Money saving tips for 2019 from Simple Personal Loans.
Whilst answering the above questions can be rather daunting, it is important to identify your relationship with money and how confident you are in your ability to manage your money. The thing to remember is that it is possible to change. Even if you are not very good with money now, then there are ways that you can overcome this and start getting to grips with your finances.
One thing you need to know is that there are five very common mistakes that it is easy to make regarding money. If you are aware of these and can start putting plans in place to overcome them then you will soon start seeing your finances move in a positive direction.
- Burying your head in the sand
We’ve all heard this phrase, which actually refers to ostriches! But what it actually means is the tendency to try and ignore a problem and hope it will go away. And this is what many of us do regarding our finances. So the first thing to do – as with any problem in life – is take a deep breath and look at the situation in detail. You need to understand exactly how things stand.
So take a good look at every aspect of your finances and create a budget to plan how you are going to use your money each month. You then need to work hard to watch what you are spending and make sure you stick to your budget. This may mean that you have to find ways of eithersaving moneyon what you spend, or bringing in extra income, or both.
For more information on how to do this, why not take a look at our recent article Top Tips to Get out of Debt in 2019.
- Living on your overdraft
When you create the budget that we have just referred to it is really important to keep your spending within the money you have coming in each month. If you have an overdraft facility with your bank, don’t fall into the trap of seeing is as “extra money” and get into the habit of using it every month.
Your overdraft should be seen as a fund just for emergencies. If you start depending on it as regular income you will start sliding further into debt. Your budget should not rely on using your overdraft to make it through the month.
If you are already in the situation where you use your overdraft regularly and are now stuck with that extra debt, it may be better to take out a small loan with affordable low monthly repayments to get rid of your overdraft completely. Then make sure that you do not use it again unless there is a genuine emergency.
- Not paying off credit cards in full
Credit card debt is dangerous because it can build up quickly without you realising what is happening. It can feel good – and empowering – to get out the credit card to buy something, but all you are doing is creating more debt.
Ironically, having a credit card can be good for your credit score – but only if you manage it well. For example if you use it to make a major purchase and know that you will be able to afford to repay the balance quickly afterwards. Ideally you want to be in the situation where you are paying off the balance in full each month.
But if you use your credit card unwisely you can allow debt to build up. You may soon find yourself at the stage where you can only afford to make the minimum repayments on your cards. But if this is the case then you are likely to only be paying off the interest on the balance and not actually reducing the balance itself. Therefore you will be sliding deeper into debt despite making regular payments.
So be very careful when using credit cards. If this is an area of weakness you may want to either cut up your cards or give them to a family member or friend for safekeeping, to be used only in an emergency.
If you already have run up various credit card debts, then you may be better to consolidate your credit card balances into a single loanwith an affordable monthly repayment rather than juggling around lots of different balances.
- Not having savings
It is really important to have savings. Even saving a little bit every month could be really valuable for dealing with an emergency. Ideally you need to have enough savings to be able to cover around three months living expenses. So if there are any problems with either your job or your home you would be able to survive.
If you are not currently in the position to be able to save then it is worth considering taking on some extra work or finding some other means of increasing your income even for a short period of time, just to enable you to start getting a bit of money behind you.
Once you do have this amount of money saved, it then makes sense to try and pay off any remaining debts before saving further. Once you have paid off your debts then this will give you more disposable income and you will then be able to start saving more money more quickly.
- Applying for too many financial products
You need to have a clear understanding about how many bank accounts, loans, credit cards that you have. If you have several products and are managing them well, this can have a positive effect on your credit score. But if you have so many products that you don’t really feel in control then perhaps it is time to consolidate them into a smaller number of products that you manage better.
Always be careful about applying for new financial products. For example, there may be an advert for a new credit card that looks to be a good deal but do you really need it? The problem is that when you apply for any financial product, the financial company will check your credit score. This usually then leaves a note on your credit score to show that it has been searched by that company. Then the next time you apply for another financial product with another company, the previous search will be visible to that company too.
This process means that if you apply for a lot of products it can lead a lender to think that you are not financially responsible. Particularly if you have been turned down by one lender this may then influence another lender to decline your application. You can then find yourself in a vicious circle that is difficult to break out of.
So if you are genuinely looking for a new financial product or a better deal, make sure that you look into it carefully. It may also be worth applying to one of the three major credit checking agencies (Experian, Equifax or Callcredit) to check your current credit rating before you try to apply for a new product.
If you are careful to avoid the above mistakes in 2019 then you should soon be able to get your finances back under control. If you need any help doing this, for example by consolidating your overdraft or credit card debt into a more manageable loan, then do get in touch with us from Simple Personal Loans.