What to Do When You Are Way Beyond Your Budget for the Month

Even with careful planning and the best budget in hand, things can still go wrong with your personal finance. An attractive special offer may persuade you to buy that round-trip ticket to the Bahamas for the holiday. You may be tempted by the new fancy restaurant just a few minutes away from the office. Emergencies and expenses that you fail to budget for could also ruin your personal finance in an instant.

Regardless of the reason why you blow through your monthly budget, the main thing to do is taking steps to prevent the issue from turning into a financial meltdown. Failure to do so could lead to you being trapped in a vicious circle of going overbudget one month after the other. To help you prepare for when you do go beyond your monthly budget, here are some tips and tricks to keep in mind.

Acknowledge the Issue

The first step to solving your financial issue is recognizing that you have an issue to deal with. Unfortunately, it is also the most challenging step. I know from experience just how easy it is to brush going over budget off, thinking that I can just reallocate money from other posts or use my savings to deal with other expenses until the next pay check arrives.

That, however, is never the case. Immediately turning to your savings or irresponsibly taking money from other posts will only get you into more trouble, especially when you have yet to admit that you have an issue to deal with.

Rather than skipping this step, review the mistakes you made with your expenses and understand where you did wrong. Was it an alluring discount that you just cannot miss? Was it a spontaneous decision? How can you avoid it in the future? More importantly, how big is the gap that one (or several) mistake create?

Reorganize Your Budget for the Month

The more you assess the situation, the better informed you will be about the magnitude of your issue. Spending £200 on a new bag because it is on sale means you have a £200 gap to fill before the next pay check. It is time to take a closer look at your budget and make the necessary changes.

Those changes usually mean cutting back other expenses that are not essential. It takes a lot of discipline to make the right changes and stick to them, but it is certainly doable. You can start eliminating non-essential expenses such as the cost of dining out or buying Starbucks to begin filling that gap.

In some situations, more cuts are needed. You can reduce your budget for other expenses; no cut is too small to make. Going from allocating £150 for groceries to spending £75 means getting an extra £75 that you can allocate to filling the gap. It is a bit of a balancing act, which is why every bit you can reallocate counts.

Explore Your Options

When the gap is big enough, cutting expenses may not be enough to fill it. This is when you can start looking into financing options in order to fill the gap without harming next month’s budget. While it is not wise to immediately turn to credit cards and loans in the beginning – when you haven’t fully reviewed the situation and acknowledge the issue – there are financing options you can use to fix the issue once you fully understand it.

Short-term loans are options worth considering. When the gap is so big that you risk not being able to cover your basic expenses and loan repayments, using short-term financing to avoid late charges and other effects is a solution worth considering. For smaller expenses like groceries, credit cards are also handy.

Try to keep the issue contained; what you want to do is preventing the gap from extending beyond the month’s budget. When using a loan to fill the gap, for example, you want to make sure that repaying that short-term loan will not disrupt your budget for the following month.

Don’t Forget Prevention

Prevention is the way to stop yourself from making the same mistake again the future. You also want to prevent bigger problems from arising. If unexpected expenses are occurring frequently, you may want to start working on setting up an emergency fund.

As for going over your budget because of your shopping impulses or other mishaps, the best thing to do is allocate a portion of your income for lifestyle expense and then sticking to that budget. If the new bag you want happens to be beyond the month’s lifestyle budget, save the allocated money until you can shop without ruining the rest of your budget.

Acting fast and taking the right steps are crucial if you are serious about preventing bigger, more challenging problems after going over-budget on your expenses. Now that you have these tips in mind, you know exactly what to do when an unexpected expense throws your budget off, along with how you can prevent them from doing so in the future.


4 Secrets to Reducing the Cost of Your Loans

There are more loans and financing options to turn to in different situations. Financing options for business and personal use are in high demand, so it is not surprising to find more financing companies and lenders offering their best loans and financing for different purposes.

Since you now have more loans to choose from, you can be more proactive when it comes to using loans and maximizing their benefits. For starters, you can actually take active steps towards reducing the cost of your loans, and we have just the secrets on how to do that in this article.

Review Your Options

The last thing you want to do when shopping for a loan without a credit check is applying for the first one you come across. No matter how lucrative the deal may be, you want to shop around a bit more and find other financing options to consider before you start applying for one. Don’t be surprised to find better deals and more suitable options too.

Here’s the good news: you have the internet on your side. Getting quotes from multiple lenders is now an easy task thanks to web services and aggregation tools. You only need to visit one or two loan comparison tools, fill in the search form with your details, and get the quotes you are looking for in an instant.

You also want to consider other types of financing. If you are looking for a personal loan to deal with emergency expenses, for example, taking a look at short-term loans and reviewing the cost of using your credit cards are also the steps you want to take. You can compare the costs of the options you have better this way.

Work on Your Credit Score

When you have a good credit score, you can get the financing you need easier. Not only that, you also have the ability to get the loan with a lower interest rate in most cases. This is because your credit score is among the factors taken into account when banks and lenders review your risk factor.

Here’s the next secret that you need to keep in mind: your credit score is greatly affected by your ability to repay your loans on time. Even when you have a lot of unsecured loans to deal with, you can still have a great credit score as long as you repay them on time, every time.

Of course, removing some of those unsecured loans from your credit history is also highly recommended. Rather than dealing with 5 credit card bills and other unsecured loans, it is actually much cheaper, more manageable, and better for your financial future to consolidate them into one secured financing.

Understand the Costs

Another thing you need to keep in mind when trying to reduce the cost of using a loan is, well, the cost of the loan itself. The interest you pay is never the only cost element to consider when choosing a financing option. You also have fees and other charges to think about; fortunately, the best lenders are very transparent with their cost structure, which means you can find out the actual cost of the loan easily.

For long-term loans, you have Annual Percentage Rate or APR as your main metric. The number represents the actual cost of using the loan on an annual basis. Using APR to compare short-term loans, however, isn’t the way to go. This is because short-term loans are not meant to be used for more than a few weeks.

Don’t forget to look into late charges, additional fees for making an early repayment, and other costs associated with using the loan. The deeper you dig into these cost elements, the better you can control the cost of using the loan in the future.

Stay Within Your Limits

Speaking about late charges, you want to avoid some costs whenever possible and late fees are among those costs. Actually, you want to make sure that you can repay the loan without completely disrupting your monthly budget before applying for the loan itself.

Ideally, you want to keep loan repayment amount lower than 30% of your monthly income. This will give you enough room to deal with monthly expenses while responsibly using loans and financing for mid- to long-term gains. When your loan repayment amount is more than 30% of what you make, you start facing more financial risks along the way, and you will end up paying more in late charges and other fees.

Those fees do add up. Missing your credit card payment every month for the entire year means paying an average of £25 on late fee every month; that’s a whopping £300 in a year. The key to avoiding these extra charges is being responsible when using the available financing options and using these secrets to help you keep the cost of using loans in check.