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Student Budgeting

13 common money mistakes to avoid

Want to know how to be better with money? Start by avoiding these common financial mistakes.

ryan air plane keys phone girl looking frustrated

Credit: TiernyMJ (background), Nednapa (bottom left), Kamulpetra (topright) – Shutterstock

Financial decision-making is a skill you get better at over time, so don't be surprised if you make some of your biggest money mistakes in your teens and twenties.

Improving your money-management skills comes down to getting into good habits. Over time, these habits will (hopefully) turn into a nice stash of savings in your bank account.

But, to get there, you need to know the most common money mistakes and how to avoid them so you don't end up falling at the first hurdle.

Before getting a savings account, compare options to find the best deal.

Common money mistakes

Here are the most common financial mistakes and how to fix them:

  1. Not having a monthly budget

    Not keeping to a budget is a very common money mistake.

    It's often little luxuries that burn holes in our pockets. These could be an expensive gym membership, spending lots on nights out or unnecessary cab rides.

    While these purchases can be okay every so often, it's when they become a habit and push you over budget that there's an issue.

    Knowing when and how to stop spending money can be tricky at first.

    However, following a budget will help you keep track of your spending and identify which habits you need to break.

  2. Not earning money in your free time

    Finding a way to make money in your free time could make a big difference in helping you afford your monthly living costs. And, if can save up a bit of extra cash, it will be easier to deal with unexpected costs, such as a last-minute trip home.

    And don't make the mistake of thinking that making money on the side is only good for your bank account. Having a side hustle is a great way to enhance your career prospects and is sure to impress a potential employer.

  3. Running up a credit card bill you can't pay off

    Using your credit card as 'free money' rather than only spending what you have is a one-way ticket to financial ruin.

    If you have a credit card, be very careful with it and make sure you can always afford to pay off the bill in full and on time each month.

    The same can be said for overspending on buy now, pay later services like Klarna. Only buy what you can actually afford.

    Paying off your credit card or any other credit every month is vital. Any missed payments will be recorded on your credit score and could make it difficult to do things like get a mortgage later on.

  4. Using your credit card to withdraw money from an ATM

    Never use an ATM to withdraw cash on your credit card if and when you do get one.

    Cash withdrawals on credit cards are recorded on your credit score and can look like irresponsible spending.

    If, further down the line when you apply for a mortgage, a bank sees you've been using your credit card to withdraw cash, they might be concerned about your money management. It could look like you're having to resort to your credit card to pay for basic living essentials.

    As such, it may lead them to think you're not financially stable enough to take on a loan.

  5. Not negotiating a salary when starting a job

    two professionals shaking hands over a table

    Another money mistake is not negotiating your salary before starting a new job.

    Negotiating your salary is essential for two reasons. Firstly, you want to make sure you have enough money to cover the basics like food and rent from the get-go.

    Secondly, negotiating your salary sets the tone of your relationship with your employer. If you go in with a really low figure, you're arguably undervaluing your work and encouraging your employer to do the same.

    How to negotiate your salary

    Always expect an employer to turn down your first bid (this isn't always the case, but doing this helps you negotiate a good salary).

    Start with a number that's higher than your actual salary expectations, so you have room to negotiate down and arrive at the figure you'd accept. So, for example, if you're aiming for £22,000, you could go in at £25,000.

    Also, any time you get a pay rise, put the difference between your old salary and your new salary away. You'll be used to living on less so you should hopefully be able to put the extra earnings into your savings account.

  6. Lending money to friends when you can't afford it

    One of the common financial pitfalls to absolutely avoid comes from having a heart of gold. It's also one of the most common money mistakes you'll make in your twenties. But you live and you learn.

    Lending money to friends, especially when you're already having to live modestly, is a real no-go. It creates complicated friendship dynamics whereby you're thinking "that money could have been used to pay me back" every time they buy a pint.

    It will also inevitably lead to that awkward conversation where you ask for your money back.

    Best bet? If you're struggling to make ends meet in the first place, keep your purse strings to yourself.

  7. Not having an emergency fund

    An emergency fund is an absolute must. If you don't have one, you may find yourself resorting to short-term solutions you'll later regret.

    Ideally, this fund should be enough to tide you over if your Student Loan is late or your phone suddenly breaks and you need to buy a replacement.

    Having some money set aside for a rainy day can also be useful if, once you've left university, you find yourself unemployed and without an income for a few months.

    There are loads of ways to make money if you're between jobs. But, it doesn't hurt to have some cash set aside to help you through a rough patch.

    Topping up your savings account a little each month, even with just a few quid (or putting a penny away in a jar each day), is a great way to get started without leaving you with little or no money to spend for the rest of the month.

  8. Having unrealistic financial goals

    It's hard to know exactly where you'll be in 10 years. But, it is worth considering what some of your long-term goals are.

    Do you want to buy a house? Or set up a business? Maybe you want to travel the world? These are all excellent ideas, but they have one thing in common: they require financial planning.

    Giving yourself some financial goals to work towards can be great motivation for kickstarting your career.

    Sit down and write out a list of things you want to accomplish. Work out a realistic timeline of when you'd like these things to happen and how much you'd need to save each week or month to get there.

    Keep the money for these goals separate from your emergency fund (if you can), and avoid dipping into it unless you really have to.

  9. Forgetting to cancel subscriptions you don't use

    When you review your budget, armed with your new personal finance skills, check if you're still paying for any subscriptions for services (streaming sites, for example) you no longer use.

    Free trials are a great way to save money, but we've all been guilty of forgetting to unsubscribe to a service before the trial ends.

    If you have forgotten to cancel a subscription, check the terms and conditions in case you're eligible for a refund.

  10. Paying more tax than you should without realising

    When you start earning, not knowing how to read your payslip may mean you don't know when you can claim a rebate.

    If you've been affected by either of these common mistakes you could be due a tax refund:

    Paying off your Student Loan too early

    Make sure your Student Loan repayments haven't started if you're not earning over the threshold:

    • £27,295 a year for students from Wales who started university on or after 1st September 2012, and students from England who started between 1st September 2012 and 31st July 2023.
    • £25,000 a year for students from England who started university on or after 1st August 2023.
    • £24,990 a year for students from Northern Ireland, as well as those from England and Wales who started university before 1st September 2012.
    • £31,395 a year for students from Scotland.

    If you're earning under those amounts and you've made loan repayments, you could be due a refund from the Student Loans Company.

    Another reason people end up paying too early is that SLC starts deducting money before the April after they graduate (repayments should not be taken off your earnings before then).

    This sometimes happens if you start earning above the salary threshold before you're eligible to start making repayments. This could be due to an admin error, such as a mix-up of graduation dates.

    Check your payslip in case you start repaying too early.

    Emergency tax

    If you've been put on an emergency tax code, you may be paying more tax than you need to and, as such, could be owed a refund.

    This sometimes happens when you start a new job. Another reason can be if you work for a new employer after you've been self-employed and HMRC doesn't have enough information on your income for the current tax year.

    An emergency tax code will show up as 1257L W1, 1257L M1 or 1257L X on your payslip. If you see this, check how much tax has been deducted to make sure it's the right amount.

    Get more information on emergency tax and tax codes on the government's website. And, for more reasons why you could be due a refund, check out our guide to tax refunds.

  11. Not taking out insurance

    travel insurance, credit card, phone, keys, passport on table

    Credit: 279 Photo Studio - Shutterstock

    If coronavirus has taught us anything, it's this: always take out insurance on holidays. Always.

    In fact, taking out insurance on all big purchases can be worthwhile, whether it's mobile phone insurance, a holiday, your car or student contents insurance.

    Paying just a little bit every month could potentially save you from facing big payments later on if something goes wrong. Some insurance purchases come with perks too, like one year of 2-for-1 cinema tickets for just a couple of pounds.

  12. Staying loyal to expensive banks and energy providers

    Staying loyal to banks and energy providers should be a thing of the past. Never assume that, just because you're a long-time customer, you'll be getting the best deal on offer. More often than not, the opposite will be the case.

    You might assume that switching accounts will be a hassle. But, most of the switching process is automated now, especially when switching bank accounts.

    Some bank accounts offer great cash rewards and interest rates on savings for new customers.

    See our guide to the best bank switch offers to compare deals.

  13. Not looking for a better broadband deal or phone contract

    Financial decision-making comes in all shapes and sizes, and knowing when to switch your bills is important.

    With broadband, you may not even have to switch to get a better deal as haggling can be just as effective.

    If you've found a better broadband deal elsewhere, you could call your current provider to let them know you're thinking about leaving. This could nudge the customer services assistant to offer you a better package than your current one.

    For mobile phones, it often works out cheaper to get a SIM only deal and buy a phone separately compared to staying buying a new phone as part of a long-term contract. Plus, if you sell your old phone, this will contribute towards the cost of the new phone.

    There are occasions when it may cost about the same. But, you might find a SIM only contract comes with a better data allowance and greater flexibility, so it's still worth checking.

Another money mistake? Not realising how many free things you can get from your university.

Jess Aszkenasy

WRITTEN BY Jess Aszkenasy

Alongside editing for Save the Student, Jess Aszkenasy has shared great tips on saving money related to meal planning, finding deals online and more. Based on first-hand experience of being an international student, she shared guidance on studying abroad.
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