Working at StepChange debt Charity, we often see clients going through a...
On a DMP? Avoid the temptation of an extra loan
We all know how difficult it can be to manage a budget. Putting it together can be a struggle but making sure that you stick to it month after month is more of a challenge.
We’ve given tips on how to create and stick to a budget but we know it’s easier said than done.
Recently we asked people on Facebook how well they budget and the responses varied from having spreadsheets and knowing exactly where every penny has gone, to not having a clue (I’ve got to confess I was one of the latter!).
Everyday costs such as travel seem to be constantly on the rise and if overtime or benefits are reduced a budget can quickly be thrown out of sync.
What if I don’t have enough in my emergency fund?
Then there’s the constant worry about emergency funds. We always recommend putting something aside for sundries and emergencies if you can afford it – even if it’s only £10 a month. The budgeting experts among you will know that these amounts can soon add up to a substantial amount.
We don’t mean expenses that are certain to come around every so often as a thorough budget should include amounts for these. Things like car tax, vets or dentist bills that aren’t paid for monthly should still be accounted for in your expenditure.
Whether the boiler breaks or the fridge just decides it wants to stop working all of a sudden, we can’t account for the unexpected and this is where the emergency fund will come in handy.
We understand that these things can happen all at once or they may come at a time when you haven’t had chance to save enough to cover the costs. The important thing to remember is that we’re here to help so if you find yourself struggling it’s best to speak to us and see what your options are.
Here’s a handy checklist you can use if you’re in a sticky situation
- Don’t panic! It’s easy to get flustered and take decisions without thinking them through properly. An emergency usually needs sorting as soon as possible but making a flash decision can end up costing you more in the long term.
- Give us a call – we’re here to help. The fantastic thing about a DMP is that it’s flexible. If something changes or you need some breathing space to get on top of things, for example while you pay for washing machine repairs, we can look at your budget to see what changes can be made in the short term.
- Review your budget regularly. You might think that nothing’s changed in the last 12 months but if you sit down and think about it carefully you might realise that your spending on fuel has gone up or that school dinners cost more. Even if they’re small changes it can have a large overall effect on your budget and mean you’re feeling the squeeze more than you should.
- Find out how to review your budget. It could even mean that there’s a different debt solution that’s now available to you that could suit you better – you won’t know unless you get in touch.
Finally, and most importantly – don’t fall into the trap of taking out extra credit – a payday or short term loan for example. We speak to people time and time again that have taken out extra credit because they thought it was the best way to deal with the situation. It might seem like a good idea at the time, especially if it’s a one off and you think you’ll be able to get back on top of things the following month, but in reality it can have a damaging effect on your finances and make things worse. Don’t forget that an overdraft is a form of credit too.
Give us a call
Taking out extra credit while on a DMP is against the terms and conditions of your DMP agreement. Additionally it can make you struggle in the long term and your creditors may be quicker to take court action (if they haven’t already).
More positively, DMPs are flexible for a reason – we know that your situation can change and that emergencies happen.
We can’t repeat enough how important it is to keep your budget up to date as it’ll help you to manage better and could even mean that you’re debt free quicker than you expected.
But if things do take a turn for the worse, don’t try to carry on regardless. Give us a call and we can talk through your options. As long as there’s a genuine reason behind the changes we should be able to help.