Budget Tips to Eliminate the Need for Payday Loans [Payday Loan]
November 16, 2007, 08:50:00

Payday loans are popular. If you’ve turned on a television or radio in the past decade, chances are you’ve heard their offers for easy money. And borrowers are listening: Payday lending has become a $40 billion business.

But some details don’t sit well with traditional lenders. The interest rates for pay day loans are very high. Most payday lenders set up shop in underprivileged areas where low-income workers need quick cash. Women and minorities are more likely to agree to these high-interest loans, and far too many payday borrowers fall into a cycle of ‘chronic’ borrowing – signing over their paychecks to repay previous loans, and then borrowing more money to make it to their next payday. When scrutinized, it all seems a little predatory.

The good news is that payday loans can be avoided with simple budgeting. You don’t need an accountant or a financial planner to create a budget, but you do need the courage to take a good, hard look at your financial situation. A spreadsheet helps, too.

To begin, you need to calculate your total monthly income. This should be all-inclusive; paychecks, child support, social security, and any other means of income should be accounted for.

Next, figure out how much money you spend in regular bills every month. These expenses should include rent, vehicle payments, child care, credit card payments, utilities, and any other bills you pay on a regular date every month.

Finally, track your personal spending for a few weeks. Write everything down! The goal here is to figure out how much you spend, on average, for variable-cost expenses like gasoline, groceries, and entertainment. Did you fill up the car? Write it down. Did you hit the snack machine at work? Write it down. You might be surprised by how much you spend on trivial items like magazines and lattes.

Once you’ve got these figures, it’s time to do a little math. Subtract your outgoing bills from your monthly income. The result is the amount of money you can spend on personal expenses. If this number is negative, you’ll need to take a look at what you’re spending your money on each day, and decide which expenses are necessary and which ones you can live without.

If you need to decrease your monthly expenses, you’re in luck. There are plenty of tips online for saving money at the gas pump. There are also coupon clubs and other web sites that help you look for great grocery deals in your area along with shopping at discount stores. Watch movies at dollar theaters instead of expensive first-run cinemas. Cook your meals at home to avoid costly fast-food. Rethink expensive cell phone plans or cable bills. There are dozens of ways to stretch your budget. Do a little research on frugal living, and you’ll find plenty of ideas to get you started.

If you’ve indulged in spending habits that have left you in debt, you can avoid even more debt by budgeting wisely. By making some simple lifestyle changes, most of them painless, you can eliminate the need for getting payday loan advance entirely.

Back To Article Categories