Take a Financial Selfie And Keep Your Mind On Your Money
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Why is there always so much month left at the end of all the money...?
What does it mean to you to spend responsibly? The meaning varies from person to person and pocket to pocket. Relatively rich or poor, we all have to stick to a budget. It makes sense to be mindful when you spend.
So how do we do this and still enjoy ourselves? Here at Ferratum, we’re committed to helping you cope with unexpected expenses and to make your month run a little more smoothly. We call it being mindful of your money and it covers budgeting, saving and spending.
Along with this service comes the responsibility of lending wisely so that you can carry on spending wisely.
So first, let's have a look at smart budgeting. It sounds obvious that you have a certain amount of money coming in, and a certain amount going out every month. Simple right? So how come so many of us get it wrong and are cutting it so fine in the run-up to payday?
If you use internet banking, this is an excellent way of being notified when that zero balance is getting a little too close for comfort. You can set up alerts to text you when some money arrives or when you get, say within £50 of your account balance. You can also simply check your balance regularly and synchronise your direct debits to payday, this way once your monthly commitments are paid, what’s left is for spending or even saving.
Make a spreadsheet using the payments using the direct debit payments you have set up. Don't know how? Here's one the Money Advice Service which takes just a few minutes to complete.
What you have now is an understanding of your disposable income. On paper it always looks like more than you ever have leftover - don't be fooled, though, it’s amazing how the little amounts on ‘this and that’ add up. Also, be aware of any overdraft or borrowed amounts you have to take into consideration.
When it comes to mindful budgeting, forewarned is forearmed so don't bury your head in the sand, know your limits.
When you've been mindful of your budget, honest with your financial selfie (no touch-ups!) you will soon see the benefit. Feeling more comfortable financially is great, but try not to slip back into old habits as it's very easy to take your eye off the ball. I've done this, had a bit of carefully budgeted spare cash and wasted all of those savings by 'nipping to the little shops' instead of a carefully budgeted weekly shop or setting off somewhere and filling the petrol tank in a service station instead of the more competitive supermarkets. It's easy to fall off the mindful wagon and we've all been there.
Of course, you have to treat yourself, but you can do this so much better if you save for it first. Savings accounts aren't what they used to be; a leather book and giving 30 day's notice to your bank manager before you can withdraw funds. You can add an online savings account alongside your current account. This can be with a debit card although this might be too tempting if it's with you when you're out and about. If you need to transfer some funds back from the savings account to your current account, you can do this at the touch of a button, but having it put to one side does make you pause for thought first.
Every month you might transfer an amount to your saving account, only to have to transfer it back, but what if you don't have to transfer it all back? his way you have a growing savings account which is there as a bit of padding when you need it and a bigger saving when you don't.
There is also the issue of seasonal costs; Christmas is always the same day every year yet we start stressing around October and November and are still dealing with the aftermath in February. Being more mindful on a yearly basis can really help. Holidays and trips are a yearly occurrence if we're lucky, but still, we leave paying the balance to the last minute, in the month that really we should be thinking about spending money. Friends and family have their birthdays on the same day as last year but they seem to creep up on us. Our school holidays and 'Back to School' expenses are a regular occurrence but shopping for school uniforms in late August is hard work.
Do you have a car or are you planning to be on the road this year? You know that MOT is coming every year, but being mindful is better than being hopeful! Saving just £20 per month from the payday after your recent MOT will give you enough for the test, plus £200 to cushion the blow if something does need to be replaced. Believe me, I know the pain of answering the phone on that fateful day, after dropping my little car off in the big oily garage... "Hello, is that Andrea? …. as my heart and stomach fight to hit the floor first. Thank goodness the tax can now be paid monthly instead of 6-monthly or annually. Last year I had £190 saved up...I didn't miss it monthly and the MOT and work cost £110.00. £80 for me! Did I re-save it? Not all of it, I saved £50 and spent the £30 on a nice day out with the kids.
Is your home a little over-crowded? Do a car boot sale - get rid of some of your unwanted items and maybe pick up a bargain or two - just don't come back with more than you arrived with. Don't underestimate the savings you can make by upcycling, buying second hand or recycling. There are shops in most towns and cities who will weigh your old clothes, shoes and books and pay you for these items in order to re-use or recycle them. You won't be retiring to the Caribbean on it, but it's better to have a few quid in your pocket and less clutter at home. This is especially handy in the run-up to Christmas or in Spring when you have a burst of cleaning energy and the urge to purge your home of unnecessary dust-collectors.
Now comes the fun part - spending! These days we have to wring as much as we can out of every £1 we earn. Take a 'financial selfie'. This can be as simple as adding up your income(s) and subtracting your outgoings. You may wish to view your credit file. Don't pay for this - Noddle.co.uk and other sites offer this for free. Be a smarty pants and shop around. It's so easy to compare prices of everything from energy companies to supermarkets. There are comparison sites and mobile phone applications so this can be at the touch of a button or the swipe of a screen. Go a step further and check for voucher codes too to snip a little bit more off the price of your heart's desire. Surf the internet auctions - there are so many to choose from now.
Your other choice is to sometimes decide not to buy something. Ask yourself if you really need this purchase. If the answer is 'Yes', ask yourself, do you need it now? From this month's budget or pay packet? If the answer is still yes, then shop around. One of my favourite tricks is to choose items from high-end lifestyle magazines, then search for the same item on an internet auction site. 30 seconds later you've ordered your 'must have' item for a fraction of the price.
Don't be fooled by 'Last Chance To Buy'. It might not really be a bargain, in fact, it's possibly something that hasn't sold well and the shop want to make way for new stock.
On the other hand, there's no harm in getting an advance and bagging a genuine bargain if it really is going to double in price before you could save for it. Borrow just enough to cover what you need, though as usually there will be interest to pay. Only use the money for the item you planned for. Don't fall into the trap of borrowing money to buy something, then letting it sit in your bank account being whittled down to nothing. Pay your loan back on time. This is crucial. Late fees and extra interest will reduce the saving you made on this bargain, so make sure you borrow for what you need and only for as long as you need it. You'll also build your credit rating by borrowing and paying back on time. It's a common misconception that no credit means good credit. In actual fact, many people struggle to obtain credit facilities because they have nothing on record at the credit reference agencies. In real terms, this means that the finance companies know nothing about you. You might be the best payer, you might be the worst payer, who knows? Starting small and borrowing, then paying back on time is the best way to build and improve your credit rating.
Mindful budgeting, mindful saving and mindful spending can all be adopted to build your credit rating and make your money go further. Remember the principles:
Take a financial selfie
Know your limits.
Save, even just a little.
Be mindful of your spending.
Pay it back on time and boost your credit rating.
Most of all - be a smartypants and you'll feel like your money is going further.
Keep your mind on your money and keep reading our Mindful Money blogs for tips and support.