Payday loans tend to catch borrowers off-guard when they consider their total itemized cost.
Not only must consumers pay off the principal loan, but they’re also dealing with finance charges based on the amount of cash borrowed. And when that total expense is not paid off in one fell swoop, a rollover loan rapidly accelerates these fees.
According to a 2021 study by Lyman J. Morrison, the average payday loan borrower takes out eight payday loans a year, spending more on interest than the principal amount.
The Consumer Federation of America (CFA) also reports that researchers at Vanderbilt and University of Pennsylvania found that 54 percent of first-time borrowers defaulted on these personal loans in the first year.
Based on these delinquencies and debt cycles, a fortified budget is critical to coming out of the borrowing process relatively unscathed. But it’s not always good enough to say, “save your pennies” or “spend less than you make” and be successful.
When the stereotypical sage advice doesn’t work, consumers need more tangible tips they can scale to their own finances so that payday loans don’t become a runaway expense. These tricks can also be implemented beyond a payday loan budget to be used as lifelong habits that may keep finances steady.
Shed those extra accounts
Keeping track of multiple bank accounts is a lot like having to juggle bills: the more you have, the easier it is to let one slip through the cracks.
Bank accounts are rife with charges that can eat away the money you have in them. Maintenance fees, minimum balance fees, late fees and transaction fees can lead to trouble.
By cutting back on the number of accounts, you’ll automatically cut back on the number of fees charged. Additionally, by focusing on fewer accounts, it’s easier to stay on top of associated expenses.
Make savings an expense
What makes many emergency savings funds so slim is that they’re more of an afterthought rather than a priority. By paying yourself at the same time as you pay your other bills, it may become easier to maintain a rainy day account over the long term.
You can also make this commitment automatic by setting up payment deposits into a savings account so that you never have the chance to miss the money.
Additionally, treating savings like an obligation can provide that extra push to commit. By sticking to this reformed way of thinking, you’ll be able to repay your next short-term loan immediately or avoid one altogether.
Squash your subscription services
Life can feel like one giant subscription. Between cable, satellite, Internet, phone, Netflix, magazines and the jelly of the month club, it’s easy to drain your income on what should be discretionary spending.
Calculate how much all of these monthly commitments are costing you and scale back. For example, you may be able to get rid of cable and Netflix, but stick to watching your shows and movies via the Internet as you need them.
This “a la carte” approach allows you to still enjoy your free time, but also choose entertainment as you go while reducing out-of-pocket expenses. Most likely you’ll be surprised at how well you can get along by eliminating a few of these things.
Downsize when you go out
You can still enjoy the food and atmosphere of your favorite hangout spots when you’re trying to budget, but with a few small changes.
Instead of ordering that entrée you can’t finish anyway, inquire about the price of a half portion, or stick to the appetizers. Enjoy your libations at home, and you’ll shave off at least $10 from your bill with the absence of a beer or cocktail.
The same downsizing can be applied to the movie theater experience. Instead of spending more than $20 on Junior Mints and popcorn, you can apply the age-old trick of bringing your own store bought for a fraction of the price.
Go vegetarian a few times per week
Many of us can’t think of a life without sizzling bacon or juicy burgers. But by switching out your meat for a vegetable-based protein at least once a week, you could start to reap some serious savings.
According to TLC, vegetarians who sub out chicken for black beans save $200 per year while trading tofu for steak would save another $237 per year.
While you may not be able to quit meat cold-turkey (pun intended), re-evaluating the carnivorous expenses populating your grocery list could yield the extra dollars you need for emergency costs.
By putting these odd payday loan budget tips into practice, you may end up finding it easier to come up with the all of the cash needed by the repayment date.
A lending product with such a short turnaround time should never be used to treat the symptoms of a lasting cash dilemma. However, these penny-pinching habits can act a proactive measure to nip financial ailments in the bud before they get out of control.