Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk
Believe it or not, money management is only possible with a well-structured budget. A financial budget is a blueprint for the future. It indicates precisely how finances are allocated to individual components of your overall spending plan. Typically, a budget incorporates elements such as maintenance of a vehicle, food, housing, education, entertainment, healthcare, retirement, petty cash etc. The precise categories in your household budget will vary according to your needs. The sooner you start implementing a budgetary framework, the better off you will be.
Too many people fall short in their money management endeavours, owing to a ‘failure to plan ahead’. The first step in creating a budget is an understanding of precisely how much revenue is coming in every month. A budget relies on income and expenses to function optimally. Precise figures are needed to create a reliable and effective budget. Your point of call is determining whether you will be using your gross income or your net income. Once you have determined this, it is imperative to list all your expenses in an easy-to-understand format. For example:
• Education (children’s schooling, undergraduate studies, postgraduate studies, ongoing learning, vocational studies)
• Entertainment (wining and dining, movies, theatre, excursions, miniature golf, birthday parties, and so forth)
• Mortgage or Rent (if you own your own property, your mortgage, HOA, insurance etc., or if you rent then consider all related rental expenses)
• Medical (this includes ensuring you have enough for the deductible, monthly premiums for health care and dental, and vision plans)
• Transportation (leases, insurance, maintenance, repayments, gasoline, wear-and-tear etc.)
• Food (your food budget is not the same as your entertainment budget, and funds should be allocated accordingly.)
These are but a handful of the many categories available in a typical household budget. You will want to take into account several other categories such as your retirement planning, and an emergency fund (between 4 and 7 months of expenses covered). Many people who have already established a budget may be considering additional lines of credit to finance renovations, big-ticket purchases (home entertainment systems, vehicles, appliances and upgrades etc.).
It is imperative that you factor the costs of these lines of credit into your budget. Applications for a personal loan, or a business loan should never be approached in a willy-nilly fashion. Always ensure that you shop around with a loan quote from each licensed and regulated lender.
All too often, folks tend to make the mistake of simply accepting the terms and conditions provided by credit institutions such as short term payday loan companies. This is the wrong approach given that there are multiple reputable companies out there offering highly competitive interest rates, repayment plans, and loan terms. Once again, a loan quote should be factored into your overall budget to ensure that you can make the monthly repayments without adversely affecting your finances.
Most of the time, you will have to contend with your credit repayments as part of your budget. This includes mortgages, automobile repayments, student loans, credit card debt, personal loans etc. Your credit score is a vital cog in the wheel that determines how much you will be repaying on these lines of credit.
Sometimes, you may encounter a snafu with payments from an employer, a client, or a policy that is due. At times like this, it may be beneficial to shop around for short term loans UK providers. Be advised that competitive loan quotes are essential before you sign on the dotted line. All loan providers must be FCA licensed and regulated, to ensure that predatory pricing techniques are not imposed upon you.
Regulated operators are bound by the law, and clients can always contact the financial ombudsman in the event of any untoward practices. Your budget must factor in your loan repayments, and any possible delays that you encounter in making good on those payments. Remember, loan providers can levy stiff penalties on late payments or non-payment – and this will affect your credit score and dramatically change your budget.
Plan ahead, so you don’t fall behind!