university, debt

Budgeting Efficiently

Budgeting Efficiently  
Yvette Morgan, 24, finds managing her finances a balancing act – she needs to pay off past debts, but also wants to enjoy the present and save for the future.
She currently works as a customer service assistant in Brighton, earning just £14,000 a year, and has to count the pennies. But after learning a valuable lesson on budgeting from being saddled with debt from her time as a student, she has devised a system to make ends meet.
University debt
In her first term at university she took out credit cards and found herself unable to make any more than the minimum payments each month. "At one point my mother was paying it off for me because I had no income," Yvette says.
Although she never had more than £500 on this card with an APR of 17% at any one time, she soon saw the dent in her pocket from the affect of compound interest."When I saw the statement after three years at university, only £20 had come off the balance, and I was determined to start paying more than the minimum required.”
After finishing university, Yvette worked for a bank and become financially-savvy. For starters, even though she had barely any spare money, she upped her repayments to £20 each month, eventually increasing this to £50 a month. Finally, she cleared the debt around 18 months after graduation.
A design for life
All this time she was using her own system to cut down on the amount of money she was wasting.
"I used an Excel spreadsheet to keep track of my monthly income and all my outgoings – such as what I spent on travel and entertainment,” she says.
And she is strict on herself when it comes to tightening her purse-strings - even taking out a set amount of cash on Friday afternoon so she knows what she has to spend each weekend, without resorting to using a card.
"I don't smoke and I don't drink, and while I was budgeting to get my finances under control, I was careful about spending money on going out and really thought about how much I paid for leisure activities," she says.
"I got myself a library card so I could read books without having to buy them, and could rent films cheaply and even hire CDs at the library. I also have a cinema card which I pay £12 for each month, and that gets me in to as many films as I want - I usually go to at least one a week."
And she had to be rigid in her regime - at one point Yvette only had around £5 each week after all her outgoings had left her account. She believes that she eventually slotted away around £100 a month simply through keeping a close eye on her finances and knowing exactly where she was, and what she needed to spend.
In addition to ensuring she takes her own food to work every day, Yvette also saves money on travel by buying her bus tickets online.
Hard-won advice
She has some advice for anyone who is thinking about using credit cards or store cards.
"Credit cards are useful for the sake of convenience, and they can give you free insurance on purchases and discounts in some shops.
"But there's no point using them unless you are going to pay off the balance every month."
And this goes for store cards as well, which can have massive interest of 27% a year.
"If anyone nabs you by the till, just say you will take the literature home and look at it - don't sign up there and then."
And with any form of credit, it is important to remember that there will always be a day of reckoning, Yvette says.
"You need to remember that the money isn't yours - you are going to have to pay it off at some point."
(Originally published on Money Matters Mon, 29 Jun 2009)
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