This document provides tips for saving money while in university by cutting expenses. It discusses the importance of real savings versus deferred spending and outlines various strategies for increasing savings like reducing costs, setting savings goals, and saving small amounts regularly. Specific tips include shopping sales, making lunches, using cash instead of cards, and tracking expenses to stay accountable. It also addresses paying off credit card debt through counseling services and consolidating to a personal loan.

1. GENC3003Personal Financial PlanningAndrew Hingstonandrew.hingston@unsw.edu.auUnit 2: Savings and Smart Buying

2. 2DiscussionWhat are some ways to cut back in expenses while at university in order to save more?

3. 3Saving versus deferred spending“I’m saving to go on a holiday”This is just a “delay” in spending money!Real saving = never plan to spend the moneyLet’s call this real savings your “investment capital”The goal is to never spend your investment capitalInvestment capital generates returnsInvest in property = generates rental incomeInvest in shares = generates dividend incomeSpend the returns … not the investment capital!

4. 4Why is saving important?Regular saving = behaviour = become wealthyOverspending = behaviour = poverty or financial stressIncome comes from two sourcesYou working and earning a salaryYour investments working and earning returns… so increased savings = increased incomeSavings required to buy a houseSavings required to start investment portfolioSavings buffer of $10,000 = peace of mind!Savings cover large unexpected expenses

5. 5Where do savings come from?Savings =Total income (salary and investment income)Less taxLess rent or interest on mortgage paymentsLess living expensesIncrease savings by:Increase salaryIncrease investment incomeReduce taxAppropriate housing strategiesReducing living expenses

6. 6How to save more?Stop spending 110% of income!Reduce expenses by 10% or moreRelearn what is a “need” versus a “want”Learn “contentment”Learn the “behaviour” of always savingsThen … work at increasing your salaryincrease your investment portfoliodevelop some good long-term strategies

7. 7Is this real long-term saving?Money left in a transaction account – NOProbably not if it is going to be spent next month!Money in high-interest savings account – YESMortgage payments – NOMost of mortgage payment is actually interestOnly payment less interest is saving (10% at start of loan)Superannuation put in by employer – YESSaving for holiday – NO (deferred spending)Saving for car – NO (car goes down in value)Saving for anything that goes down in value – NOT saving!

8. 8Setting goalsEasier to save if you have some goalsVisualising goal makes it easier to forgo spending now… in exchange for future future happinessExamples of goals:New car for $12,000 by 30 June 200X (really deferred spending)Holiday $5,000 on 5 Jan 200X (really deferred spending)Deposit on first house $30,000 by 31 Dec 201X (real saving)

9. 9How much to saveWork out how much goal will cost – Eg $12,000Work out when you want it = 5 yearsCalculate number of months = 5 x 12 = 60Divide amount by number of months = $200You need to save $200 per monthYes, you will receive interest on these savingsBut it will cover you for the fact that most people under-estimate the total cost!To work it out exactly, use =PMT( ) function in Excel

10. 10Saving tipsSave little, save oftenKeep spare coins in jar and deposit in bank each monthDirect debit $X per month into a separate accountMake sure you are receiving good interestING Direct Savings Maximiser pays high interestCompound interest means savings grow exponentially“But I’m a student”Start a good saving behaviour with $50 per month.Live like a student for 2 years after graduating!

11. 11Don’t treat shopping as a “hobby”Don’t buy unless you have the money to do soPay with cash (it feels more expensive than cards)Shop around and wait for the salesSubstitute water for coffee and BYOMake your lunch to uni/workShop at Aldi rather than Coles / Woolies / 7-ElevenBuy second-hand on Ebay – then sell it again!Give up on smoking, gambling and binge drinking

12. 12Delay buying something for two weeksOften after some time you realise you can do withoutTry classical conditioningSay out loud 10 times …“I cannot afford this now … I need to save money instead”Track your expenses to keep you accountablePutting things into a spreadsheet is a hassleCreates a disincentive for small purchasesSpreadsheet keeps you accountable each month

13. 13Cut up credit card if you can’t pay full balanceStay away from buying “Interest free”Personal loans – for people who can’t saveDon’t let your parents borrow against the houseHome loan rate is much lower than personal loan rateBut term on a home loan (25+ years) is much longer than a personal loan (2-5 years)End up paying a lot more interestUnless disciplined enough to make extra home loan payments

14. 14What if I’ve got credit card debt?Recognise you may have a serious behavioural problemUNSW COMPAS Counselling Service (Free)http://www.counselling.unsw.edu.auWesley Mission Financial Counselling Helpline (Free)Phone 1800 808 488Most important steps:Realise that you have a problemTalk to your bank – banks hate zero communication!Move your credit card debt into a personal loan with bankCut up your credit card and pay off personal loan

15. Stop and readNow read:Chapter 3Saving FasterChapter 4Smart Buying and Credit15