAIMER: The information below and on CreativeMoney.co.uk is provided for financial guidance and education purposes only and is not intended to address your particular personal requirements. It is not tax advice, financial advice or recommendation and should not be considered as such.

Matt Parker is NOT a financial advisor, accountant or tax advisor and Matt/Creative Money is not regulated by the Financial Conduct Authority (FCA). This means he is not authorised to offer financial or tax advice.

Always do your own research and seek professional advice from an accountant or tax advisor before acting on any of the information provided here.

The content in this guide is based on information sourced from gov.uk and was accurate at the time of writing. Creative Money and Matt Parker cannot be held responsible for subsequent changes to the law or tax system.

Help I’m new to self-assessment!

Getting started? Gov.uk is your gospel.

First and most importantly: for all information relating to UK tax, use gov.uk’s pages on Self Assessment.

This is the official site of the UK government/HMRC. Be wary of all other platforms – even this one – as they may not always relate to the UK laws, carry the correct qualifications, or be kept up-to-date.

Do I need to register as self-employed?

When you are self-employed/freelance (unless you setup as a company or partnership) you are a ‘sole trader’ in the eyes of the taxman. Here’s Gov.uk’s criteria for being self-employed.

Anyone who earns over £1,000 in a single tax year from self-employed work (even students) needs to register as self-employed and complete a self assessment tax return. Head to Gov.uk to register as self-employed.

Once registered, you can complete the self assessment process online and the site calculates the amount owed based on your profits.

How does it work?

To calculate our profits (and later our tax) we need to know how much our business as a sole-trader has earned and how much it has spent:

Your business income – your business expenses = your profit.

You are responsible for tracking and evidencing your own income and expenses. Once a year you will then enter these figures to calculate your income tax, student loan and national insurance payment, via the self-assessment website.

Personal Allowance for self employed workers

Everyone gets a tax free Personal Allowance, which is the amount you can earn in income (or self-employment profits) before you have to pay income tax. As I write this, in May 2021, the standard Personal Allowance is £12,570.

National insurance for self employed workers

National insurance payments are collected in addition to income tax and are essentially another form of taxation.

You will be liable to pay tax and class 4 national insurance on profits above £9,569 at 9% and above £6,515 you pay Class 2 national insurance at £3.05 a week – payable annually with the rest of your bill.

Student loans and self assessment

As with the Personal Allowance, self-employed workers share the same threshold for student loans as regular employees. As of April 2021, that will be £27,295 for new graduates.

However, whereas regular employees have an automated deduction from their pay cheque, the self employed make the repayment in an annual lump sum based on their profits, which (as mentioned above) is rolled into your income tax and national insurance payment.

Here’s the gov.uk guidance on how to tell HMRC about a student loan on your tax return. Here’s a bit more about student loans, from a previous piece I wrote.

When is the self-assessment deadline?

The tax year runs 6 April to 5 April. Your first payment will be due on or before 31 January, following the end of your first tax year.

You will need to keep records of all your business expenses and income. Keep hold of these for at least 5 years after the 31 January submission deadline of the relevant tax year.

For instance, a new graduate who has started doing self-employed work after 6 April 2021 would complete their tax return following the end of the year tax year in April 2022. They will then have until the deadline of 31 January, 2023 to complete the return and make their payment. They would also need to hold the records until at least 31 January 2028.

OK, now let’s get on with being self-employed…

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Invoices and getting paid

What you need to know to create your invoices

To get paid for your work as a self-employed person, you will need to send an invoice. This is a request for payment from your clients and there are rules about what an invoice needs to contain.

Make sure your invoice includes the following information:

  • a unique identification number
  • your company name, address and contact information
  • the company name and address of the customer you’re invoicing
  • a clear description of what you’re charging for
  • the date the goods or service were provided (supply date)
  • the date of the invoice
  • the amount(s) being charged
  • VAT amount (if applicable)
  • the total amount owed

You can track the key information from your invoices (dates, invoice number, clients, jobs, amounts) on an income spreadsheet for the year. This will help you to keep on top of payments you have received and give you a running tally on your income.

Use a separate bank account for your business

Setting up a separate bank account for payments and business expenses will help simplify your record keeping process and make it easy to review business transactions.

As a sole trader, it does not have to be a business account, a separate current account will do. Should you ever form a partnership or limited company then it needs to be a business account in the business name.

Expenses

You can deduct some of the costs of running your business provided they are allowable expenses.

This is the link you need for Gov.uk’s guidance on claiming expenses while self-employed. You can’t claim absolutely every cost you incur for your business, though.

Allowable expenses typically include the following…

  • office costs, for example stationery or phone bills
  • travel costs, for example fuel, parking, train or bus fares
  • clothing expenses, for example safety gear or stage wear
  • staff costs, for example salaries or subcontractor costs
  • things you buy to sell on, for example stock or raw materials
  • financial costs, for example insurance or bank charges
  • costs of your business premises, for example heating, lighting, business rates
  • advertising or marketing, for example website costs
  • training courses related to your business, for example refresher courses

Keep records and evidence of all your business expenses and income – this might include bank statements, receipts and invoices. They need to be well-organised and accessible. This is important should you be audited, but it also makes filling in your return much easier.

You can periodically log your expenses on a spreadsheet or use an accounting app to scan/record them. If you use a digital method to store receipts, make sure you scan both sides.

Joint business and personal expenses

If you use something for both business and personal reasons, you can only claim allowable expenses for the business portion of your usage.

To calculate this you need to make a reasonable estimate of your business usage. For instance, if you know 50% of your phone usage is business related, you can claim half of your phone expenses for the year. The key word here is reasonable, so when in doubt, err on the side of caution

There are lots of areas this joint usage might apply to, but in order to make things easier HMRC provides some ‘simplified expenses’ calculations for key situations. These are flat rates you can use to calculate the costs of working from home, living in your business premises and ownership/use of vehicles. You can choose to use these instead of your actual expenses (though you will still need to retain records of your actual usage).

Using your vehicle for work

If you use your vehicle for work purposes, you can claim a flat rate for work trips of 45p per mile for the first 10,000 miles and 25p per mile thereafter. Across a whole year this could really add up, so remember to track your mileage, particularly if you’re a touring artist.

While, we’re on the topic of vehicles: remember you will need to add business use to your car insurance if you use it for work. Otherwise, you may not be covered for any accidents that happen while travelling for work.

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Saving for your tax payment

The art of saving when you don’t know how much you’ll need

A tax bill can represent a significant amount of money, so it’s a good idea to ‘save as you go’. One way to do this is by deducting a percentage of each payment made to you to set aside for your tax bill.

A loose rule of thumb is to save 25% of everything you are paid for self-employed work. However, those anticipating payments on account, may want to aim for more like 40%.

This will vary for everyone, of course. If you want a little more clarity on your own numbers, Gov.uk has a tool to help you budget for your tax bill.

You may also find it helpful to store those savings in a separate bank account for each tax year, as it can help you avoid the temptation to dip into them.

Struggling to establish a savings habit? Read: How to start saving (when you don’t think you can)

Completing your tax return

Calculating your tax bill

Once you are registered you can login to the self assessment portal and complete your tax return from the end of your tax year (5 April for most). Your tax return (and subsequent first payment) will be due by 31 January in the following year.

You’ll need to enter some information about yourself and your business, then enter the figures as prompted for various forms of income and expenses. It will then produce your calculation for your tax, national insurance and student loan payments based on this information.

It all comes out as one total figure. This is how much you will need to budget to pay by the 31 January (and, if necessary, 31 July) deadlines.

Don’t forget payments on account

If your tax bill is more than £1,000 you will likely need to make payments on account. These often surprise people who are new to self assessment.

  • This is a downpayment on your next tax bill that equates to 50% of your current tax calculation. Payments on account are split equally across two instalments. One is due 31 January alongside the rest of your tax bill, the other by 31 July.
  • Effectively, once you hit the threshold you will need to pay 150% of your tax bill across the January and July deadlines associated with that tax year – the current calculation amount and the additional 50% downpayment on next year’s bill.
  • The following year you will pay the remaining balance (i.e. the difference between your actual tax bill for that year and the payment on account you have previously made) and your next payment on account instalment. This then feeds into the following year’s bill and so on…
  • Here’s the gov.uk link for more information on Payments on Account

Need help? Don’t wait to contact HMRC

If you have an issue, the absolute worst decision is to ignore it – there can be serious penalties for not paying your tax. There’s almost always a better outcome to found by taking any problems directly to your accountant or HMRC.

Here’s the Gov.uk link on Help and support for self-assessment

Here’s the HMRC Self Assessment advice line: 0300 200 3310.

HMRC are even on YouTube. They post using the (very catchy) handle HMRCgovUK. See…

https://www.youtube.com/watch?v=L8F6micVczE&list=PL8EcnheDt1ziQSjJNRITtCf7XD_ne-_lQ

How to pay your self assessment tax bill

Finally, when you have completed your calculation and have enough money set aside, you have to pay your bill!

Fortunately, HMRC make this step nice and easy. There are options for bank transfer, direct debit, debit card payments, paying via your bank or building society and paying via cheque, among others. See the full list of ways to pay over on the Self Assessment site.

Whichever method you choose, make sure you allow plenty of time for the funds to clear, as they need to be with HMRC by the deadline date for you to avoid late penalties.

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Getting ready to graduate? 5 tips for new creative workers

silhouette of people standing on hill
Photo by Baim Hanif on Unsplash

From understanding student loan repayments, to calculating if you’re ready to move out, here’s what you need to know

It’s late April and those of you in higher education will currently be torn between a looming fear of final assessments and a looming fear of entering the workplace and post-graduation life. Finding your way in the creative industries is hard enough as it is and, while no one is in it for the pay, having a handle on your personal finances nonetheless has a very direct impact on your ability to sustain your creative work.

Life after graduation is sort of a weird time. After three years of independence, it often takes a surprisingly short spell at home before you realise that, actually, you very much need to be anywhere else. No shade on your parents (I’ve met them and they’re wonderful), I think it’s just an evolutionary thing.

“Establishing a few good financial habits could make a real difference to your ability to survive initial knocks”

Roles in the creative industries lack the graduate schemes, clear-cut salaries and HR conveyor belt of corporate roles. We all know this going in, but there’s also a part of each of us that is nonetheless banking on being the lucky individual who just happens to land a salaried dream job out of the gate.

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More likely, you’ll wind-up self-employed, working part-time out of the industry, in work experience/apprenticeship positions or some combination of all three, meaning it can be hard to figure out how or when you’ll be able to support yourself.

As part of my Creative Money workshops, I’ve been talking to creative students about how to set themselves up financially for life after study. This can be an expansive conversation, but there are five points I think it’s important to get across…

1. Setbacks are normal (pt. 1): Getting used to it takes time

Even in the most glitteringly successful creative careers, you will definitely encounter a hefty amount of rejection and you will very likely face some form of redundancy.

In addition, if you’re anything like me, you will entertain an ongoing series of identity crises. I question who I am, what the hell I think I’m doing and tell my wife ‘I’m leaving music journalism’ roughly every six months.

“The truth is that your emotional and financial resilience is built over time”

I am not sure if the right word for all of this is ‘normal’, but it’s certainly par for the course in creative work, as are many positive elements, for example: meeting interesting people, not dreading the alarm, moments of intense, victorious elation and bragging to people at house parties.

I don’t say this to deter anyone, more to reassure you that when the time comes that one or all of the above is happening to you: it’s not your fault, it’s not a sign – it’s just your turn.

Bloggers will often say unhelpful things like, ‘get used to it’, but the truth is that your emotional and financial resilience is built over time. Starting out from a place of relative strength, then establishing and building on good financial habits could make a real difference to your ability to survive those initial knocks.

2. Setbacks are normal (pt. 2): Emergency expenses WILL occur

I’ve said this before but it bares repeating: you cannot know when or where an emergency expense will hit you, but it will definitely happen.

You can really limit the impact of these by building up an emergency fund. Typically, the advice is to initially aim to hold £1,000 or a month’s expenses (whichever is higher) in reserve and then expand that to three months’ expenses over the longer term.

“Creative work tends to operate on a ‘feast and famine’ cycle, so putting money aside is crucial”

If you’re living at home and keen to move out ASAP, this might sound like the sort of expense you could skip (particularly when you might be factoring in rental deposits etc.), but it’s worth sticking it out a few months more and building that cash buffer if you possibly can.

Not only will give it you a sense of extra confidence and security, but starting out with an emergency fund in place could make the difference between you maintaining that independence or having to move home for a much longer stint down the line.

Creative work opportunities tend to operate on a ‘feast and famine’ cycle, so putting money aside is crucial. What longevity, stability and freedom I have achieved doing this work has been directly proportional to my ability to accept that I have to save.

What’s more, it has probably not escaped your attention as a new graduate that we are living through the worst economic calamity for 300 years. We’ve all got our fingers crossed for a swift recovery, but when newsreaders talk about ‘economic pain’ in certain sectors this is usually code for ‘we have shafted the young in order to protect the management team’s pensions’. Protect yourself with savings.

3. Know how much you need to support yourself

This is all about figuring out your likely monthly expenses figure.

Try to be accurate. As an inherently optimistic idiot person, I find this quite difficult. The best way I have found to do this is to stop predicting and start actually tracking my spending using a budgeting app.

“Don’t judge yourself on what you see –  when you involve emotions figures have a habit of getting ignored or rounded down”

You download it, connect it to your bank account and it will automatically categorise your transactions. Use it for a month or so, review the information to make sure it’s correct, but don’t judge yourself on what you see –  when you involve emotions figures have a habit of getting ignored or rounded down.

If you’re living at home after graduating and looking to move out, this will give you a reasonable idea of your current spending and what non-essential items you could cut if you decide to redirect that money towards a higher priority (e.g. rent on your new place).

Your app will give you monthly totals. Add these up and factor in your projected utilities, council tax (more on this below), rent costs and a savings buffer to get an accurate picture of how much you’ll need to earn on a monthly basis to support yourself.

Here’s a handy tool for estimating utility bills for a property, based on its location and how many rooms it has.

4. Get a full picture of your accommodation costs

Accommodation is one of the ‘big three’ expenses, alongside food and transport, so spending time to get it right will pay-off month after month.

We all have access to Rightmove and Zoopla, so it’s now easy to establish a reasonable rent for an area with a bit of online investigation.

“Council tax is not a sexy topic, but it never fails to surprise at least a portion of new graduates”

However, do make sure you investigate the area (talk to people who know the area, Google it, look at the transport options). Then book multiple viewings and spend a little time walking around there on the day – you’ll soon get a feel for whether it suits you and your budget. It takes a bit of effort, but it’s worth it.

Also worth noting: agents have a habit of showing you places at the top of your budget, so resist their tricks and be cautious about committing on a big rent payment.

As above, don’t forget to factor in utilities and council tax when you’re totting up the pros and cons. Council tax is not a sexy topic, but it never fails to surprise at least a portion of new graduates. It’s a tax on domestic property set by your local council and paid by the occupants of that property.

I have lived in five cities around the UK in the last decade and it’s varied wildly. My anecdotal experience is that it (perversely) tends to be higher in cheaper cities, because they are skint. Currently, I live in Liverpool (you should, too – it’s brilliant) and it’s about £130 a month for my house, which is… unpleasant.

If you’re living with others, council tax is an expense shared between all occupants, much like rent and utilities. So before taking on a rental room or property, make sure you find out what bills are included and what share you’ll be expected to pay. Note them down, so you can make a proper comparison.

Be aware that council tax, like most of these expenses, also has a nasty habit of increasing each year. This (and the fact you didn’t have to pay it a few months previous when you were young and carefree) is why everyone complains about it… You will get used to it, though.

5. Don’t fear your student loan repayments

There is a lot of noise around the student loan system in this country.

Agreed, it is not perfect and compared with your parents’ system, or even the system of 10 years ago the figures can seem astronomical. However, I’m in agreement with Martin Lewis (great video from him below) in that it behaves much less like a loan and is really a misbranded graduate tax.

“In England, you won’t start repaying your student loan until you are earning over £27,295 a year”

Tax doesn’t sound like much more fun, admittedly, but this is a ‘progressive tax’ (the good kind). This means that if you earn more you pay more and if you earn less you pay less.

That’s right: what you repay is based on what you earn, not what you borrowed and after 30 years, any unpaid amount is wiped.

This differs dramatically from a traditional bank loan, which is calculated on what you owe, not what you earn. In that situation, there’s always a fixed minimum payment, it’s up to you to setup and maintain those payments and it is never wiped (with the possible exception of declaring yourself bankrupt).

When do I have to repay my student loan?

You won’t start repaying your student loan until you have left full-time education and are earning over £27,295 a year (for April 21-22) in England.

If you’re self-employed it’s calculated as part of your annual tax return and if you’re salaried it’s repaid via PAYE (your monthly paycheque).

How much will my student loan repayments be?

In April 21-22, your student loan repayment will be 9% of any amount you earn over that £27,295 threshold.

For example, if you earned £27,395 (£100 over the threshold), you would repay £9 for the year.

£27,395 (your earnings) – £27,295 (the threshold) x 0.09 = £9

If you earned £28,295 (£1,000 over the threshold) you would repay £90 for the year.

If you want to get some sense of what this might mean for you and your potential income situation, pop your figures into this salary calculator (and select repayment plan 2 from the student loan options).

Bear in mind, too, that a significant number of creative workers won’t repay any loan. A poll by the Musician’s Union last year found that 87% of musicians expected to earn under £20,000 in 2020. If you’re repaying anything, take it as a good sign!

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5 lessons learned from talking to creative students about money

flat lay photography of blue backpack beside book and silver MacBook
Photo by Matt Ragland on Unsplash

Back in November, I launched a series of online workshops at music colleges across the UK, the aim of which was to help creative students to better manage their money.

The idea being that if they can figure it out during their studies they might have an easier time while in education and start their professional lives on a stronger footing. As a result, I have spoken to students from Manchester to Brighton, London, Bristol and Birmingham. It’s been really interesting to see how this stuff connects with people.

“I always ask people who come to the workshops what financial education they have received. The most common answer is ‘I haven’t had any.”

Like many of us, I am what you might optimistically call a ‘multi-hyphenate’ freelancer. Alongside my main role in music journalism, I also spend a day a week teaching budding music/media types and I do Creative Money stuff about one day a fortnight. The workshops have felt like a good way to bring all these threads together.

What’s more you learn pretty quickly as a tutor that your knowledge is highly subjective. So, with the first iteration of the workshops, I tried to be a good listener. Now, as I go into the second run of these workshops, I’ve been pondering some of the main points I’ve learned from the first run. Here’s what I’ve found…

1) Fix the cause, not the behaviour

It probably won’t come as a surprise that students worry about money, however, the proportion still surprised me. An astonishing 71% worry about making ends meet, according to Save The Student’s annual money survey. Money gets quite intertwined with our emotional state sometimes and many of them tell me that they have experienced anxiety when checking their balance.

I can get on at them about using a budgeting app, but if someone feels they can’t check their balance in the first place, it’s not going to help. Instead, I’ve realised that helping people to think about the causes of that anxiety (be it self-judgement, role models, or a simple knowledge gap when it comes to money) needs to take priority before you can change those behaviours.

2) We still have a major issue with financial education

I always ask people who come to the workshops what financial education they have received. While a few have had some tips from parents, the most common answer is ‘I haven’t had any.’ Again, Save The Student’s annual money survey backs this up, with the vast majority (71%) saying they wish they’d had a better financial education.

Martin Lewis has made some good strides in partnership with Young Enterprise and this stuff is now on the secondary curriculum, but it seems it’s still potluck when it comes to the depth and resources devoted to the topic by different schools.

The majority of the young adults and adults in this country (i.e. those with almost ALL the earning and spending power) have had no financial education outside of the ‘university of life’, ‘school of hard knocks SON’ etc. Talk about the blind leading the blind…

I have written before about the fact that you can not be inherently bad with money – most of the time we’re just not educated. However, the more I consider the lack of educational infrastructure around this utterly essential topic, the more the situation strikes me as completely insane. And that’s before we try to get our heads around the misbranded student loan system…

3) Location matters

Because I am A COOL GUY, I surveyed students at the beginning and end of the five week course. They were asked to gauge agreement or disagreement with a number of statements, for instance, “I know what to do if I run out of money.”

One thing that struck me was that students in London and Brighton were noticeably more anxious about their finances. Those students’ biggest gains in the course came from alleviating anxiety points. For instance:

  • “I am confident avoiding or getting out of debt” = 50% increase
  • “I know what to do if I run out of money” = 68% increase
  • “I worry about running out of money” = 46% decrease
  • “I feel anxious about student debt” = 53% decrease

While I’m pleased to see the course helped them, I think it’s telling that they made noticeably greater gains in these areas than their counterparts in Manchester.

Of course, many students already consider living expenses when picking a university, but the numbers would suggest that those in places like Manchester were generally happier about their finances.

Given money’s ability to affect everything from our mental health, to our diets, relationships and even our ability to focus on education, the financial impacts of the location are worth serious consideration when picking a place of study.

4) Most of them know much more than I did

I was not great with money at university and I had good financial role models around me.

“The students I meet rate far, far lower on the ‘financial tool-o-meter’ than I did at their age. This is a good thing.”

My typical day at university went something like: wake up too late to make breakfast. Eat a disappointing plastic sandwich on the way to my lecture. Sit through engage fully with a lecture and seminar. Break for lunch (baked potato from the canteen). More lessons. Go to the pub. Eat a gigantic cheeseburger. Drink. Go to another bar. Drink. Give £20 to one of a series of guys with suspect nicknames. Order pizza. Fall asleep in front of the DVD menu of Alan Partridge.

Essentially: it was the best of times, it was the worst of times. My approach was fun and fairly typical, but the consistency of it was, err, sub-optimal…

The current generation have only known the world, post-financial crisis, and are aware of the need to not-be-tools when it comes to money. Even if they haven’t got all the answers, they’re taking this stuff seriously because they have been left without the comfortable cushions of fully functioning welfare, healthcare and employment opportunity enjoyed in the previous two or three decades.

The students I meet rate far, far lower on the ‘financial tool-o-meter’ than I did at their age. This is a good thing.

5) The best solutions are the simple ones

Many people think learning to handle their finances will be a dangerous combination of the complicated and the mind-numbingly boring. It doesn’t need to be either. People can be suspicious of simple principles, but my experience thus far has told me they tend to work best because it makers them much easier to communicate, adopt and turn into habit.

Once you can address the causes of your financial behaviour, the basic solutions to any financial goal almost always comes down to the following…

  1. Track your net worth, income and spending
  2. Find a way to spend less than you earn
  3. Save or invest the difference

Tracking your net worth might sound fancy but it is essentially just asking ‘What have I got?’ (i.e. your cash, savings and investment balance minus your debts) once a month and noting the total.

There’s an abundance of apps that can track your spending and income without demanding you switch accounts. Then, once you know what you’re spending, you can see where the fat is and trim accordingly, making way for that burgeoning savings habit.

Sometimes I tell people how I go about the above and I can see them switch off, as if it’s too simple or obvious to be really helpful. It needs to be simple, though, or we don’t do it, at least not consistently. To the doubters, I ask, “But are you really doing all of this?” Most are not. Keep it simple, students – and everyone else, too…

Want me to talk to your students about running their personal finances? Get in touch!

Creative Money Blogs include principles, resources and opinion pieces relating to personal finance for creatives.

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