As modern day consumers we have become increasingly accustom to having to manage our finances in a manner which is on-going. By which I mean the purchases we make often must be accounted for over a number of months; given the increasingly popular trend of using credit on a more general scale. Household debt continues to rise as consumers are prepared to make purchases in knowledge of the fact the purchase is not fully paid for and therefore a monthly commitment must be agreed and adhered to. Credit now exists in many elements of our everyday lives and it is certainly no longer the ‘norm’ to make purchases only when the full funding required is readily available to us. These type of spending habits are by no means new and in fact collectively consumers have become increasingly used to turning to credit as a realistic and affordable method of buying the things not only needed but wanted also. The result of this is that the way we manage our money has had to change and by which I mean, extra care needs to be taken to ensure we are managing our monthly expenses in a manner which is sensible and affordable.
Managing your budget and therefore the money you receive and must subsequently pay out each month, takes planning and maintenance. In the contents of our budgets is likely to change from month to month depending on the new and existing costs which must be satisfied. Generally speaking it is common for certain living expenses to remain static, in that the cost of our rent or mortgage and for example, travel expenses is likely to remain the same each and every month. Other basic living costs however may need further consideration from time to time as the cost of our household bills may be applicable to price changes from time to time. The same can be said for the costs associated to the cost of insurance based products, such as home and content insurance, as well as car or pet insurance; although most of these are subject to a 12 month contract and therefore a reliable budget can be planned accordingly. Once all the ‘basic’ living costs have been accounted for, there are of course a whole host of other monthly costs which may need to be correctly and accurately planned for, to avoid contractual repayments being missed.
These additional monthly costs could involve anything from credit card repayments to catalogue instalments and of course these are changeable. As we have discussed many consumers may be managing a number of credit based commitments each and every month and therefore pre-planning is essential. This is particularly true where credit card repayments are concerned as it is important to make repayments which are not only affordable and meet the minimum requested by the provider but also are of a size designed to reduce and repay the balance as quickly as possible. Managing and being fully aware of the costs linked to credit based commitments is not only important from a monthly management point of view but also in terms of ensuring new commitments are not agreed without the understanding that they are truly affordable. Take for example a new Hire Purchase agreement, such as those offered for sofas. Many consumers like to use such agreements due to the fact that they can be interest free agreements. This means a monthly instalment can be made over an agreed period of repayment until such time that the agreement is deemed satisfied and therefore the goods repaid in full. Although of course an interest free credit agreement is always going to be favourable, it is still important to ensure the actual amount to be repaid each month is an amount which is realistic to your existing budget and therefore the commitments within it.
Refreshing your budget on a monthly basis is important to ensure any new costs are account for. This means should your car tax be due and not paid for by way of a monthly instalment, every 6 months this will be an additional cost to factor into that months budget. The same can be said for months where it is someone’s birthday, there is a weekend away planned or a larger than normal one-off purchase is due. Therefore refreshing your budget regularly will ensure you are not ‘caught out’ on months where your monthly expenditure is higher than normal. Planning your budget regularly and in a manner which is sensible will also assist in covering the costs on months where an unexpected cost presents itself, such as a broken car or emergency vet cost. These are of course not costs that can be specifically planned for in advance but equally are important and can demand our immediate attention.
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk
Representative Example: Representative 1286.98% APR on a loan of £300.00 with 5 monthly repayments of £101.03 Total amount repayable £505.13 Annual interest rate (fixed) 290% Maximum APR 1351%
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Author: Internal Marketing Department