AS THE Christmas season approaches, we know too well the pushes and pulls that we experience on our cash flow. It is, however, always important to remember a few guiding principles around our personal finances. Here are six tips on how you can organise your money not only this Christmas but also all year round.
1. The starting point should always be making a proper budget so that you know what your expenses are and how much disposable income you have. Many of the high street banks offer on-line budget planners and these may be helpful. Once you have worked out your basic budget you will know how much you have to spend – you may want to set up a savings account with your high street bank and save a regular amount out of your surplus income for a ‘rainy day.’
2. Always make sure that you pay your bills on time. Be particularly careful when putting shared household bills in your name as these will ultimately show up on your credit file. Be very wary of allowing friends and acquaintances to use your name or bank account for their mobile phones or bills etc. – again all their bills and payment history will be reported to your credit file. We see so many cases where friends disappear leaving the account holder high and dry (and liable for the full amounts spent). What is a friendly gesture at the time can soon turn sour and you can find yourself unwittingly left with a stain on your credit file, which will make it more difficult for you to access credit in the future.
3. As we all know, unexpected expenses can and do arise – unforeseen medical bills back home, education expenses, property repairs for weather related damage etc. At times – even with the best budgeting you may need to look to borrow to cover some of these emergency expenses. Accessing an overdraft facility from your bank is often a good short term starting point. Be very careful however, to make sure that you understand the charges they will apply both on setting up the overdraft and then using it. Some banks will apply a daily charge which can soon become very expensive e.g.: £10 a day usage fee. If your borrowing is of a longer term nature you may look to a loan from your bank. If you have a good history with your bank this may be a cost effective and simple starting point, as you will already have a ‘credit rating’ with them.
4. There is a wide range of lenders offering loan products that may suit your needs. You should, again, be very careful to make sure you understand the fees and charges and the way in which you will make your repayments. “Payday” loans for example which offer very short term loans to cover cash flow shortfalls would be expensive and unsuitable for longer term borrowing,
5. There are a wide variety of instalment loan products in the market, which do give customers a range of choices. With an instalment loan you will have a set amount that you pay back each week or month. You will have a set time frame in which you have to pay off the loan and will know when you will have cleared the debt.
6. As always be sure to check carefully what you are signing up to. All consumer lenders are subject to authorisation and regulation by the Financial Conduct Authority. You should be given a full explanation of the product that you are being offered and a chance to ask any questions. Whilst it may be tempting to go for the “fastest on-line” model this may not be the best for you in the longer run.
A final word of warning – be very wary of borrowing from individuals running loan businesses without permission from the Financial Conduct Authority. These practices are illegal, as such operators do not have to comply with the consumer protection requirements applied to legitimate businesses. Such illegal “Loan Sharks” can be reported on the following organizations:
FINANCIAL CONDUCT AUTHORITY (FCA)
Telephone: 0800 111 6768
ILLEGAL MONEY LENDING TEAM
Telephone: 0300 555 2222
By REBECCA FULLER
Director of Anico Finance Ltd