Saving TipsThe PANDA way
When it comes to saving, there’s thousands of millions of ways to do it and things you should learn about how to save. As much as we all want to splash out our funds on every party or event we go to, your bank account survives by those savings.
I have to admit I was never a big a saver and was that guy who splashed out a bit more than I should to have those few hours of fun to only be regretting it the next morning (anyone else had that feeling?). After I heard my mum for the millionth time telling me I needed to save better, I decided to give a few tips and tricks a try.
If you find it hard to save as well, these quick tips are sure to get some ideas flowing and pennies building.
10 Step Saving Guide
1. Dangers of overdraft
Term has started, you got your nice chunk of your maintenance loan and that student account you opened has got a nice 0% interest on your overdraft. STOP!
The truth is that as great as that student account is with its overdraft terms, it’s not free money you’re gaining. It may be free for the next 3 years or until you leave university but once you graduate it’s worth knowing when your bank stops your student account and turns it into a graduate account or a normal account. When this happens your overdraft will be hit with a interest rate until you pay it off.
It’s worth keeping in mind that you’re going to have to save some funds ready, the closer you get to leaving the student life.
2. Credit cards
To start with there are tonnes of incentives to join certain credit card schemes such as 0% interest for the first 12 months. On top of the initial incentives, the more you use some cards the more points or air miles you could rack up and potentially spend instead of your hard earned £££. To top it all off it helps that all important credit score that will help you later in life.
Now the not so good news. There are no such thing as student credit cards with 0% indefinite interest rates for borrowing. Never spend money you can’t afford to pay back before the 0% interest finishes. Also as nice as it is to hear you will have a better credit score, if you miss your minimum payments or can’t afford to pay back what you owe, your credit score could take a turn for the worst.
If you are not going with handling money, this is not for you. That being said, I think credit cards are quite good and useful, as long as you make your payments, ON TIME. It can open up a lot of doors later in life and can be used for deposits when hiring cars or a dingy on holiday.
3. Haggling life
It may not appeal to all and you may only save a few £ but those few £ can add up to £££. Going to the local market and beating those high supermarket prices does pay off, and it gives you a little smirk for an added thrill once you haggle those prices right down. It really won’t hurt you to try.
If you don’t not know to haggle hear is a quick starter guide:
- Look for stalls with discounts already, these people are up for giving a discount.
- Use words or sentences that make you seem interested but unsure. ‘I like but I’m not sure.’ or ‘I do like but I should probably check elsewhere as well’ or even a bit more direct ‘I do like but I won’t be able to pay that much.’
- To get the price down even more, offer to pay in cash and see if that tempts any eager ears.
- There is usually a middle number you can get to. If something is £40, offer £30, if they say no, try to meet them in the middle at £35 and slowly work your way up till you agree on a good little deal.
4. Worth checking your statments
Why isn’t my bank balance right? I’m sure I had more money than this!
There will always be confusion on how much you have, spend and maybe even lose because you’re not checking your account. I would definitely recommend looking at your statements often as it gives you a clear understanding of how many drinks you bought last night as well as how much you may of been overcharged for something.
Getting into mobile banking and even banking apps is useful and quick way to keep track of your account but they don’t always give you the full extent of your account activity as your online or paper statements do.
If there are any charges to your account that you do not recognise. Contact your bank immediately.
5. Deals & discounts homework
As much as that Buy 1 get 1 half price offer is tempting does it actually work in your favour? There are loads of deals and discounts out there that you would blindly trust but before you decide you cash up, you should really check if that buy one get one free is actually cheaper or is that 20% off in that one store cheaper than in another store.
Always do your homework before just blindly giving into deals! However there is help as well from the CMA (competitions & market authority). They won’t be able to tell you where to get the cheaper deal or if that 20% off is worth it, but they do try catch companies out from small to large on there misrepresentation.
6. Normal Vs. Compound interest
If you have never heard of compound interest, don’t worry, it was not till my I started investing that I learnt about it. Compound interest is essentially interest on top of interest.
Normal interest works by putting money in the bank (called principal) and you earn an interest rate off of it annually. If you go into debt that interest will work act as it normally would but in the negative effect as you owe money.
- You put £100 into the bank with 2% interest (of your initial principal)
- This will mean you earn £2 annually off the normal interest
- After 10 years your account will now have £120
Compound interest is different from the previous as it has interest on top of interest. This means your interest is not based on your initial principal but the new total you have gained from the interest added to your principal. Be warned if you are in debt this method may have a high negative effect on your account.
- You put £100 into the bank with 2% compound interest
- This means you earn £2 in Year 1 giving you a total of £102.00
- Now the compound interest takes effect and you gain 2% of £102.00
- In Year 2 you have total of £104.04
- After 10 years your account will now have £121.90
This might not seem like much but if we up the principal to £1000 with 2% compound interest you would have a total of £1218.99 in 10 Years, were as your total would be £1,200.00 with normal interest.
7. Passive income
Passive income will be the greatest tip you will learn through life to get you closer to that 1 Million £££ without constantly checking up on topics, trades, news and so on. The idea is that it constantly produces money for you after you initially set it up (even through your sleep), it’s the slow and steady side income. There are many ways and forms of passive income to be exploited, some safer than others and a lot of them require minimal effort initially but some require your attention every so often.
Passive income is a side income separate from your career or main salary. For ideas of how to set up your own passive income check out our passive income options post.
Some quick ideas are investing in shares or stock. You initially have to find stock or shares that you want to invest in and then you let the passive income role in. This will require checking up every now and then to make sure your investment is always giving you returns and not in a loss. If you’re thinking you have no idea about the stock market, we have you covered, check our guide on copy-trading.
8. How to invest = Passive income
Investing is an important part of life, it creates that all important, you guessed it, passive income (you’re going to keep hearing that word so get used to it). Investing seems like such a hard thing to understand but plainly put, it’s putting a portion of your funds towards something you believe will grow and give you a nice little return. In the modern day there are thousands of ways to invest. Stocks, shares, currencies, property and also for those a bit lost on what stocks are but want to get into it, copy-trading.
When it comes to investing, it’s all about the slow and steady approach. If you invest a high amount you may make a bigger return but you may also take a big gamble. Slow and steady wins the race (those kids stories were right!).
For those that simply don’t understand or don’t trust themselves to invest their own money, there are Fund Managers who can invest on your behalf. They do however take a fee on your behalf.
Whatever you do decide to invest in, I would highly suggest you don’t invest in currencies as they are quite difficult to predict and left to people who understand the trading game, on the advanced level, day traders. The best investment as a starter would be into a market index. This is a tool used by investors to describe the market, and to compare the return on specific investments.
9. Rent Vs. Mortgage
You’re probably thinking straight off the bat, there’s no way you could afford to get a mortgage! But do you actually know much about it or the facts?
Let’s start with renting. When you rent a place you are the current occupant but the property is in the Landlord’s name. If the landlord has gained the house through a mortgage, you are essentially paying for their mortgage and adding a small sum to their pocket. This being said, anytime the boiler breaks, the landlord would have to pay for the cost (unless you broke it). You also have the freedom to move whenever you’re rental contract runs out and it would be more ideal for the student who’s trying to figure out who they are and what exactly they want to do later in life.
The property ladder and mortgages can be a tough vehicle to get in with you most likely having to put up the initial deposit which will be a good few thousands. That being said with a mortgage, you are your own landlord, and once you pay off your loan you will essentially have free rent!
If you can’t afford to pay those instalments then why don’t you rent out a property with a Buy-to-Let Scheme were people looking to rent will pay you to live at a property. This will give you that all important passive income, your loan repayment instalments will be paid by your tenants and there will be funds left over to add to your account. To top this all off, any refurbishments and decor you put into the property will be yours and not rented furniture.
Owning a property is almost always cheaper than renting. It is just that initial step of getting onto the property ladder that can be a high hurdle. Owning may not be for those freshers to worry about or consider but for those soon to be graduating or have already, it maybe a possibility you may want to look into as it will definitely help you later in life.
OUR KEY TIPS
1. Know the dates when your credit card incentives run out.
2. About to buy a new game or product? Check around for a cheaper rate.
3. Keep an eye on your bank accounts. Know how much money you actually have and how much you are borrowing!
4. While passive income is not saving technically, it can add to your savings after the initial investments and some time.
Have you got any game plans for boosting your savings? Let us know in the comments below.