I can’t remember if I’ve done a post on my stance on credit cards, but I’m sure I’ve mentioned it in the past – I’m not a fan. And you know what I hate even more? Companies advertising ‘cheap’ loans on TV. It really grinds my gears. It’s easy for me to say that I wouldn’t touch them with a ten-foot barge pole, BUT if I run out of money, it’s only really me that suffers. It could be much more difficult to change the channel if I had cold, hungry kids, a partner that depended on my income and bailiffs knocking on the door.
I honestly couldn’t tell you I wouldn’t be sucked in by the promises of instant cash will no obligation to pay it off until the following month. I’m in the very fortunate position of having parents that would prefer to help me out before I took out a loan, but trust me, I’d need to be in some pretty deep water before I accepted their help.
Credit card companies are just as tempting – sometimes more so because they seem more legitimate and ordinary than a payday loan. Still, I’m not a fan of them – they don’t work unless you pay off the balance in full and are collecting, for example, air miles. I don’t bother, tbh.
So what do you do when a crisis hits?
For a start read this post detailing how to cut your expenditure quickly. You may also wish to take this mini email course on getting your financial situation sorted. It may feel like you have no option other than a short term loan, but I beg you to check out every other avenue.
Firstly, go to the Citizen’s Advice website and see what can be done – the government may be able to help you get back on your feet, especially if you have children.
Then, depending on your problem, get yourself on social media. If your car needs repairs, see if you can convince a mechanic friend of a friend to work you out a payment plan. If your TV breaks, see if you can score an old one someone wants to get rid of (although tbh if you’re thinking of taking out a loan in order to buy a TV I’m not sure you’ll be taking any of my advice onboard anyway). If your boiler needs repairing, ask friends who did a good job of theirs – now is not a time to use a cheap cowboy.
It’s scary, but you’ll muddle through. A few sleepless nights are better than having two years worth of sleepless nights because you can’t pay off a loan that’s incurring hundreds of pounds of interest.
And if the crisis hasn’t hit yet…
FFS get the ball rolling on your emergency fund. The best way to save money and stop wasting your pennies on interest payments is to do your best not to allow yourself to get into that situation in the first place. The problem is, human nature ensures that we pretty much ignore potential problems as they brew. We prefer to wait until we’re in a full-on crisis before thinking ‘hmm, maybe I shouldn’t have wasted all of my paycheck on that £80 jumper that shrank in the wash.’
Don’t be that person. Having been that person, trust me: it ain’t fun.
A lot of PF websites suggest that your emergency fund should be 3-6 months worth of your living expenses.
WHO DOESN’T HAVE A CASUAL 5 GRAND CHILLING IN A BANK ACCOUNT SOMEWHERE?
Whilst you’re first navigating the turbulent waters of personal finance, aim to get £100 in a bank account that you’re not going to spend. £100 is a small enough amount to be attainable – even if you literally have pennies to spare from your budget – try to put aside £2 a week and you’ll have a £100 in a year. If you want to save a few grand, go for it, but I appreciate that if you’re a single parent with a minimum wage job, that’s a bit of a pipe dream.
If you think that a year is a ridiculous amount of time in which to save measly £100, just read this quote:
At least your £100 can cover that surprise dental work. Or the taxi home when you run late and miss the bus. It’s not meant to propel you to financial freedom, it’s to pop a tiny cushion between you and real life.
IF you can save 3-6 months of your living expenses, that awesome. Why? It creates a little…leeway between you and your job. If something happens – you get a new, hateful boss, you get made redundant, you want to start your own business, it’s not the huge, massive deal it would have been had you not had the savings ready and waiting for you.
Either way, you’re not going to be able to increase your security by taking out credit. You’re just not. You’re merely putting your money in somebody else’s pocket.
I’m not including mortgages btw – I hardly expect you to save up for a house (although I would if I earned enough) in cash, but I am including car loans, personal loans and credit cards. Even business loans would have to absolutely necessary for me to get on board with. You’re always in a better position if you’re skint but debt-free, rather than being comfortable but with credit.
So, now I actually need to discuss how to avoid credit. Erm, basically treat it as an absolute, proper last resort. I would ask for a pay rise/increase in hours at work, side-hustle my arse off and write a letter to my MP detailing my struggles before taking out a loan. I’d live on sandwiches to cut the cost of putting the oven on. Anything. Let’s hope it doesn’t come to that (although I do love me a sandwich).
TV ads make getting credit seem so easy and convenient, which it can appear to be if you’re up to your eyeballs in bills and can’t afford to put food on the table. Don’t believe them though – these people are praying on vulnerable people that are panicking about finding money, or people that don’t understand just how much interest they’ll be paying. Remember: the house always wins – don’t be filling their pockets – concentrate on filling your own.