Missing a repayment is unfortunate. Bills start overlapping, fees pile up and making next week's repayment becomes that much harder.
Luckily, there are many easy ways to budget well. So, even if your math skills aren't the best, you can still follow these easy steps to keep on track and never miss another repayment.
1.) Automatic repayments.
Automatic repayments are excellent for making sure you pay on time and with the exact amount. But, relying on them entirely also means you run the risk of payments not going through if you're suddenly short one week or month.
If you decide on an automatic payment schedule with your bank or credit provider, we suggest you also set aside a time each week to check on your account. Another option is to set a notification on your phone to remind you when payments go through.
2.) Check your income and current expenses.
The key to any budget is working out these two important details — your income and expenses. Whatever you have leftover is potential for repayment funds.
If you can't meet what you need, work out some priorities first, based on what you might not need and what is essential.
3.) Make some rules.
It's hard to be strict with yourself, especially when you see something you want. One way to stick to a budget is to set hard and fast rules, like the 50/30/20 system:
- 50% on expenses.
- 20% savings and repayments.
- And 30% on whatever!
You don't have to use this exactly — you can work out whatever percentages suit you best.
4.) Budgeting calendars and schedules.
Sometimes writing down physical notes can help jog your memory and sort payments by date. You can even work out the amount of interest you'll owe, the number of months you have left, what loans you're paying off and where your account is at now.
Finding an online tool that works for you is also a great way to start. Try using Google Sheets or find a budgeting calculator, to help you add up your expenses. Don't trust one single calculator though — these tools are meant to give an overview. Try an online calculator for a glance at your spending habits.
5.) Credit utilisation.
Credit cards are helpful — they let you buy stuff easily, at a click of a button, with few limitations — until the bills come in. One neat trick for staying on budget is to utilise only a part of your credit 'allowance'.
Allowances are what you're allowed to take out on your card, which is a set amount of credit per month that you then pay.
You don't always have to take out everything you're allowed either. Credit card companies are more likely to approve those who use only part of what they can borrow. Ideally, you want to aim for around 30% of what you're allowed to take out on your credit card.
6.) Keep within your set credit limits.
Applying for too many loans or credit cards can stretch your account and quickly become a juggling act — especially when you factor in credit cards and other fees. The same applies to credit enquiries — the more you use, the further your score will drop. Make sure to build up a good credit history before you start applying for more loans, and take out quotes when you do.
7.) Debt consolidation.
One way to round off all that additional interest from existing open accounts is to consolidate them. This means bringing all your existing debts into one account that you pay off.
Generally, consolidating debt means you pay less in interest over time, as it's based on one overall amount. Some transfer fees may also be involved in moving accounts, but these won't generally cost too much. Make sure to check with your credit provider if you think debt consolidation could help.
8.) Be wary of loan types.
Your loan and credit terms can change over time. If you've signed a fixed-term loan, you're locking yourself in for X amount of time at X amount of interest, which is all good unless you need to shift the exact terms. However, a floating loan or one that isn't fixed has an interest rate that depends on the market, which is excellent for flexibility, but potentially very costly if the market price suddenly drops. So make sure you're aware of the small print of your agreement before signing and the type of risk you want to undertake.
A lot of interest rates advertise an excellent rate for the first year, which is typical of more oversized items like cars or houses that may take several years (or maybe even decades) to pay off in full. A good tip is to set a reminder to check after that first year that you can continue meeting the terms of the agreement.
There are many ways to budget, reduce hidden fees and avoid surprises. The key is working out a way to remind yourself about upcoming payments and funding well in advance. That way, you know what you're paying for and can even set aside some money for savings.