Deciding to take a course outside of Brazil, whether it be an undergraduate, postgraduate or even one focused on improving your English, requires not only research but also planning – keeping an eye on deadlines, gathering all the documentation and, most importantly, organizing yourself financially.
We know that being a student is not easy, especially when we feel like life is just one bill after another. In general, this segment of the population does not have large sums of money, leaving little to save – and thinking about the exchange rate of foreign currencies can scare anyone thinking about studying abroad.
With planning, however, it is possible to gather the necessary amount to travel, without getting into debt or paying interest on loans. With this in mind, loveUK spoke with financial educators and gathered some tips on apps and the best investment options that can help you in this process.
Where to start?
The first step to starting your financial planning is to research your destination city. How much do you need, not only to pay for your flight and tuition fees, but also to support yourself in the country each month? Do this survey, taking into account things like your accommodation, supermarkets and transportation – one tip is to search on travel websites and international student forums about the cost of living in the city, so you can get values that are closer to those of people who already live there.
Next, it is important to evaluate how much money you already have and if there is any source of income you can count on, so you can do a “counter calculation”: how much is needed to save the amount raised and from there have an idea of how much you should set aside each month.
“It is important for people to think that a pre-calculated portion of all the money they earn should be earmarked for travel. The goal is to get the money out of your system and set it aside so that it is not spent on anything else. You need to control yourself and go through a process of financial empowerment,” explains Victor Barboza, Financial Coach.
Founder of Creative Financial Management, a website that focuses on small business management and personal finances, Victor also suggests that when traveling, people define the amounts allocated for each expense in envelopes. “If you leave everything in the same package, you run the risk of spending on unnecessary things. I joke that it’s like giving each envelope a name: this one is for accommodation, this one for food…”.
Financial educator Claudio Ferro warns that anyone who wants to start planning should think about the reverse process of paying monthly bills: first set aside part of the money as soon as you receive it, and then deal with fixed expenses. “If you follow the logic of first paying all the bills and then seeing how much is left to invest, there will be nothing left, never any left, because you end up spending on unnecessary things, buying a pizza… I once heard Warren Buffett, the American shareholder, say that when you receive your salary or allowance, set aside at least 10% of the money and invest it right away. From there, you deal with your bills and your planning. With this, you have the discipline to avoid spending on unnecessary things or going into overdraft, making the month longer. Psychologically, you adapt to what you have. If you have 3, your life will be based on those 3. If you have 5, it will be 5, and so on. You adapt.”
Executive Director of the platform PoupaBrasil Investments, Claudio recommends that the person create a spreadsheet with all the bills and expenses, so that they can see “on paper” the money that was used superfluously and that could be used in a better way, such as an investment.
Financial applications
Nowadays, thanks to technology, there are apps specifically designed to help you control your expenses. Available for all smartphone operating systems, your spreadsheet can be in your hands at all times, but “the main point when choosing one to use is that it must become your habit, it has to be in a way that you can use it on a daily basis or at least once a week,” warns Victor.
We've put together a few options to get you started:
1. Mobills – This free app is one of the most popular, having received the Google Seal of Excellence this year for its high performance. Mobills allows you to create categories to manage expenses, updating the flow of expenses in real time and providing easy-to-interpret interactive graphs.
It is also possible to create a monthly plan that sets savings goals, checks credit card statements and even sends email notifications about bill payment deadlines.
2. GuiaBolso – This offers a direct connection to your bank accounts, in a secure manner. The application allows automatic control of finances, monitors the status of your CPF and also offers the option of taking out a personal loan virtually, charging interest of 2.8% per month.
3. Wisecash – Completely free, this app is ideal for those who don't use most of the functions that finance apps offer. On the first screen, you can access your previous balance, expenses, income and current balance, register your bank account and track transactions using graphs.
4. Daily Expenses 3 – The application offers two versions: the free version, which allows you to classify expenses into categories and schedule fixed bills, and the paid version, which, in addition to other features, balances accounts and gathers information in graphs.
5. Organize – The application does not require internet access to work and uses encryption to protect the information entered. It synchronizes accounts, calculates the consolidated balance between them and shows the monthly transactions. It is recommended for less experienced users due to its simple interface, and it is also possible to organize expenses by categories and subcategories.
“There are many different options for finance apps to organize your budget. Choose the one that best fits your profile. However, remember that using technology is no guarantee of success. What really matters is that you develop healthy habits for managing your money. This way, it will be much easier to create savings to invest in your dreams,” says Claudio.
What about investments? The financial market has terms and concepts that can confuse any layperson. According to Claudio, this is one of the reasons why savings accounts have a much higher investment volume in Brazil: lack of knowledge. “It seems easier, you don’t have to rack your brains. But savings accounts yield very little.”
There are, however, good investment options other than those that are risky, such as the stock market and investments in very aggressive funds or those with currency fluctuations – remember that these investments depend on the financial market and political situations, which generates speculation.
Both financial educators recommend investing in fixed income. As the name suggests, this modality allows the investor to predict the profitability before even carrying out the transaction and also has the guarantee of the Credit Guarantee Fund (FGC), which offers coverage of up to R$1,400,000 in case something happens to your money.
“[The FGC] exists in all banks in Brazil and in all financial institutions. This does not extend to the stock market or risky operations, only fixed income. This is the best option for young investors,” says Claudio, who also explains that fixed income investments are also preferred by those with large financial assets: “with these elections, I observed the candidates’ income tax returns. [João] Amoêdo has a high income, but all of his money is invested in fixed income. He was once vice president of a bank, but has zero exposure to risk. Henrique Meirelles, who was president of the Central Bank, also has no stocks; his only focus is fixed income. So, even for people who work more, fixed income is always a safe bet, which will have returns above inflation. I highly recommend this path, it won’t cause any headaches.”
Fixed income investments work as a “loan” to companies, banks, governments and financial institutions. They use the money to finance projects and other activities and, in return, return the amount plus an interest rate. The best-known fixed income options are:
1. Direct Treasury – The most popular option for avoiding savings. This is a program by the National Treasury to negotiate national debt with individuals through bonds. In practice, it is as if the person could assume part of the government's debts, being remunerated through rates that vary daily. Tesouro Direto guarantees the contracted return, and can start with very low amounts – with just R$30 it is possible to buy a fraction. It is worth remembering, however, that taxes and custody fees charged by investment banks are levied on these returns.
2. Bank Deposit Certificate (CDB) – This option can yield up to twice the amount invested in savings and follows the same logic as Tesouro Direto. CDBs are issued by banks to raise funds to finance their activities, such as loans to other clients and improvements to their structure, returning the amount to the investor with interest. In the case of smaller banks, the profitability of the bonds can be even higher, compared to larger institutions.
As with the option above, the CDB is also subject to tax charges, with rates that vary according to the contracted term. When applying, note how much tax will be levied.
3. Real Estate Credit Letter (LCI) or Agribusiness Credit Letter (LCA) – The securities are very similar: in LCI, the money raised will be used for financing in the real estate sector, and in LCA, the amount is earmarked for the agricultural sector. Both have a minimum redemption period, which means that if the contract provides for at least 60 days to redeem the amount invested, it will not be possible to use it before that.
In the case of LCI, it depends on the real estate market, so when it is high, the gains are greater and when it is low, the yield will be lower. LCA, on the other hand, is based on the amounts loaned to rural producers of all sizes. Therefore, the variation depends on how much money is being moved in the form of loans.
In both options it is possible to start with amounts around R$$500, depending on the financial institution, and they are exempt from Income Tax.
There are other fixed income methods, and you can choose the one that best fits your planning and goals. PoupaBrasil makes a simulation that compares your application for each investment in real time, allowing you to not depend on third parties to make your decisions. You can also invest in more than one security, so if the profitability of one is not so good at a given time, the others can compensate.
Loans Anyone thinking about taking out a loan to pay for their studies abroad should always take the interest rate issue into account. “People need to remember that if they decide to pay in full, they may get a discount [on fees], but if they decide to pay in installments or take out a loan, they need to remember that they will end up paying more in the future, and they need to be prepared and aware that this day will come,” says Victor.
The creator of Creative Financial Management explains that if a person is going to resort to this option, they should pay attention when researching places that offer loans, as there are institutions that have small installments, but the interest rate is high, making the amount much higher than what was borrowed. “People end up doing it naturally: they go to the bank where they have an account and take out a loan there, but this is a mistaken process. There are websites, like Buscapé, that compare financial loans from different places. There are countless options on the market besides the bank. There are even startups with more attractive interest rates.”
Claudio, however, does not recommend students taking out loans. “Loans always involve interest. Nobody gives anything away for free. If a person has a financial plan, if they can organize themselves and do it in a more disciplined way, I recommend avoiding loans. The right thing to do is to plan ahead and start early. It’s never too late to start, whether you’re 20, 30 or 40 years old,” he says.
Starting to pay In an election year, there is always a high variation in the currency exchange rate. Therefore, it is important to keep an eye on the rates so that you can gradually pay both the fees and the cash, instead of paying everything at once. There are websites that compare the rates of exchange bureaus in each city in Brazil and My Exchange offers a variation of the currency of interest, and may even offer more attractive rates, depending on your city.
“It is also important to plan to buy [the currency] little by little and actually have paper money, so that you don’t arrive at the place and only pay with a credit card, as there are still taxes, IOF, and it is money that goes beyond what you planned”, concludes Victor.
