What to do when an unexpected cost strikes

For most of us our ability to move from month to month in a sensible and financially stable manner is something we have developed and honed over the years. A basic ability to budget and plan in a successful manner is fundamentally crucial in our modern day society with the average UK rented household managing bills totalling £1300.00 each and every month. More so than ever we exist in an economy which allows us everyday access to a whole host of credit based facilities and as such collectively we are accumulating more household debt than ever before. The key to avoiding or certainly minimising such debt lays in effective money management and in addition financial restraint where new borrowing is simply beyond our realistic means. This appears to be particularly true when it comes to our younger generations who are more used and accustomed to credit being part of everyday life. Given that many young adults start their lives with student loans and the somewhat inevitable additional debts which can accompany them, the ability to manage money and everyday costs is an increasing concern. What often can often catch us off guard are the costs which fall outside of our normal spending and as such, outside of our normal budget. These are the costs which cannot even always be planned for in advance and instead ‘appear’ from time to time and require additional financial commitment.

In order to effectively and sensibly manage our costs, expected or otherwise it is important to be aware of your incomings and outgoings at all times. One of the simplest and most effective ways of achieving this requirement is through the use of a budget planner. Whether this be by simple pen to paper or a more technology based tool, a budget is an effective measure and management tool for all of your existing and expected costs each and every month. Many of the main stream banks provide budgeting tools within their mobile banking apps and online services which cannot only assist with saving money over the cost of time but also in simply managing your costs month in and month out. There are also more complex money management tools which are in existence from the likes of Step Change. Step Change are actually a Charity based organisation who can offer free and impartial debt advice for those of us who are struggling to manage our everyday living costs on a regular basis. The point being is that there are a number of resources and methods which can assist in the sensible and effective management of your everyday costs each and every month.

As for those costs which we did not plan for, a slightly different approach is often required. Whether it be a broken washing machine in need of urgent repair or a broken down car which needs fixing promptly to avoid missing work, these are the type of costs which sadly we cannot simply just ignored. In such times when ‘additional’ cash must be found from our normal budget there may be a requirement to seek out an affordable borrowing resource. There are a whole host of short term borrowing choices which exist today and depending on the specifics of your requirement, there is likely to be a resource which fits your needs. Of course where it is affordable and sensible to do so, a one-off cost may require the use of existing savings or ‘spare’ funds option if you have it available. Using existing and readily available savings will negate the need to source borrowing elsewhere and therefore manage the overall cost in an interest free manner.

For those of us who simply do not have the ability to cover a one-off cost through the use of existing funds a small and sensible borrowing resource may be the best consideration. In terms of the options which are available they will range from short term loans through to credit cards and purchase specific finance. Short term loans are also known as payday loans and are available via the completion of an online based application form. Each year millions of consumers use this particular resource for their short term borrowing needs and thanks to the recent appointment of the Financial Conduct Authority as the regulating body responsible for the market as a whole, they now offer flexible and customer focused small loans. As well as online loans there are also a number of credit card providers who offer small credit facilities and often have a range of introductory offers, such as interest free use for a stated period of time. Depending on the purchase required the supplier may be able to offer a credit facility directly also, potentially making the entire process more seamless. The key in any case is to select a resource which is realistic to your existing budget and therefore can be repaid comfortably as required.

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%

Warning: Late repayment can cause you serious money problems - For help, go to moneyadviceservice.org.uk

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Author: Internal Marketing Department

 

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