Oops I did it again! Financial recovery from school holidays

Rescue your finances with a short term loan from LoanPig.

Summer is over, the kids are back at school, and before we know it Christmas will be here!!

But in amongst all the business of everyday life there is one small problem: money. Or, to be more accurate, lack of it.

Let’s be honest, most of us will have overspent during the summer. Despite all our good intentions everything always seems to cost more than we planned, not to mention all those unexpected visits, outings and long sunny sessions in the pub.

If that describes you then you need some kind of financial recovery plan to sort out your finances before things get any worse. We reckon there are Six Steps that you need to take to do this:

  1. Be clear about your financial goals

You need to decide what you want in terms of your finances, and then grit your teeth to do whatever it takes to get to that point. Whether it’s to clear your credit card debts, save for a house, buy a newer car or travel the world – decide what you really want and then find the determination to make that happen.

You need to commit to financial recovery otherwise when things get tough you are likely to give up and go back to your old ways. There are long standing habits that you need to break, and it will take effort to do this. You need to realise that from the start and be prepared to see it through. But it is possible and you can do it!

  1. Get an overview of your financial situation

It can be scary to sit down and really work out your financial situation but until you do this nothing will change. So the first thing to do is make a list of everything to do with your money. You need to include:

  • Sources of regular income eg salaries, benefits, pensions, rent (eg if you have a lodger)
  • Savings and investments eg bank or building society, ISAs, shares
  • Debits eg loans, overdrafts and credit cards

At this stage look particularly closely at your debts vs your savings. If you have some savings available it is usually  better to pay off some of your debts. With many credit cards you will find that your monthly payments may just be paying off the interest and the actual amount of debt is not decreasing at all – particularly if you keep spending on that card. But if you can pay in a larger amount of money this will then reduce the actual balance of the card and reduce the amount of interest you owe.

If you do not have any money available to reduce your debt then you need to consider other ways of paying off that debt and we will look at that below.

  1. Create a monthly budget

We’d all love to wave a magic wand and get out of the financial mess that we’re in but unfortunately  life is rarely like that. The only real way to get yourself sorted out is to create a realistic monthly budget then work hard to stick to it.

To make a budget, first of all make a list of everything you spend each month. Start with all the regular payments that you have to make such as mortgage or rent, loan or credit card repayments, household bills, subscriptions etc. The best way to handle these is to set up monthly direct debit payments from your bank. You will then know exactly how much is going to be taken out of your bank account and when.

Once you have accounted for these you then need to add on other essential spending such as food and transport to work. Then take a deep breath and add on all those other things that you regularly spend money on. Include everything –  going out, hobbies, clothes, hairdresser etc. Be honest so that you can get a real picture of where your money is going.

Then make a list of all the money you have coming in every month from all the sources you identified in Step 2 above. Anything that brings in money – no matter how small – should be included.

  1. Test and tweak your budget

So you now have on paper or computer what you think your budget looks like. But it is also important to test it out. So as well as making a budget it is essential to put in the effort to check whether it is accurate. For the first month or two it is important to record all your actual expenditure to see how realistic or otherwise your budget actually is.

You may be horrified to find that your expenditure on food or clothes is much higher than you estimated it was. But at least you will then know where every penny is going and will be able to tweak your budget accordingly.

You should now be in a position to know whether you are managing financially or are struggling – and if the latter, where you need to cut down.

If you have a little money left over at the end of the month then use that to pay off your debts more quickly, and also try to save a bit of money for either treats or emergencies. But if your budget clearly shows that you have less money coming in than needs to go out you need to take further action to make things work.

  1. Balance the books

Ok so now you have a budget and you know whether or not you can realistically stay within it. If not, you have a problem. Particularly if you have raked up some extra debt over summer. It is tempting at this point to bury your head in the sand and hope it all goes away but it won’t. You need to do something to pull yourself round.

Put simply, you have a choice of either increasing your income or reducing your expenditure. Or preferably both. A few ways to start doing this are:

Increasing income

  • Change jobs
  • Take on extra work as well as your job
  • Turn an artistic hobby (music/painting/crafts) into a money-maker
  • Downsize your home
  • Take in a lodger
  • Sell things that you no longer need

Reducing expenditure

  • Check your budget and get rid of anything that is not strictly essential
  • Look around for new suppliers of energy, insurance, phone contracts etc for better deals
  • Find cheaper ways of doing everything, for example:

– socialising at home instead of going out

– buying second hand goods from eBay and charity shops

– trading skills with friends and family instead of paying others to do jobs for you

Some of the above are not easy choices to make, and some will take time and effort to do, but it will be worth it if it will enable you to get your finances back under control and then keep them that way.

As part of your financial overhaul you may also want to consider taking out ashort term loan which you can use to pay off all your existing debts. This could enable you to have just one affordable monthly payment rather than lots of different ones that are spiralling out of control.

Whilst you do not want to pay debt by getting into more debt, a loan could be a good short term solution just to get you back on track. But then make sure you do not increase your debt any further: it may even be worth giving your credit cards to someone else to look after until you get yourself sorted, so that you are not tempted to start overspending again.

  1. Start saving

Many people do not have any savings. Recent data shows that one in ten UK adults have no savings at all, one in eight adults have no cash savings, and one in three only have savings of between £1 and £1,999.

When you are struggling to get by month after month, the idea of having savings seems like an elusive dream. But it is important to have them and it is possible to start saving, whatever your situation.

Savings are important because they mean that you are prepared for any kind of emergency that may come your way, rather than having to get into more debt when something unexpected happens. Also, once your finances are calming down a bit, having savings means that you can treat yourself to something nice.

So as of now, start saving some money into a different bank account each month. The ideal savings account is one that is not too easy to take money out of, but that you can get to in an emergency. Even if you are only able to put in a few pounds a month, start doing it now.

One good way to save is to set yourself mini targets every day and put away a tiny bit of money when you either make or break them. For example you may want to have a naughty jar that you put say 20p in every time you swear or eat a sweet or have a drink or do anything else that you are trying not to do.

Or turn this round to be a positive thing – that you pay yourself something when you achieve a goal, such as going for a run or mowing the grass or cleaning the house. Anything that works for you and starts you putting money to one side is great. At the end of the month you will be amazed at how much you’ve managed to put away without even noticing, and you can then put that money straight into your savings account.

We hope that these six steps help you to recover from summer and keep your finances under control from now on. Remember if you need help with a short term loan then do get in touch with us at LoanPig.