Jeremy Francis says he is "officially the worst saver in history". Why? "I have been working and earning a salary for the past four years, and I don't have a great deal to show for it.

Name Jeremy Francis
Occupation Supply chain planning
Income $70,000 gross
Investments Nil
Debts $2500 credit card, $10,000 HECS
Superannuation $8000

"I spend pretty much everything I get. Every time it gets to the last week of the pay cycle, I find myself drawing on the money that I put in my savings account."

With plans to buy his own home or travel overseas, the 23-year-old wants to get out of the cycle of living from pay-to-pay.
In his favour, he has already been putting away $1000 a month in car loan repayments. Having recently paid the loan off, he's in a great position to start saving.

Adviser Matthew Anderson is an authorised representative of Collins House.

Strategy It is vital to undertake a thorough budgeting exercise. This will help Francis understand where his funds are going and allow him to pinpoint areas where cutbacks can be made.

He is at a stage in life where he is earning a good income, has few financial commitments and a long investment time frame. It is therefore an excellent time to commence saving and investing, allowing the power of compound interest to work its magic.

Currently his future plans, relating to overseas travel, are somewhat uncertain, so I believe it is important to keep his financial affairs flexible.
I recommend he delays the purchase of a home until he has clarified his future plans. This will also allow him to accumulate a larger deposit and limit the amount of non-deductible debt required to fund the purchase.

To do this, I recommend that he makes regular contributions to a flexible investment program. Many fund managers offer regular investment programs that can be started with as little as $1000, giving him access to a professionally managed portfolio of investments in cash, fixed interest, shares and property.

Investing regularly allows you to take advantage of the effect of compound growth on your investment capital and reduce the risk of entering the market at the wrong time. It is also easier to remain disciplined if the regular amount is automatically deducted from your bank account.

Francis has recently paid off a car loan where he was making repayments of $1000 a month, so he could redirect those funds towards an investment program without it having a great impact on his lifestyle.

If he contributes $1000 a month to an investment fund that earns an average annual return of 7 per cent and if he increases his regular contribution by 3 per cent a year, it could grow to about $79,000 in five years or $199,000 in 10 years.

He has asked about paying off his HECS debt early. As buying a home in the not-too-distant future will require him to take on non-deductible debt at an interest rate that is considerably more expensive than his HECS debt, I recommend he concentrate on maximising his deposit through his investment program and does not make additional HECS repayments or aggressively channel money into super at this stage.

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