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| IF YOU NEED EXTRA MONEY, IS IT BETTER TO USE CREDIT
OR SAVINGS? |
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| Credit |
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When you use credit, you get your money
or goods immediately. The interest you pay is the cost of
being able to get the money or goods now. You can buy a car
on installment terms, use a credit card to buy clothes, take
out a loan to pay for a holiday, or a mortgage to buy a house.
But never forget: if you borrow money, you have to repay it
sooner or later, and you will pay back more than you borrowed
in the first place. |
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Before you borrow, or use your credit
card, always ask yourself the following: |
Do I really need this item? |
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How much do I already owe? |
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How much extra will all of these repayments really cost me? |
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Can I really afford this? |
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Use a budget planner to see how much
you are already spending of what you've got coming in. And
remember to leave a margin for emergencies. Put this in an
account where you have easy access to it. If you really can't
afford to save, it's unlikely that you can afford to repay
a new loan. |
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Be tough with yourself.
You might want a new TV set, but will you really be able to
keep up the monthly repayments? Try saving the amount of the
monthly payment each month for a few months first. If this
doesn't cause you any problems, you can probably afford the
loan. |
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| Top tips: |
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| 1. Always keep track of what you've bought with your credit
card. |
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2. Taking regular cash advances is
generally not a good idea - it's still money you will have
to repay and, if you use it to repay other loans, or to top
up your salary, all you are doing is increasing your debt,
which will not help you to get your finances in order. |
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3. Never use a loan or a credit card
to repay the monthly repayments on other loans, or to meet
regular household expenses if you regularly have no cash left.
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If these kind of events happen regularly,
your budget could get out of control and you must talk to
your creditors about restructuring or refinancing your debts. |
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| Savings |
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Some people will save over time in order
to buy the goods or build up the savings they need. The cost
to these people is the time they have to wait until they have
enough money to obtain what they want. Many ways of saving
are available, from simple deposit accounts for easy access,
to term investments for higher returns, and long-term pension
savings. |
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Top tip: Always try to have some
money set aside for the future. It will help if something
unexpected happens. If you only have loans, it will be much
harder to manage. If you have money left over each week or
month, always aim to put some aside for savings for you and
your family future emergencies .Aim for an emergency fund
up to 6 months of your salary. |
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| A bit of both |
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In most cases, people do a little of
both, saving and borrowing for the things they want - this
is certainly the best way of managing your financial affairs.
The challenge is to get the balance right. And if you're going
to borrow, you need to know how it works, and what it will
cost you. This will help you to budget successfully. |
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