Now the summer has come to a close and Christmas festivities are a far off memory we often have a bit of a shock. Having spent like no tomorrow, tomorrow has come. We find our savings depleted, we have run up debts, and may even be scratching our heads as to how to meet essential payments such as rent / mortgage and credit card repayments. Let’s have a look at how to get over the post summer hangover and quickly get back on track for next year’s fun and games…
First we will look at paying the debt off and getting stable and then preparing your finances for long term stability.
Part 1 – Clearing the Mess
OK, so you’re in a mess – now’s the time to fix it. Check out these tips to repair your finances.
Savings vs debts
If you have savings but also debts, use the savings to pay off the debt. While having a nest egg is all well and good, it comes down to the fact that banks charge more interest for debts than they pay on savings. If you have $2000 in savings and $2000 in a longer term credit card debt you might only be getting 1% in interest from the savings account but be paying 35% for the debt. Why pay some banker 34% net interest to have your nest egg?!
While you are in debt you should forget putting savings aside too. Ideally, you should put as much of your disposable income as possible toward your debt to get into debt freedom…
Fast cash loan?
While we more often than not gamble on everything going swimmingly at home during a summer of fun, sometimes things go quite badly wrong when you least expect it. Perhaps your car breaks down close to your mortgage or rental payment deadline? Perhaps your kid gets sick and you have to take time off work during the period and haven’t been able to earn enough to meet the essentials?
In this case, consider getting a fast cash loan. Fast cash loans are slightly more expensive than longer term loans, but fast cash loans are extremely quick to get and can help you make ends meet in an emergency. While a bank will take ages to consider giving you a loan, credit checking you extremely carefully, Swoosh Finance aren’t so overly considered and bureaucratic, and can give you a fast cash loan normally within a few hours of application.
While fast cash loans are a good move for repairing a massive hole in your finances that could sink your ship altogether, fast cash loans aren’t always the best solution in recovery from a major financial mess. Think of a fast cash loan as a way to patch a hole in your hull to stop you sinking!
Longer term loans
Debt consolidation loans are a good way forward. The better your credit rating, the less interest you will pay, and even for someone who has a few late markers on their credit history can usually get a loan to pay off the credit cards. You will pay 10-15% interest typically over a 3-5 year period but this is significantly cheaper than your credit card would charge.
Put simply, instead of $350 for every $1000 you have borrowed on a credit card you would pay a bank $150 a year for every $1000. For those with a better credit rating, this is the better option than fast cash loans. Fast cash loans are there for everyone – not just the very credit worthy…
Automate your payments
In most cases we can rely on a certain amount of money hitting the bank at the end of the month and can make our essential payments soon after. In an ideal world you would pay off your mortgage / rent, energy and telecommunications bills, and loan repayments / credit cards the day after payday.
The best way to do that is through direct debits that you can set up with your account providers. That simplifies the process of being paid and paying out to the point that you don’t even need to think about it. You then look at your online bank account and see what you have left and can do what you want / need to do with it.
One of the upshots of direct debit payments is that you’ll never make late payments and can start building or maintaining a good credit history for future loans.
Don’t give up the fun stuff!
While a bank loan assessor will make you feel guilty about every beer and coffee you drink, as well as going to the gym or having the odd beach party or whatever makes you happy, you don’t need to live like a nun or a monk to clear your finances. There’s a strange fact that fun things are important to keep a perspective on life and may ultimately keep us sane!
While over Christmas and over the hot summer months we may push the boat out and sometimes say, ‘Bugger the finances’, again this is no terrible thing. We live to live, not live for the banks.
But there are times to get serious and you’re probably reading this blog for exactly that reason. Let’s look at four ways you could trim back your expenditure without feeling trussed up by a bean counter:
- Do you use that gym membership? If you don’t like being chubby and happy, do you really need the Platinum membership with all the bells and whistles? Could you sweat off the kilos without spending the same every month? You could cut $30 or more from your expenditure every month in this way.
- What about your Spotify or Xbox subscription? Is it worth paying for Amazon Prime Video just to watch those three idiots on Grand Tour once every few months? You’d be surprised at how many electronic entertainment subscriptions are barely used, if at all. Despite Spotify being cheaper than buying CDs if you are a music aficionado it may actually be cheaper to go back to CDs for the average Jo or Joe who buys less than one CD a month normally!
- Do you really need that gadget or gizmo? At $1000 or more, is the latest iPhone really necessary in your life? People waste $$$ on having the latest, well marketed electronics yet really don’t use them for all they are worth. While the iPhone SE isn’t as cool as the iPhone 7, you will pay your cellphone provider a lot less for the privilege of using it and ultimately that is money in your bank not some financier shareholder’s in SE Asia…
- What about your car? Are you paying shedloads of cash just to keep it on the road between breakdowns? It may be time to replace it and pay less on repairs…Newer cars are far more fuel efficient too and you could save a lot more money in fuel efficiency.
While $50 a month here and there in not spending on unnecessary things may sound much in itself, it soon mounts up even without living a monastic existence. You can use the savings to hit your credit card and other debts and start moving toward your longed for debt free existence.
Part 2 – Rebuilding the Finances Long Term
Now you have managed to stop the interest payments pouring out of your bank you can start preparing for a stable future. When you are out of debt, start thinking about putting a similar amount of money that you were putting against your debts only toward savings.
You have a choice where to put your money and you really should spread your savings between three different savings accounts:
- Consider Peer to Peer lending. You may get 5-7% in interest on the loans that you make, a sight more than traditional banks. When considering this, look for a P2P lender with a Provision Fund that is basically insurance against defaults on the debt. Don’t look at this money as quick access as it can sometimes take two weeks or much longer to withdraw. You are also shouldering an element of risk which is why you get such good interest. Look carefully at a P2P lender’s default rates before putting money in.
- Get a 30 Day Access savings account. Banks will pay slightly more interest on these than the faster access savings accounts as people don’t withdraw so freely. These are good for saving for a vacation abroad or even the coming Christmas.
- Have a savings account attached to your current account. While the interest rates are at best a joke they are a good place to keep your cash against a hefty credit card bill that you don’t wish to pay interest on for example.
None of these need a stockbroker and you can get good returns every year without taking a punt on the stock markets. If you’re taking $70 in interest for every $1000 you put in then you have a night on the beers from someone else’s debt instead of paying for someone else to have a night on the beers from your own debt!
Ultimately, you should save for future expenditure rather than borrow. While bankers won’t be too happy if everyone saved and no one borrowed, the current state of the global economy was caused by them ripping ordinary folk off back in the early 2000’s so a few bucks less in the pockets is the least you can do to repay their silliness. Bankers will never go broke but it is a very nice feeling not being enslaved to them.
It could also pay to take the odd fast cash loan to make ends meet while you are saving as you could still end up in the plus as you generally stay debt free. If you look at your debt / savings as a balance sheet you can see that sometimes it is OK to borrow with negligible net expenses.
We’ve looked at how to effect emergency repairs to your finances through the likes of a fast cash loan, but at the end of the day, slowing interest to a trickle on your expenses is only possible through being sensible with your money. Ultimately, you could reverse the flow of money to being an inward flow and have the banks pay you. That’s no bad thing by any measure!