There are a number of ways in which you can suddenly find yourself with debt management issues in the modern climate. Things can either quickly sneak up on you with an unexpected incident, illness or similarly serious issue or, it could be a case of historic debts coming back to haunt you. If you’ve consistently, over a number of months or years, failed to budget properly and accrued even minor debts regularly then this can come back to haunt you and is not solid financial budgeting.
When it comes to your household finances, it’s essential that you apply some long-term thinking and goals to your budget because otherwise it’s difficult to get a holistic view of how you are coping. This is often where problems start to arise and, with the UK still continuing to struggle economically, you literally can’t afford to work on a month-to-month basis when it comes to your money. Often it can work well to have short-term and long-term goals working together as money-saving tandem.
So you could set yourself a target of paying off a certain bill before the end of the month while also looking to reduce the amount of money you spend in that regard regularly over the course of a year. This means that you won’t get disillusioned by not attaining your long-term goals right away but, at the same time, you won’t think that it’s necessarily job done just because you’ve paid off one bill.
Finding that right balance between the ‘here and now’ and considering past and future commitments is key for any budgeting process.
Another thing to note when it comes to the benefits of long-term budgeting is that you’ll be able to factor in special occasions which require extra expenditure. If you know that such an expense is coming up on the horizon then it’s always best to take action early and budget properly for it.
It may also be an idea to offer yourself some sort of reward if you achieve your targets regularly, for a six-month period for instance. We’re not suggesting you throw all your good work down the drain and splash out on a personalised Bentley just because you reduced one of your bills, we’re thinking more along the lines of treating yourself now and again to keep morale up.
It seems as though more and more people are coming round to the idea of budgeting properly in the long-term with recent research from Zipcar suggesting that hiring product was on the rise because of its fiscal benefits. The research found that many Brits are now becoming more comfortable with hiring out items and services as they look to adopt a ‘pay-as-you-live’ lifestyle.
Also within the study it was revealed that the main reason for hiring rather than buying was not being able to afford to buy it with 53 per cent citing this as the main reason. Cost-per-use benefits were second ahead of depreciation in value, ongoing maintenance costs and flexibility to upgrade or change models.
Pippa Goodman, trend consultant at the independent global consumer research business, Future Foundation, said the results showed the rise of professional budgeting among consumers. She said:
What we’ve really seen a rise of overall is what we call professionalised budgeting. It’s the fact that people are being very smart and are managing their finances in a semi-professional way. That might be about using apps on your phone, an app from your bank that tells you when you’re about to go overdrawn or a good old spreadsheet.
Technology, she explained, was a major factor in how budgeting had improved among consumers.
“Consumers are really empowered through technology to find out the best options and make those choices,” Ms Goodman said. “The flexibility that exists now is great for the average consumer, who can make the choices that suit them and their budget.”
Whether you choose to budget with your iPad or paper pad, it’s vital that you consider both what’s going on in your life at the minute as well as what has gone and what could happen in the near future.
Ignorance is no excuse when it comes to debt and so being aware of your finances is a must.
Guest Post by Steven