We are all tempted at some time or another to overspend but with careful planning you can still do the things you’d like this year without breaking the bank or getting into debt you can’t cope with.
Anticipating large purchases is a great way to avoid debt. If you know your car’s on the blink, or that you’ll want to join the girls on holiday this summer, start planning ahead. Saving a small amount every month can translate to a large sum over time. Sit down and work out exactly how much you can afford to put aside each month (10 per cent is a good start), how much you’ll need, and how many months you’ll need to save in order to have the sum you want.
Prioritise. If you’re used to eating out every night but aren’t left with enough remaining for Louboutins, or Jimmy Choos, decide which really means more to you. Would your standard of life really be lower if you discovered the art of home cooking? Or would it be lower if you stopped seeing friends every night just for a pair of shoes? It’s your call, but whatever you do make sure you can afford it. Living above your means may seem great, but the unfortunate catch is that, at some point, you’ll have to live below your means in order to compensate. If living within your means is that tough, you won’t enjoy it when you have to live on even less to make up.
It’s extremely important to go through bank and credit card statements regularly. Compile lists of all major expenditures and see where your money is really going. A good approach is to list your five or so main outgoings, so you could have rent/ mortgage, essential food and commuting costs, then social life –restaurants, theatre, pubs and clubs, appearance and grooming -clothes, shoes, accessories and makeup, and finally, travel and experiences. Everyone’s five lists will be different, you may need more, but the point is to see the proportion of income you spend on essentials, and the proportion you fritter away on things you neither want nor need. It can be very surprising to see how much you spend on an area you hadn’t even considered. Across the course of a year you may be spending enough on lattes to fund a holiday.
Try and review your finances in this way at least every quarter, this way you can monitor and shape your financial situation, and maintain a sense of control.
If you need to make a specific purchase you haven’t prepared for, or cover a large expenditure on something necessary like maintenance on your house or car, it’s extremely important to take out a loan that is both sensible and affordable. It’s easy to get swept away by the immediacy of the money you could borrow, but it’s important not to lose sight of the reality of repayments and debt. If you do need a loan, opt for one with reasonable repayment rates.
Clydesdale Bank’s instant decision loan offers an APR representative of 5.1 per cent on all loans between £7,500 and £15,000 (subject to conditions).