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Budgeting to reduce reliance on payday loans

[Nov 12, 2010.]

 

If you find yourself owing money on too many payday loans or counting on the availability of quick payday loans to bail you out of the next emergency cash need, it is past time to sit down with pencil and paper or a simple financial software program to create a budget. Most bank websites have a simple budget worksheet on their website, or you can use one from the Consumer Credit Counseling Services organization.

Budgeting and saving

Most financial experts recommend developing a budget in order to establish a savings pattern. Setting up a savings account and automatically transferring a small amount per paycheck is a great way to set up an emergency fund that can help you avoid relying too much on instant payday loans. Many financial planners suggest that you aim to set aside ten percent from every paycheck for savings. However, if you are behind on your bills and in danger of having your utilities cut off or your landlord is threatening eviction, setting up a savings account can wait. It is more important to deal with your financial emergency first.

Setting budget priorities

When you have limited funds you need to rank your expenses in terms of importance. Make sure you have the money for your rent or mortgage payment before any other expense, because if you stop making those payments you can lose your home. You also need to pay your utility bills so you have heat, hot water and can cook. Next, if you must have a car to get to work, pay your car payment and your car insurance. Once you have paid for the essentials you can allocate the rest of your funds to pay other bills. Make sure you pay your credit card bills on time and pay at least the minimum payment in order to avoid late charges.

Renegotiate your payments

If you are experiencing a rough patch of reduced income or unemployment, it's time to reach out for the help you may need. Short-term payday loans can fill in for savings in an emergency, but you might also be able to negotiate extensions on bills such as a cable bill or electricity bill until you get back to work or past your current financial crisis. Call your creditors and explain your situation to see if you can work out a new repayment plan that is easier to handle.

Review your spending

While it may seem as if saving a few dollars here and there can make little difference to your situation, small amounts of cash can accumulate quickly into enough to repay a bill or two. While you are watching your spending, be sure to look for additional income sources such as a second job or even selling a few possessions on eBay.

While quick payday loans can help you out of an emergency, a budget can get your financial feet on solid ground before the next crisis arrives.

 

About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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