Personal financial management balances income with spending, striving to keep payments current and responsibilities met. For some, the primary household concern is where to invest excess funds coming in to the home. But for most, the equation is tilted in the opposite direction, requiring creative financial approaches just to make ends meet.
When budgets occasionally grow thin, savvy families stretch their income to cover costs. But when difficulties occur regularly, consistently challenging earners to keep pace with expenses, changes are in order. Facing cash flow shortfalls, finding firm financial ground generally requires struggling families to increase income or decrease spending. And though it seems straightforward, establishing financial order is an imposing task for those straddling the line between affordability and insolvency.
Budget First, Borrow Later
Comprehensive budgeting is the first step toward effective long-term money-management. The process accounts for a wide range of expenses, covering major household spending areas, like shelter, food, clothing, recreation and a host of other costs of living. By distilling monthly spending obligations and comparing the outgoing flow to the levels of incoming cash, it becomes easier for cash-conscious families to see where their money is going, enabling them to tighten spending where appropriate.
Budgeting takes two types of spending into consideration. Fixed costs account for the immovable sums you’re required to pay over and over. If you own property, for example, your mortgage payment is a sizable fixed part of your monthly budget. Credit card debt, on the other hand, is an example of a discretionary expense tied to daily buys and general spending. When cash is tight, it is easier to shift discretionary costs than fixed obligations, by freezing spending on items that aren’t absolutely necessary.
Breaking outgoing cash flow into recognizable categories helps track expenses over time, accounting for the ebb and flow of consumer spending. But even well-executed budgets are disturbed by unanticipated financial needs, capable of throwing family finances into a tailspin. Fortunately, diverse financial products assist families in times of need, presenting multiple options for addressing financial obligations.
Types of Loans
Flexible funding helps countless families find their way back to firm financial footing, stepping-in to provide relief when expenses pop-up. If cash flow becomes irregular or expenses spike beyond affordability, consider these types of loans to regain financial order at home.
Personal Loans – Personal funding provides flexible options for qualified borrowers seeking loans to be paid back on a regular monthly schedule. The loans, also referred to as unsecured loans, are not guaranteed by property or other assets, so they have broad consumer appeal. For starters, payback occurs on a regular schedule, enabling borrowers to budget for repayment. And since various payback options are available, a personal loan’s payback period can be adjusted to ensure an affordable payment level is established. Though extending the length of the payback period may result in higher interest charges, it is a more secure approach than risking default on a monthly payment that is beyond your means.
Payday Loans – Another short term lending option, which is appropriate for some circumstances, is a loan tied to money you earn on the job. To understand how payday loans work, it is helpful to think of them as advances on your salary. The short-term option is best used covering needs less than £500, when it can be repaid on schedule. The flexible and immediate nature of payday loans makes them attractive to borrowers, who don’t mind paying premium interest for the loans’ convenience.
Guarantor Loan – In some cases, a borrower’s credit history is not sufficient to guarantee a loan. In order to issue loans in these instances, lenders need further assurance the money will be paid back. To find the proper level of comfort, lenders require another party to sign-on for this type of loan to be carried-out. By co-signing the credit agreement, the guarantor is pledging to repay the loan, should the primary borrower fail to make good on payments.
Even the best laid plans occasionally need to be bolstered, so personal financial management draws from multiple resources. When frugal habits and prudent budgeting fall short of financial obligations, for example, UK residents turn to a variety of financial products for relief. Choosing the right loan depends upon your individual circumstances, but creative financing is available to push diverse borrowers beyond the hurdles they face.
