The coronavirus pandemic has taken a toll on many people’s incomes and budgets, and hence their ability to pay their bills and rent.
It’s coming up to a year since the UK went into its first national lockdown in March 2020, which means that it’s been almost a year of no financial stability for many Brits.
With this in mind, budgeting fintech bank thinkmoney revealed seven ways to get your finances back on track.
1. Set a budget and stick to it
By having a budget and making a note of how much you’re earning and spending, you’ll be far better placed to avoid unnecessary spending.
You’ll also feel more at ease with your finances rather than having the constant fear of checking your bank account without knowing how much you have left for the month.
2. Consider balance transfer cards
Balance transfer cards can be a great way to stop paying high interest fees on credit or store cards, so they are worth considering if you have a lot of debt on such cards.
Essentially, a balance transfer card will allow you to move your debt to another company at a lower rate — often 0% interest — meaning you can focus on paying off the debt rather than worrying about the interest as well.
When you get a balance transfer card, the company pays off the debt and you then start paying them back instead of your old provider.
3. Try and pay more on your credit cards
Although it’s tempting to just pay the minimum repayment amount for credit cards and other debts to make your monthly budget stretch a bit further, you should keep in mind that this will cost you a lot more in the long run because the interest will pile up.
The table above shows the difference in time and costs if you only pay the minimum repayment amount compared to a slightly higher figure. Think about what you can realistically afford and how long you want to be paying off your debt. You should also consider that this example doesn’t include compound interest, which can add up considerably over time.
4. Reduce your loans and overdrafts
It can be easy to see an overdraft as an extension of your money but in reality, it’s just another form of debt. Even arranged overdrafts can be costly, with one worth up to £500 ($704.31) costing at least £70 over a 12-month period.
Similarly, loans have a habit of costing much more than advertised. Even though most loans are promoted as having an APR between 2.8% and 5.5%, the average loan in the UK ends up with an APR of around 7%, meaning that you’ll end up paying 150% more in servicing costs than you’d have expected to when taking out the loan.
Paying off your loans as quickly as possible will help you avoid extra charges and allow you to start saving for yourself rather than simply paying off lenders. If possible, you should also see if you can change the terms of the loan so you get a better rate, but be aware that changing rates could lead to an extra charge.
5. Switch account providers
Changing to an account that better suits your needs can be a great way of getting rid of extra costs that are holding you back. One problem that people have with their bank account is that they’ll often miss bills as they have no way of budgeting for them, and once they miss it, they’re hit with a late payment charge.
6. Be wary of buy-now-pay-later schemes
There has been a rise in the number of buy-now-pay-later schemes available at retailers in the UK, with some common examples being Klarna and Laybuy. Although these schemes might be attractive because they let you buy something and pay later, in reality, they’re just another form of credit. For this reason, the missed payment fees can be really high, and the records of them will go on your credit report.
7. Picture your goals
When setting out your budget and saving plan, take a moment to think what you’d like to save for and start keeping this in mind throughout the month. You’ll find it far easier to watch what you’re spending as soon as you picture this goal.
WATCH: Easy budgeting tips for when you leave home