Sticking to a budget isn’t always plain sailing. It requires work, commitment and responsibility. Keeping a budget will help you achieve your aspirations, so it’s worth putting in the effort! Oftentimes people naturally assume that debt is the end of the world. But if you’re in short term debt to achieve long term financial goals, it isn’t necessarily a bad thing.
Only borrow what you can repay
At one point or another in life people will need to borrow money. Whether it’s to get them through an emergency, to fund a wedding, funeral or some kind of event or to help with a larger purchase. It’s important to consider how much you need to borrow and how quickly you’ll be able to pay it back. Knowing that you can keep up with the repayments is vital otherwise you may face legal consequences. So, work your debt payments into your monthly budget and prioritize them.
Repaying your debts over a shorter period is more cost effective
Before you go ahead and spend the money that you worked hard for, ensure you pay off your debts first – prioritizing your most expensive loan debts. If you have a pay rise and you’re able to put money away into savings, you can use this cash to repay your outstanding loans at an earlier date. In fact, many people use their savings to repay outstanding loans and your loan provider must allow you to do so- just be sure that the early repayment charges aren’t ridiculously high – the fee might be something like 1-2 months worth of interest. Repaying your debts early is much more cost effective, just make sure you read the terms and conditions before you sign the agreement.
Read the fine print and understand what you’re signing
It’s imperative to read the terms and conditions so that you are sure of all the information and any disclosures that are not necessarily in the main document but in the footnotes. Take your time to read over it all so that you fully understand how and when you’ll be repaying your loan before entering into an agreement.
Be aware of interest rates being changeable
The pandemic means that prices have inflated everywhere – from higher gas and electric bills to a more expensive food bill. Interest rates on mortgages, pensions and borrowing have also been affected. When you agree to your loan, it is most likely that your interest rate will be changeable. Of course it’s important to compare interest rates to ensure that you’re getting the best possible long term deal.
Budget for your repayments
It’s so important to create a budget in order to pay your debts on time each month. Use a spreadsheet to input all your monthly transactions and additional payments. Make sure your repayments come before any extra splurges. Share the responsibility with your partner or family members to help you take accountability for your purchases; could you cut your food shop down? Do you need to eat out every Saturday? Is that extra pair of shoes necessary? All of these little things build up. If you monitor your accounts daily it will help with your spending and you’ll repay your outstanding loans in no time.