Recent research has found that more than half of people in the UK are living beyond their means, which means they’re spending more money than they actually earn. Of course, it’s not always as black and white as ‘earn £100, spend £110’ – you can be spending more than you have without really realising it. Credit cards, overdrafts and store cards could be masking the full extent of your spending issues from you, whether they’re small or significant.
The study showed that over-spenders tend to spend £150 more than they need to each month. This can build up to huge amounts over a number of years, and this is where trouble can begin. Do you know exactly how much you owe in debts? Are you running out of cash each month, or putting ‘normal’ everyday spends on a credit card to get by? These could be indicators that you’re living beyond your means and you should try to address this before you find yourself in more debt than you can handle.
If your overdraft and credit card is always maxed out, then you could be damaging your credit score, even if you’ve never missed a payment. Being constantly on the edge of your credit limit (the amount which you’re allowed to borrow) may show other lenders that you’re a consistent over-spender, which could lead them to believe that you haven’t got a good hold on your finances. Stability and an ability to deal with your money properly are traits which are important to credit reference agencies and other lenders, so maxing out your cards and only making the minimum repayments may not work in your favour all the time.
If you’re not sure exactly what’s going on with your finances, then you’ll need to sit down and get as much information as you can in order to paint a clear picture in your mind of where you stand. You may not know exactly how much you earn, how much you owe or how much you spend. It’s very important to at least have a ballpark idea of these three things so that you don’t get into trouble with your finances. Check your bank statements (you can access these quite easily if you have online banking) to work out where you’re spending your money. Highlight any spends that you don’t remember and circle any which were essential (like rent/mortgage payments, bills, debt repayments etc.).
In order to get a grasp on your income, you may need to access your payslips. If not, your bank statements should show what has been paid in (unless you are paid with cash). If your income fluctuates, or if it comes via different avenues, then you’ll need to record as much as you can. A year planner should help you to plot your payments and see when your essentials are due to come out. Seeing everything on a wider basis can help with forward planning and will ensure that you never miss payments or run out of cash again.
This article has been written on behalf of Guarantor Loan News