In the modern world, borrowing money, whether it’s a mortgage to buy a house or simply using a credit card to shop for groceries, has become a part of everyday life. In recent years, there has been an explosion of short-term lenders offering payday loans to those who need extra cash, usually for an unforeseen expense that they don’t have the money for, such as a car repair or a broken down boiler.
So how can you avoid needing to rely on short-term borrowing?
- Carefully plan your monthly bills
Unfortunately, many people also use payday loans to bridge the gap in funds from one payday to the next. Indeed, according to Cashlady, taking out a short-term loan to pay bills is one of the most common reasons for taking out a loan of this kind.
This means that in order to avoid short-term borrowing, it is vital to ensure that you plan for your monthly bills. Write a list of all bills you know go out every month. Many of us pay our gas and electric in monthly direct debits of the same amount every month, which makes planning easier. Alternatively, many utility providers enable you to enter your usage online every month and get a bill estimate, so you can plan ahead.
- Draw up a budget
Now you know how much goes out each month in bills, you can start to draw up a budget.
Add up all of your essentials (bills, food shops etc.) and minus this amount from your monthly wage. Anything that is left is known as disposable income, which can be spent on luxuries, such as a trip to the cinema or non-essential items.
- Put aside some savings
If you have any money left after paying for your essentials every month, put a little aside if you can. Even if it’s only a small amount, this can build into something sizeable over time as you keep adding to it.
Having savings can help you to avoid taking out a payday loan for an emergency or unexpected expense.
- Plan your meals to reduce your food costs
Don’t let your food bills eat into your earnings and result in you needing to take out a short-term loan to cover your other bills.
Planning your meals and making a list before heading to the supermarket can help you to reduce how much you spend on food.
- Take time to find the best deal
If you do need to make a big purchase, do your research to find the best deal. These days, you can visit many different stores to compare prices from the comfort of your own home, with just a click of a button.
With a little careful planning and by drawing up a budget and sticking to it, you can work towards avoiding taking out short-term loans to cover your costs. Don’t forget to put a little money aside each month, too, if you can. Even a small pot of savings can help you to pay for those unexpected expenses that may once have resulted in you applying for a payday loan.