This module will help you start planning and saving – an important step in taking control of your personal finances.
Does any of this sound familiar?
- ‘I have always had a part time job which earns enough money to support my needs while studying at university. I manage to spend each pay and then struggle to pay unexpected bills when they arrive. This has led to my credit card bill increasing over time. As a result I am paying more interest and I don’t manage to get in front.’
- ‘I spent all of my previous pay!’
- ‘I am constantly borrowing money, but am not sure how I can pay it back.’
- ‘I can’t afford to go to the dentist or the pharmacy.’ (Remember dental and medical prevention is always cheaper than the cure.)
- ’I try to pay my bills on time to receive a discount, but I don’t seem to have the money at the time.’
Throughout this module you’ll find tips to help you plan and save.
Set Realistic Goals
Having some short-term and long-term goals can help motivate you to save some of your hard-earned money and help you plan for now and the future.
BEFORE YOU SET YOUR GOALS IT IS IMPORTANT TO UNDERSTAND YOUR OWN FINANCES:
- What is your current bank balance?
- Do you pay bank fees? If so, how much are these?
- What are your regular household expenses, for example gas, electricity, phone, internet, insurance, car repayments?
- How much do you spend on food, outings, take away food, fuel and/or transport, hairdressers, gym fees?
IN SETTING YOUR SHORT-TERM GOALS:
- What do you need to achieve initially?
- Is your credit card incurring interest and do you need to pay this off?
- Do you have to invest in car repairs, tyres or a new phone or computer?
- Would you like to know you have 3-6 month’s rent saved in advanced in case you fall ill and can’t work for 4 weeks or much longer?
- Are you saving for a deposit on your own property and how will you achieve this?
THE RULE FOR GOAL SETTING
Remember the S M A R T rule for goal setting:
- Be specific about what your goal is.
- Make sure that you can measure your progression towards your final goal.
- Consider your personal situation at the time.
- The goal needs to reflect your skills, resources and ability to achieve your specific outcome.
- Set a definite time frame for your progression so that you can keep track.
Create a realistic budget around your pay period. Remember to work on pay after tax. This will help you to cut back on unnecessary spending and allow you to allocate your resources and save money.
Write down your expenses, along with your annual bills.
HAVE YOU EVER ASKED YOURSELF:
- Do I really NEED this, or do I simply WANT this?
- To trim your budget, cut back on the WANTS first. That is, anything that is not an essential NEED.
TIPS TO HELP YOU SAVE
- Avoid impulse buying.
- Make a list of your priorities before you spend.
- Allocate for unexpected expenses and emergencies.
- Look at how much (if any) money remains after you have deducted the sum of your expenses.
- Consider saving the remaining balance.
- Save all receipts to remember ALL those hidden amounts which many of us spend without thinking. Take note of all those items you don’t always get a receipt for such as drinks, burgers, taxis etc.
- Beware of the buy now, pay later. If you don’t end up paying on time; the interest rate sky-rockets and you could finish up paying far more than the original price.
- Set aside a regular amount to save each week before you are tempted to spend it, and deposit a fixed amount each pay into a separate account that earns interest.
- Investigate Savings Accounts, Term Deposits, Access Accounts and Cash Management Accounts for savings to take advantage of higher interest rates, but make sure you are aware of any fees or charges incurred. Weigh up these charges against your interest earnings before signing up.
- If you don’t already, get your pay credited directly to your bank account. Having ready cash in your hand tempts you to spend it.
- Save your pay rises, bonuses or tax refunds and try to invest these.
- Consider a debit card rather than a credit card, so you can only use the money you have allowed for.
- Consider a credit card that has the full amount deducted from your account each month to avoid paying high interest rates. This also helps you to spend only the amount you have access to.
- For expensive times of the year such as birthdays, Christmas and holidays, either lay-by items or factor these amounts into your savings plan and put the money away.
- If you have interest bearing loans, try to pay fortnightly rather than monthly (you are paying an extra payment over the year which will help reduce the debt considerably over time).
- Combine your accounts to save on extra bank fees.
- Talk to your financial institution to find out the best deal for your needs.
- Use internet banking to pay your bills and avoid credit card fees charged by the payee.
- Question any extra charges on your bank accounts.
- Be creative and take your lunch to work and university. Just $12 per day over a year of 5 days a week adds up over one year to $3120.
- Check and compare prices online before you head out shopping.
- Keep all warranties and receipts in case you need to return or claim on the warranty.
- Take faulty items back to the retailer for a refund or exchange (another reason to keep your receipts).
- Shop around for the best price. Many companies will meet or better your best quote with verification.
To help you complete Activity 1, download your Excel Personal Budget: Managing Finances Activity 1 – Part A (Personal Budget)
Please complete Activity 1 of your Activity Book.
This is your chance to start preparing your own personal budget. This activity comes in two parts (A and B), so make sure you complete both!
Click on the Activity Books icon at the top of the screen, find the Managing Your Finances Activity Book and click the blue download icon.
You may leave this Activity Book open for the duration of the module. Do not forget to save your answers for future reflection.
Identify Your Spending Needs
YOUR BUDGET IS YOUR BEST FRIEND!
Unexpected expenses often come up throughout our lives, so how do we pay for these? Without savings we create unnecessary hardship and stress, not to mention the disarray we send our finances into.
Budgets need to be reviewed regularly as the cost of living and the cost of consumables increase.
Throughout this topic you will discover how to make the most of your budget, budgeting pitfalls and ways to help you assess your spending.
Your personal budget will help you to:
- Plan for the future. This could be for the coming weekend, a holiday or future years;
- Identify areas where you need to change your spending habits;
- Save towards your goals. Without goals you could be tempted to waste any money you have saved.
Credit cards are a form of instant finance, allowing you to purchase now and pay later. This is a convenient method of payment that lets you to buy now and pay off over time when you have the finances to pay. The problem is this makes spending easy without thinking too much about the consequences. Items purchased this way come at a greater cost, unless your credit card is set up as a direct debit and paid off before the required date. If you commit to paying off something such as a computer over several months, you need to know you will have the finances to cover the payments over this time.
Keep a record of how many interest free days you have on your credit card. It is also helpful to calculate how long it will take you to pay off a card if you are only paying the minimum payment each month. This is extremely high interest bearing and definitely adds to the cost of the items.
- You have access to interest-free credit, but only if you pay off the full amount each month;
- Gives you access to purchasing online or over the phone. Note: when using internet sites, be sure they are secure sites and have the ‘s’ in ‘https’;
- You have instant access to money;
- Gives you access worldwide;
- Reduces the need to carry cash;
- Can assist bill paying when necessary.
Are you aware that a debit card offers many of the same benefits as a credit card without the temptation to overspend, as you can only spend up to the amount you currently have in your account? You will not be charged interest on your debits. However, the down side is that you don’t receive your 30 day interest free period because the money is deducted immediately.
Shop around to check you are not being charged fees to use this card. REMEMBER as a full-time student, most banking institutions will offer you ‘no fee’ accounts.
Special offers with credit cards
Many financial service providers offer additional benefits for choosing their credit cards. For example, if an institution wants to promote American Express or any other card, they may offer to waive any fees for a set period of time; or a supermarket or department store may offer points schemes that reward the user with shopping vouchers.
These incentives may look worthwhile, but they are designed to encourage you to spend so try and be realistic about your ability to stick to your budget when considering these options. Shop around. There are a number of publications and websites that conduct regular surveys and compare such deals – Money Magazine and Choice, for example.
WHAT TO LOOK OUT FOR
Shop around for the lowest interest rate, just in case you pay after the due date (Try to pay the full amount each month before the due date so you can avoid all interest charges). Interest rates can vary from as low as 4% and can go up to 24%.
Be mindful of annual fees and factor this into your budget. Many have low costs which can be offset by the convenience it provides. It is still important to be mindful of the temptation it provides for impulse buying.
Consider the cost if you only pay the minimum amount. Some can take years to pay off and it is the one of the highest interest charges you can incur.
Credit cards are also an expensive way to obtain cash advances as the interest charge starts upon withdrawal. To avoid this unnecessary charge, speak with your financial institution to find the best way for you to set up your account and the use of both credit or debit cards. If this does get out of control, consider looking at the benefit of paying off the card from another loan source which has much lower interest rates.
In summary, it is extremely important to monitor your spending via your credit card, and remember more than one card encourages a lot more financial burden.
Be aware many institutions will charge a fee for using another institution’s ATM. Check the policies of your provider and keep a check on your statements to see if you are being charged any unnecessary fees.
Direct debit payment is relatively straight forward to set up, but you need to manage your accounts so that there is always money in the account to cover the debt. If not, you could be paying a bank ‘dishonour’ fee along with a charge from the creditor. This becomes inconvenient if you don’t have a buffer amount in your account. Make sure you read the terms and conditions before you sign the debit request form. This process allows the creditor to deduct the agreed amount from your account at the agreed times. Make sure you have an end date in mind, as you will need to fill in more paperwork to finalise your accounts with these creditors or billers.
Direct debits are your responsibility, so keep an eye on your account to check the correct amount is being withdrawn. Note: If the creditor/biller misses one month, be aware they will take out double the next month. A false sense of security here could lead to a bank charge if you spend the money in the meantime. If the amounts are incorrect, be sure to alert your bank as soon as possible.
Be mindful if you need to close an account that you have the necessary transfer documents in place before you close.
Some creditors/billers need several days for a cancellation to come into effect, so call to clarify both the creditor/biller and the bank’s needs.
Double check your cancellation has been successful. If payments continue to be withdrawn, and your paperwork has been filled out correctly, in the required days prior to the withdrawal, you will need to contact the bank or card issuer immediately.
Keep all receipts so that you can reconcile your accounts. If you find any unauthorised debits, contact your bank or card issuer immediately.
If you have any unresolved issues which have not been finalised by the bank or card issuer to your satisfaction you can take your complaint to the Financial Ombudsman Service Australia.
Financial Ombudsman Service 1800 367 287 (free call)
An easier way to manage your ongoing payments might be to set up your account to utilise the recurring transfer function via internet banking. This process enables you to be in control and to ‘fix’ the dates of your regular payments.
Centrepay – a bill-paying service for Centrelink customers in Australia. Centrepay is a free bill-paying service offered to customers receiving payments from Centrelink. You can use Centrepay to pay bills (such as rent, gas, water and electricity) through a series of regular deductions from your Centrelink payment.
Instead of having to pay large bills in one go, Centrepay gives you the option of having smaller, more manageable amounts deducted from your fortnightly Centrelink payments. This can help you pay off bills gradually, and is a way of ensuring that money is always set aside to cover your bills.
This article has been sourced from www.centrelink.gov.au.
FOR MORE INFORMATION
You can visit these websites:
- The Australian Securities and Investments Commission (www.moneysmart.gov.au) – to find out more about direct debits and tips for managing them
- The Australian Banking Association (www.ausbanking.org.au) – to download a copy of the Banking Code of Practice
- Centrelink (www.centrelink.gov.au) – to find out more about Centrepay. Alternatively, call Centrelink directly on your usual Centrelink payment number.
Please complete Activity 2 in your Activity Book.
In Activity 2, listing your day-to-day spending can help you identify where you may like to conserve some of your finances. Use the Managing Finances Activity Book you downloaded in Activity 1.
You may leave this Activity Book open for the duration of the module, and don’t forget to save your answers for future reflection.
WHAT IF I CAN’T PAY MY BILLS? WHAT IF I LOSE MY JOB?
Always call your creditors (the institution or company) if you are going to be late with your payments. Sometimes this gives you a much needed window of time before the company takes action. It can help considerably if the institution has security over your assets. Make sure you are aware of your entitlements before you make any decisions on your finances, so you know your options regarding your future.
The following information services in Australia offer financial counselling to help you take control of your situation:
- Centrelink – www.humanservices.gov.au/individuals/centrelink
- Money Smart – Financial counselling www.moneysmart.gov.au/managing-my-money/managing-debts/financial-counselling
- Money management www.moneysmart.gov.au/managing-my-money
- Women – www.qld.gov.au/community/women
For a list of financial counselling organisations visit – www.financialcounsellingaustralia.org.au
Retirement is probably not something you contemplate often, however the sooner you start to invest in your future the easier it will be when you decide to cut back on your working life and enjoy the fruits.
The earlier you retire the longer you will have to live on these savings or investments.
According to many financial checklists if someone was to retire now at age 55 and only wanted an income of around $35,000 for the next 30 years they would need to have over $720,000 saved or invested. This will, of course, vary greatly depending on a retiree’s desired lifestyle in retirement.
BE INFORMED AND STAY IN CONTROL
Financial problems can be the cause of much stress and can cause relationship breakdowns and ill health, so the better able you are to manage your finances, the better off you will be. This Government website has great resources and helpful information to put you in control: www.moneysmart.gov.au
Times can be tight on a student budget, but there are ways to shop without ‘blowing the budget’.
Generally the cheapest places are the large supermarkets as opposed to the smaller corner store or supermarkets found in ‘strip shopping’ areas. Supermarkets in lower socioeconomic areas can be cheaper than those in more affluent areas, but only if they are nearby to you. Travelling to save a few dollars is ineffective.
Generic or home brands are produced by the major companies and packed under the retailer’s own name. These products are usually cheaper than the major brands, but are the same or similar product. Compare the prices along with flavours and ingredient labels to help you make your decision.
Specials usually appear towards the final hour of trading on Saturdays in the fresh food sections. Stock up and freeze for use during the coming week/s.
Look out for when and where the markets open for fresh fruit and vegetables, as these will last longer. Farm fresh fruit and vegetables will have a higher nutritional value than produce that has been sitting on shelves for long periods of time. Weekend ‘farmers’ markets’ are popular and provide healthy fresh food along with an enjoyable outing. Combine with other households and save.
Google ’Townsville markets’, ’Cairns markets‘, ’Brisbane Markets‘ or ’Singapore Markets‘ for listings in your local area.
End of season and stocktake sales will save you money.There are direct factory outlets (DFOs) that offer reduced price items. Discount variety stores offer mass produced items more cheaply than specialist stores. Then there are charity stores such as Lifeline or St Vinnies where you can pick up a second-hand bargain, especially if you are attending a formal occasion and only need a suit or dress for one night.
MAKING THE MOST OF YOUR STUDENT DISCOUNT
There are concessions available to students on public transport; consider purchasing weekly or monthly tickets if you are regularly using this form of transport. If you are only travelling 3-4 days, this may not be of any great advantage.
Apart from your student discount as a full-time student, there are savings to be made by purchasing a number of tickets, or a book of tickets, provided by some movie companies. Many theatres also offer deals like ‘Two for Tuesday’ or ‘Cheap Tuesday’ if you are a regular movie goer.
Student travel centres cater for discounted fares and travel arrangements for students. Being a student service you will find many of these tours are filled with similar age and like-minded people.
Purchasing online can be risky, but it does have its advantages. This form of buying allows you to research the market globally to access cheaper prices. It is a convenient way to shop as it is available 24 hours a day, 7 days a week from the comfort of your own home.
Remember to take the following precautions when purchasing online:
- Don’t be fooled into thinking that a professional website will necessarily offer legitimate and professional goods and services;
- Find out who you are dealing with;
- Confirm the after sales service and warranties in case you have problems with the purchase;
- Read the evaluations and comments online from other buyers. This may prove useful if the seller is not legitimate;
- Remember it is hard to check the quality without being able to physically inspect the item;
- Check there is a physical address and phone number in case you need to contact the seller. Beware if they are reluctant to give you this information;
- Be aware of any freight costs involved in receiving the goods.;
- Confirm the timing of delivery;
- Consider currency exchange rates and fees if purchasing internationally;
- Beware of impulse buying. There may be a better offer on another site. Compare and save!
- If you are dealing internationally, you can find out information on disreputable companies via www.fraud.org.
- Avoid using your credit card for payment unless the site offers a secure payment service. If not, pay by phone or mail. Remember not to give out your bank details, (especially your password) to anyone;
- If you have a dispute, contact your credit card institution immediately;
- Keep a record of all purchases, costs and payments.
INTERNET AND MOBILE PROVIDERS
Do your research and ask around – the cheapest rate may not always be the cheapest in the long run. Watch out for hidden fees, download and hourly limits as well as the cost of the support services that are available. Research the plans to determine which one best meets your personal needs.
The Australian Competition and Consumer Commission (www.commsalliance.com.au ) provides more information on these providers, along with advice on your rights as a consumer.
Watch for long-term contracts. These are legally binding and if you have items stolen or in need of repair, you will still have to pay out the contract.
IF YOU HAVE A DISPUTE, THE FOLLOWING SITE MAY BE HELPFUL:
- Telecommunications Industry Ombudsman – www.tio.com.au/
For more information on comparative companies and products, ‘Choice’ will provide you with current information or findings, some of these documents are free to view however some will have associated fees to access.
HAVE YOU EVER:
- Found yourself in charge of collecting the rent and your housemate doesn’t have the money? or;
- been left with the rent to pay after a housemate has left suddenly?
If all tenants are not on the rental or tenancy agreement, this is likely to happen. When all tenants sign a contract, each person is responsible for his/her own payments and will be dealing directly with the agent or landlord if rent slips into arrears.
It is always advisable to have each tenant on the tenancy contract and contributing to the security bond. This way if they break the agreement, that person is liable for the costs, not the whole household. It also gives ownership and responsibility to each person as no one wants to leave a premises and forgo their share of the bond. As with all contracts, there should be a ‘cooling off’ period. This can vary from 2 to14 days. This gives you time to think about your commitment and cancel during this time.
In most cases you will need to pay up to the equivalent of 4 weeks’ rent as a bond prior to your tenancy date. The bond is held as security over any costs you may be liable for during your tenancy period. When you pay a bond you must be given a receipt and sign a Bond Lodgement Form. The bond must be lodged by the property owner/landlord with the Queensland Residential Tenancies Authority (RTA) and at the end of the tenancy you apply to have your bond returned. In most cases you will also be required to pay up to two weeks rent in advance.
Health clubs will also lock you into fixed term contracts. Consider your needs and situation before committing to these contracts. Paying up front may give you a cheaper deal, but if the club closes down you will lose your money.
Cancellation of these payments via direct debit will also need to be given in writing to both your financial institution and the company. Make sure you keep all records. Contact your bank for all relevant forms.
Please complete Activity 3 in your Activity Book.
This will help you calculate any unnecessary spending and help you save.
For additional finance tips and ideas in a printable factsheet go to the Resources area of the JCU Counselling Services webpage, where you’ll find a range of different information sheets on various topics.
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