Money is an important part of life. Whoever said that it’s not important probably hasn’t experienced being in debt. When managed properly, it will allow you to have a comfortable life where you can enjoy the fruits of your labor. The problem is, most people do not know how to manage their finances. They live well above their means and the money they earn is never enough to make ends meet. Due to this, people are left with no choice but to borrow money and take advantage of easily approved, high interest loans such as Payday Loans. They don’t mind the interest as long as they are able to pay off whatever emergency expense they have at the moment or just to tide them over until the next paycheck. The end result is that a lot of people are spending most of their resources in debt payment and when they can no longer pay, they default.
Statistics show that most people who avail of Payday Loans belong to the middle class income families – people who have stable jobs and regular paychecks. What makes them put themselves in situations where they are financially burdened? We believe that this is most often caused by mismanagement.
13 Ways to Better Manage your Finances
We’d like to share some tips on how you can better manage your finances, so you can avoid the need to avail of high interest loans.
1) Get a Steady Source of Income
We will start with this since we cannot manage what doesn’t exist. What is your source of income? It doesn’t matter if you receive a big or small paycheck. It needs to be managed. But first, you need to have a source. It needs to be something you can rely on.
2) Track Your Expenses
What are your fixed expenses monthly? Track them down and make a list. Determine which expenses cannot be avoided, such as Rent, Utilities and Food. Which expense is seasonal and something that you need to plan and save for? An example would be quarterly school tuition fees. Write all the expenses down. This will enable you to see clearly which of your expense is absolutely necessary, and which ones can be removed to better fit your budget. It is often the case that we are not aware of how much we are spending and what we’re spending them for. You will definitely be surprised at what your expense tracker will show you.
3) Determine the Budget
Once you have a steady source of income, and you know how much you need to spend monthly – you can map out your budget. This will be your spending guide. If you’re earning a regular income of $1000 a month, you can have a working budget of $900 and put aside $100 as your savings. Most people fall into the trap of living beyond their means because they do not know how much they can afford to spend in a month. Probably, they know but are not really paying attention to it. We have to be realistic and not spend money that isn’t there yet. How many times have you told yourself that you can afford to buy that new Smart Phone since you’re expecting some extra money next month? Budgets are crucial to managing your finances. If your monthly income is not enough for your monthly expenses, that’s a different story. You now fit the profile of Payday Loans customers. As much as possible, you need to avoid making loans to augment your income. The best way is to go back to the drawing board and either find a better paying job, or a source of extra income.4) Be Realistic and Look at the Facts
The secret to successfully managing your finances is to not fool yourself. You need to be brutally honest. Doing otherwise will only hurt you. How much can you really afford to put aside? Will it be a hard stretch? When you’re doing this budgeting exercise, it’s easy to want to be strict about it – but you also have to be realistic. If putting aside $100 a month will be difficult for you, then lower it to $50. You can increase it when your finances are more stable and your income increases. Don’t be too hard on yourself. What is your financial status to date? Are you spending more than you’re earning? Were you too impulsive these past few months? Did you charge too much on your credit card? When you are realistic and you accept the facts of your situation, you can make positive changes to improve it.
5) Re-assess your Budget and Expenses regularly
Incomes and Expenses change regularly. They can increase or decrease and you should be on top of these changes. The great thing about having a budget is that you are tracking it. From your records, determine if there are expenses that are unnecessary and re-allot your budget to something more important, or probably put more money into your savings. Don’t be intimidated by budgeting. You are totally in control here… and that’s the way we want it to be. People who fall into debt traps totally lose control over the situation. They fall under the mercy of their creditors.
6) Plan for the Unexpected
We usually don’t plan for the Rainy Day. We don’t think about getting sick and going to the hospital or our car breaking down. These are the moments when Payday Loans are so attractive, and it’s also what makes them so dangerous. During these unexpected situations, you have a need that you can’t fill and any source that will solve your immediate problem is good enough. To avoid being trapped in this situation and falling into debt, plan for the unexpected by setting aside a small portion of your income every month. 10% of your paycheck is the ideal amount but any amount that you save, is a saving for the unexpected.
7) Spend Money Wisely
Always try to get the best deal. Even the richest man got that way because he knows how to get the best deal for himself. Haggle. Negotiate. Get to know where you can buy the cheapest gadgets and appliances. Be on top of where the biggest Sale is happening in your area. Take advantage of coupons. (Did you see that show in TV entitled “Extreme Couponing”? Now that’s what you call spending money wisely. They shopped for 10 people and didn’t spend a single cent!) The wise man knows the value of every cent, and strives to make the most out of it. If you need to go to a prom, for example, or attend a wedding, do you need to buy that expensive tux or can you just rent one? Assessing situations this way keeps you from making unnecessary purchases.
8) Watch your Debts
Not all debts are bad. Debts like a home mortgage is not really a debt but an investment in the future. Credit card debts and Payday Loan debts are what’s bad and should be paid off as soon as possible to avoid paying the high interests that tend to accumulate. These are debts that not only ruin your budget but also reflect negatively on your credit score, if you don’t pay them on time. It’s easy to lose track of what you charge to your credit card. Owning a credit card is good for your credit score and it can be very useful for emergency expenses, but if you don’t manage it and control your spending, it’s a debt trap. If the damage has been done and you already have a very poor credit rating, pay your debts off slowly. Include it in your budget. By doing this, you can start slowly building your credit score again. Talk to your creditors about how you can settle your debt, within your means. Paying off your current debt by taking out a loan is not the way to go. You should pay only what you can afford. Most creditors would be agreeable to staggered payments, rather than not get paid at all. Work with them and negotiate a deal that will work for you.
9) Set Priorities
New TV set or your child’s tuition fee? A long awaited trip or your mortgage payment? When you are reading it, it seems so easy making the right decision. Of course you will prioritize your child’s education and your mortgage payment. You’d be surprised to know that a lot of people will choose the new TV, and try to pay off their child’s tuition fee afterwards. A new TV is exciting and well… new! The monthly payments are boring. It seems that their ability to acquire things is how people gauge their success these days. If things are stable and quiet (as in, nothing new is happening) they get bored. Well, being in debt is no fun either, and you don’t want that kind of excitement in your life. When you can’t afford to buy everything, like Bill Gates, you have to make compromises and be happy with them. Be happy that by prioritizing, you are able to manage your finances and there’s no creditor knocking on your door.
10) Be on the Lookout for Money Making Opportunities
One good thing about money is that you can never have too much of it. There’s no overdose. Having enough will give you a comfortable life. Having too much means you have more than enough to enjoy your life and even share it with your loved ones. You can sleep well at night, without fearing for the future. It empowers you. So, it’s only logical that even if your current income is enough to make ends meet, you should always be on the lookout for other money making opportunities that will bring in extra income. You can’t anticipate what the future will bring. While you are able, earn as much as you can. With the extra income, you can build your savings even when you don’t need it yet and you’ll have funds ready when you do need it. The best way to earn some extra money is by doing something you enjoy and getting paid for it. If you’re good with handicrafts, you can sell some of your work. If you’re a writer or a web designer, you can be a freelancer. There’s a lot of ways to bring in extra cash, if you’re really determined.
11) Buy in Cash
Retailers lure in customers with the promise of low monthly payments when they purchase an item. Customers fall for it. The reason for this is because people want instant gratification. If you can afford to make the monthly payment, then that means you can afford to save up for the item you want to buy – if you can wait, that is. What retailers fail to mention is that you are also being charged interest and other finance charges. If it’s not really critical that you get the item now, save for it instead and buy it in cash. That way, you can have what you want and not be in debt.
12) Don’t Give Up
If you go over your budget or give in to material temptations, it’s not the end of the world. Everyone falls off the wagon once in a while. Just start over.
13) Make this your Last Option
If something comes up before you were able to strengthen your financial situation, and you need cash fast, go for Short Term Loans instead, which is an alternative to Payday Loans. Same as a Payday Loan, you can avail of it even if you have very poor credit rating and all it requires is that you have a stable job and a Canadian bank account. It offers the same convenience – you can apply online or through phone and your application will be processed and approved in 1 hour or less. The advantage of Short Term Loans over Payday Loans is their lower interest and longer payment terms. Payday Loans need to be paid on your next paycheck and charge very high interests. Short Term Loans are more flexible and you can pay it for a maximum of 90 days. Being in debt by itself is bad enough, but the longer payment term will at least allow you to fit the monthly payment into your budget, rather than pay the whole amount on your next paycheck. This will result in your not having enough money again to last you until your next pay. Get the most flexible and affordable loan you can get, if you really need to borrow some money.