If the new year has brought money worries, then you might consider unsecured loans; or perhaps you're interested in some clever budgeting solutions. There are plenty of things you can do to stay on top of your finances in 2018, so you don't have to let financial anxieties take over. You just need to be a little more organised and find some easy and effective ways to direct your spending and achieve better control over your budget this year. 2018 is your opportunity to be a more financially-savvy version of yourself!
1. Repay Your Credit Card Balance – And Then Leave It At Home
First thing's first – if you have credit card debt, start working towards paying it off. Life is much easier when you don't owe money every month from the get-go. Don't stick to minimum payments, either; did you know it can take you decades to pay an average UK credit card bill that way?
Save your pennies by avoiding impulse purchases by cutting out your biggest enabler – your credit card. Having a thin, plastic magical pile of money at your disposal may be convenient, but it's also dangerous, because it's always accessible.
You're always just a quick transaction away from over-spending on things you don't need just because it's so easy. Make it harder for yourself by leaving the card behind when you're not planning any purchases. That will save you the need to get unsecured loans to pay off credit card debt.
2. Make Several Individual Budgets
This method might be old-school, but it works beautifully. At the beginning of the month, take your cash out and divide it into several different envelopes, according to expenses: bills, food, leisure, other necessities, etc. That will curb your spending by limiting the amount you are allowed to spend on any one category.
That means that you're going to have to make some choices. You can't have everything you want, so you will be forced to prioritise. If you've only got £100 in "fun money" for the month, you can't buy all the clothes you want, and eat out several times a month, AND go on a night out every weekend.
3. Use Budgeting Tools Like Spreadsheets
Most people don't track their spending; in fact, some avoid looking at their expenses at all cost, and do you know why? Because it can be terrifying. But that's precisely the secret of this method.
Use budgeting tools to track and organise your expenses. For example, you can make a spreadsheet and write down every little expense and every penny that goes out vs. money that comes in. Once you've done it for a month or two, you will have a clear picture of just how much money you're wasting on things that aren't really that important to you, and you will be horrified, my friend. And that's great! This way, you will be able to identify the fact that you spend entirely too much on takeaways, for example, and will be able to cut back on the money you spend on it.
Other budgeting tools you can try:
- Personal Capital (which is good for investments)
- Prepaid cards
- Mint (this app can give you a pie-chart style visual representation of your spending)
4. Prioritise Your Spending
If your version of budgeting does not cover necessities first, before moving on to leisure spending, then you're doing it all wrong. Prioritising your spending is absolutely essential in budgeting, and you have to be aware of what is important and urgent and what can wait. I propose a 3-tier system: urgent expenses, necessary expenses, and sleep-on-it expenses.
Money for urgent expenses is for any unforeseen emergencies, such as medical bills, home repairs, a car repair, etc. Then come the necessary expenses, which are always bills, any outstanding instalments for unsecured loans, mortgage instalments, school tuition, basic food expenses, perhaps a new pair of shoes because your old one is worn out, presents for an upcoming celebration, etc.
Finally, the sleep-on-it expenses come last, and they are any expenses you don't have to make and that you may not need, or may stand to save for over a longer amount of time, like recreational clothes shopping, a new gaming system, a vacation, a new car, etc.
5. Employ The 50/20/30 Method
Popularised by Elizabeth Warren, the 50/20/30 system is simple to follow, and it ensures that all of your necessities are covered and that you allow yourself some fun and leisure money, while also managing to save some money at the same time. Saving is extremely important, so that should absolutely factor into any budget plan you set up. In this case, 50% of your monthly budget goes to necessary everyday expenses, 20% is dedicated to savings, and the remaining 30% is yours to play with for little extras that make life worth living.
How you choose to spend it once you've divided it up is up to you, so if you want to blow your whole 30% leisure money for the month on a weekend getaway, that is your choice. But it means you are not allowed to dip into your other funds to cover other desired things like takeaway coffee, or nights out. It's advisable that you set aside the 20% savings immediately, so that you're not tempted to keep dipping into that extra fund.
6. Use Unsecured Loans To Consolidate Your Debt
With total UK personal debt sitting at £1.566 trillion at the end of 2017, according to the Money Charity, it's safe to say that a lot of people have loans, whether they're unsecured loans with bad credit, student loans, secured loans, or short-term payday loans. So, you don't have to be embarrassed about it. What you should be focusing on, instead, is budgeting in such a way to minimise your debt and that can be achieved if you get unsecured loans. It may seem counterproductive, but in fact, it can be a very clever way to pay off what you owe.
You see, taking out an unsecured loan can mean you can merge all of your debt together and consolidate it under just one loan, so you're only going to make one payment, with one interest rate. That can significantly cut back on the time, effort and stress of repaying several types of debt, and if you play your cards right, you may even get your debt reduced.
All in all, there are several actionable steps you can take this year to reduce your debt and budget more efficiently. Is it enough to track your spending, do you need a strictly organised budget, or are you better off getting a loan or a credit card to stay on top of your expenses? Make sure to read all about unsecured loans vs. credit cards and choose the right option for you!