Everywhere you look these days – newspapers, television, even on street corners – you can’t help but see how stressed out people are over finances. No matter how far we stretch our paycheck, it just doesn’t seem to go far enough. It appears as though payday loans are a booming industry, popping up everywhere you look. But as bad as our finances seem to be today, if we’re not careful, they could be considerably worse a few years down the road when we retire.

Money education

A major new study (the Scottish Widows Pension Report) indicates that barely 51% of British workers are putting aside enough money for their golden years. And worse, 20% of all workers are not saving anything at all. The poor economy is not the only reason why, apparently our youth are not getting the proper advice from their elders. When it comes to giving their children advice, mum and dad are far more likely to weigh in on the birds and the bees than they are about pensions, according to a government survey. There is just no ‘culture of saving’ that exists with those who are just entering the work force. It makes you wonder. Just how do these 20 somethings plan to pay for their lifestyle when they grow old? The government agency responsible for keeping tabs on pensioners, the Office for National Statistics, indicates that barely more than half (53%) of single UK pensioners had an income in 2009 of less than £10,000. Imagine living on that. And you wonder why the faces of so many of the elderly seem so gaunt. It’s the result of being able to afford only one meal a day.

So let’s start with pensions

What exactly is a pension? Simply put, it’s a way of saving money that allows you to retire without worrying where the next meal is coming from. Not too long ago, we didn’t have to worry about that. Society was so ill-advanced that we rarely lived until retirement. Now, thanks mainly to advances in medicine, the current life expectancy is 81 years for men and 86 for women. For 16 years and more we get to sit in front of the television doing nothing, if we don’t starve to death first.

It’s very difficult for a young person 22 – 29 to think in terms of retirement. First, they think they’re going to live forever and, second, they’re too busy living the good life. That’s right, living beyond their means which makes it necessary to visit their friendly neighborhood payday loan shop or the Internet for payday loans online. It’s a common joke in the industry that the only people in their 20s who are concerned about pensions are those who sell them. By the time the notion of pensions become topical, usually in their early 40s, almost 20 years of potential savings have been squandered. And it’s even worse for women. Government figures indicate that, in the UK, the number of women aged 22 – 29 who are signing up for pensions has gone down for the fourth consecutive year, the worst and most rapid decline for any age group.

The government says a retirement income of about £24,000 is needed to live comfortably. It’s not for lack of intelligence that people don’t know this. There’s just something that prevents us from saving. There is a “widespread and ingrained inertia” throughout the country, according to the Scottish Widows UK pension report, that keep savings levels down. How do we overcome that inertia? The government is taking a major step in that direction. Beginning this year, reforms to automatically put all workers into a pension (unless they choose to opt out) is expected to add a major impetus towards alleviating the country’s savings crisis. These automatic pensions have a major advantage, you won’t be able to get at the funds accrued until you actually retire.

In ode to our North American cousins and all those that are celebrating Thanksgiving over the next few days here’s Simple Payday’s contribution to the festivities.

Holiday Treats on a Budget

With half terms and Christmas holidays cutting a big dent into your monthly pay cheque, it may seem impossible to find treats and activities to amuse the whole family without having to take out a bank loan or finding yourself unable to make you pay last the whole month. Nobody wants to have their children sitting around bored playing video games for their whole holiday, but what can you do when half term falls a week before payday?

One solution is to plan in advance, making sure you save some money from the preceding months to ensure two or three great days out to make their holiday really memorable, or taking out a payday loan to see you through until the next payday. Payday loans are instant cash advances of up to £1000 that will appear in your account within 24 hours and can be paid back on receipt of your next pay cheque. There is no need for a credit check or lengthy application process and you can take as little or as much as you need to make sure both you and your family have a stress free and enjoyable break. However, with fees and interest working out to around £25 per £100 borrowed, this may leave you in a tight spot the following month, especially with Christmas coming up, so working out cheap or free activities is an even better way to have fun worry free!

Wherever you live, take advantage of any free activities available to you and your family. Museums will often be free entry, meaning you only have to pick up the cost of travel there and back, and will give you a full day’s entertainment that will also prove educational for your children (in a way that is fun enough for them not to realise they are learning!) The Science Museum in London has a number of hands-on exhibits that will thrill and tire the kids out, and give you plenty to look at and enjoy as well, while The Manchester Museum in Manchester offers a fun look at everyday science, zoology and biology. Any town should have a tourist centre which can tell you where your nearest free museum is.

For a completely free day out, meet up with some friends and their children and head down to your local park. Take a picnic, toys and bikes and let the kids go wild running around in the fresh air whilst you and your friends have a catch up. If the weather is nice it could last you a whole day, or you can move the fun back home to play games as a group. Your child’s games console can become an activity for the whole family with multi-player games and family entertainment such as Singstar or the Nintendo Wii making for a full day of fun and laughter.

A Morning or Afternoon at the flicks

Vue Cinemas offer mid-morning showings of children-oriented films for just £1 (£2 for 3D showings), and you could follow this with a restaurant lunch to make the day really special. Many restaurants offer cheaper deals at lunchtimes, and if you look online you can find a number of money-off vouchers, half price coupons and even loyalty cards which will offer a free meal to your group.

For a really big day out for almost half the price, take a look at online voucher codes websites for half price entry to theme parks across the UK. With ticket prices coming in at well over £100 for a family of four, half price tickets can cut the price of your big day out in half, leaving more money for treats while you are out! Theme parks and attractions often work in conjunction with supermarkets and catalogues as well, to offer half price or cheap family tickets for theme parks with locations all over the country, meaning there is bound to be one close to you, helping you to save on travel money.

Half terms and holidays don’t have to be a stressful time full of money worries, if you can take some time out and be clever in your choice of activities, you can guarantee the whole family has a good time without having to bankrupt yourself!

No matter how carefully you budget and plan in advance, there is bound to come a time when you don’t quite have the finances you need to see you through the month. Whether you have an unexpected expense due to a household problem (such as a kitchen appliance breaking down), a bill coming in that you were not prepared for, or even a longer gap between paydays than usual, it may be necessary for you to get your hands on some cash fast.

In these circumstances there are a number of ways to use objects in your home to make you some quick cash to see you through the month

Most people have wardrobes full of clothes and shoes that they no longer wear but hold on to ‘just in case’. Now may be the perfect time to have a clear out of anything you don’t think you’ll wear again and head to Ebay or Gumtree to let your old clothes make you some money and let someone else get their hands on a bargain outfit that they will wear time and time again! Not only does clearing out your home free up space,but it is also a good way to make you feel happier, with less clutter to irritate you and making the clothes you actually want to wear easy to find.

You might even find some items you had forgotten you owned! For designer pieces, and items in perfect condition, you can actually make quite a decent amount of money, and you will not need to send the item until the money has cleared into your account. With auction terms being anything from one day to one month, you can choose how quickly you need the money and how long you think you’ll need to get the right amount for your items.

Making fast cash look easy

Another way to make some fast cash is to look through your CD and DVD collections. Most people have large collections of both, and once you have watched a DVD a few times, or added a CD to your MP3 player you are unlikely to need it again. Music Magpie offer good rates for both CDs and DVDs and even send you a freepost sticker so that no matter how many you choose to send off, you won’t end up paying out more than you get back. They’ll send you a cheque for your goods once they have been checked to make sure they are in good condition which you can put straight into your bank account.

If you have any unwanted electrical goods, CEX can give good money for televisions, MP3 players, stereos and so on, as long as they are in good condition. In fact, even if your items are broken, there is a good chance CEX will take them at a cheaper rate anyway. You can visit the website (uk.webuy.com) and enter your items to get a total straight away, send your items to their freepost address and receive a cheque in the post, or for an even quicker solution, just pop into one of their stores with their items for an instant valuation and money handed over in cash for your items. With most households having plenty of electrical goods stored away in cupboards, unused, this could work out as a very profitable way of making some fast cash.

Looking at the quick loans option

Finally, if you cannot find anything to sell, or just need a brief loan, it may be worth looking into taking out a payday quick loan online, these are short term loans which can be paid back anywhere between one week and one month. You can generally take out between £100 and £1000 and interest works out at around £25 for every £100 borrowed. A rule of thumb is to only take out a payday loan if you are absolutely certain you will be able to afford to pay it back on your next payday, and always take the interest into account. But for quick money, payday loans are one of the most instant and easy to obtain forms of cash you can find. An internet search will bring up a large number of payday loans providers so do your research and you could have the cash you need by the end of the day.

Obviously, it is always better to make quick cash that you won’t need to pay back, so look through your home first for anything you don’t need and can be sold easily via any of the simple above methods.

Life has a habit of surprising you at the worst possible moments financially. Unexpected bills, tuition fees and broken household appliances can all leave you in desperate need for some quick cash, and if you are more than a week from your payday it can seem incredibly difficult to get through the month. In such a short space of time, it is pointless to take out a bank loan, and if you cannot borrow the money from friends or family, a good way to go about it would be to ask your boss for an advance on your pay cheque. This may seem like a frightening proposition, but if handled correctly it could be the easiest way to get yourself through a difficult financial spot.

Don’t psych yourself up – Relax yourself up

First of all, make sure your boss is in a calm and relaxed mood. If there are difficulties in the company that your boss is dealing with, it will be far easier for them to just say no so that they won’t have to deal with your situation as well. Choose a good time, perhaps the end of the day when the boss is getting ready to leave, or at lunchtime so that they are in a relaxed and happy state of mind.

Another important thing to think of is how your company is doing financially. A company that is struggling to make ends meet are far less likely to want to let go of any extra funds, as they may need that money to pay for other things throughout the month. If you company is financially stable and is not approaching a big review or deadline, and your boss is in a calm mood, you should feel confident to go and request your advance.

Three’s a crowd

Make sure that you and your boss are alone, as bringing up something so personal in a meeting or when surrounded by others may cause your boss to feel pressured, and will also not give you the time and atmosphere you need to make your case professionally and calmly. Perhaps ask your boss for a meeting, or even just for ten minutes on their own, then state straight away what you are asking for. Your boss should give you time to state your case and will be more likely to hear you out of they know straight away what you are asking for.

The pitch

Explain why you need the advance, making sure you speak in clear facts as opposed to using an emotional standpoint. Keep the conversation professional and relaxed and even if you are rejected for the advance you will not lose any standing with your employer. Show that you have thought through all of the issues that may arise because of this and offer various repayment plans – perhaps offering to pay back the advance in full before your next payday, or offering to have the advance taken out of your pay cheque in stages over a couple of months. Allow your boss to make their thoughts known, as there may be standard company procedure for this.

Another way to make sure the advance pays off for both you and the company is to offer to work extra hours and overtime to pay off the advance. This would also ensure that your next pay cheque is not affected and will actually bring in more money as opposed to money you need to pay back.

Let your employer state their case and if the answer is still no you should thank them for their time and leave in the same relaxed and professional state you entered into the conversation with. There are other options for short term cash advances, such as payday loans, which can be given within 24 hours for amounts of up to £1000, and work to a fee of around £25 per £100 borrowed. These loans are easily available on the internet and do not require lengthy background checks or even a good credit rating, meaning that even if your boss cannot offer you an advance this time around, you are still capable of getting your hands on a short term cash advance with little trouble.

Should your employer say yes, make sure you say thank you, and do not abuse this facility too often. A one-off cash advance is one thing, but if you continue to ask for advances on your money you may find yourself in financial trouble quite quickly. Consider raising your hours or taking on some part time work if you continuously struggle to make your pay cheque last.

Debt is generally perceived as ‘bad’. Owing money means that you are never fully financially secure, and the money that comes into your bank account is not truly yours, belonging instead to your creditors. However, there are certain kinds of debt which can in fact help provide a more secure future for yourself and your family, and even improve your financial situation. This kind of debt is ‘good’ debt, owed money which creates an investment sure to pay off later in life, and which will not negatively impact on your situation while it is still owed.

There is such a thing as good debt

Good debts are debts which in the long term will help to generate an income, such as university education or even a mortgage, or debt which is taken out as an investment in yourself. Loans taken to buy a car needed for work for example, or a start up loan for a small business can generally be considered good debt. Similarly, a mortgage, despite being taken out over a long period of time (often 30 years or more), will help to improve your credit rating  as well as take you out of the essentially wasteful process of renting a property, where every pound spent goes into your landlord’s pocket and gives you nothing more than one more month in a property you do not own. At the end of a mortgage term you will own a home, something which can continue to rise in price and leave you with far more money in the long term than you began with.

Similarly, low interest loans can be considered generally good debt, as they can be used to consolidate higher interest loans and credit cards to help you into a far better financial situation. When consolidating debt, make sure you shop around for the very best deal and lowest interest rates, ensuring that you will be able to meet the repayment terms, because otherwise you risk this good debt turning bad!

So now the bad debt

Bad debt always comes from buying inessential purchases which are high in value but will depreciate from the day they are bought. A widescreen television bought new can be a hefty amount of money, but secondhand will cost almost half of what you paid for it, and any damage will render it worthless. Plus with new products coming out all the time, the ‘must have’ product of the moment is bound to be worth far less in a year’s time. Credit cards are frequently used for these purchases and although often have low interest rates, if you cannot afford the product in the first place you may struggle to meet repayments, leaving you paying off up to double the cost of the item just in penalty charges.

Personal loans taken out for general spending or something like a holiday would also come under bad debt. A holiday will not raise in value once it has been taken and leaves you in debt for far longer than the break was. Similarly with loans taken for general spending, once the money is gone you are left in the same situation as before, but with an extra amount of money that needs to come out of your pay cheque each month.

Payday loans are also considered to be quite dangerous ways of getting into debt. With these loans they are incredibly simple to get, even for those with bad credit ratings, and because there are so many payday lenders out there it is incredibly simple to take out more than one at a time, despite the fact that individual companies will not lend out again until the original loan is paid off. It can be tempting to take out a payday loan to fix a short term financial problem, but it is always worth remembering that these loans need to be paid back, will have relatively high interest rates, and may leave you in a far worse financial situation in the long run.

It is not impossible to go through life only ever living on the money that is yours, but in many cases debt can actually help you to move onto a new and more secure future. It is just important to ensure that you only choose the right kinds of debt to save yourself from getting into stressful and difficult financial situations.

If you are looking to make a large purchase, or just want some extra money to play with every month, the best way to go about that is to ask your employer for a raise. If you have worked at a company for a long enough time (say a year) and have not yet received a raise, this could be the perfect time to go about it, especially if you are coming up to a review with your manager. In order to go about asking for a raise there are a number of factors you will need to look into first.

Firstly, find out what others at your level in your field are earning. This is easy to do over the Internet for a general idea, or if you work for a large company and have close friends at the same level as you asking politely might work. Do be aware though, that earnings are a private matter and if they do not want to answer you should never push them. If you find that you are not earning as much as others at your level then you are in a prime position to ask for a raise. You may still want to ask if you find that you are earning the same as others in your position, but you will need to go about it in a much more careful way.

Doing your research

Take a look at your employer’s financial situation. In the current climate many businesses are having to make cutbacks to make ends meet. If there are redundancies and cuts being made in your company then you will need to have a very good reason for wanting a raise, and should prepare yourself for still being told no in this situation. If your employer is in a healthy financial situation and seems to be taking on more employees, this may give you an opportunity to ask to take on more work in order to receive a raise. This would be the best way to go about asking to have your salary boosted, as you are offering more in terms of skill and labour to receive more financially.

Matching you expectations with your experience

Consider your own experience when preparing how to ask for your raise. If you are in a skilled position and have more experience and assets to the company than you are being given credit for, make a note of them. Perhaps someone else in your team is at a higher level and has less experience, try to work out how you can make the most of your skill and experience to benefit the company, and present this as an argument for a higher position and thus more pay. If you find that you are less experienced than others at your level, take into account what you have done and are continuing to do for the company on a day to day basis and use this as your jumping off point.

When preparing your argument, don’t talk about what you need in order to live on, as this comes across as desperate and unprofessional, but talk about what you deserve with regards to your skills and workload. Let your employer state their case to you and have counter arguments prepared to demonstrate a higher value and make your argument seem convincing and appropriate. Decide in advance what you are going to do if you request for higher pay is rejected and let your employer know what this case will be. You do not have to go as drastic as threatening to leave your job, but reaching a compromise saying that you will ask again after a specific amount of time, or asking to be considered for promotion in future.

What if your request is rejected?

If your request is rejected and you still need extra income, take a look into part time or weekend work to make ends meet. There are plenty of jobs you can do online or in your spare time that need not take up too much time or energy and will make you a little extra cash. Sales representatives for Avon or even Ann Summers can host one party per week and earn enough commission for a healthy amount of savings, or babysitting and dog walking could earn you a little extra cash. If your financial need is immediate and short term, look into payday loans as a short term solution. If you are only trying to make ends meet for one month because of an unexpected financial crisis, payday online loans are there to help you make ends meet. You can apply online and find that the money is in your account within 24 hours. Interest usually amounts to around £25 per £100 borrowed, so make sure that you will have enough in your pay cheque to pay it back in full the following month, but payday loans can really be a very helpful bridging loan for short term financial problems.

In the long term, wait a couple of months and then ask your employer for a meeting to discuss a possible raise again. If your request is rejected more than three times over the space of a year, it may be worth looking into a new job!

In the current financial climate, with banks cutting back on lending and price hikes making borrowing money a crucial way of staying afloat, having a bad credit rating can affect you far more negatively than ever before.

Credit checks are required in order to take out a loan, secure a mortgage and even to take out a mobile phone contract. A credit check tells lenders your credit history, and helps them to make a decision on whether you are an attractive prospect to lend to, ultimately making up their mind about giving you credit. A number of things can affect your credit rating. The most serious is defaulting on a loan or credit card, which makes you an undesirable customer for a number of years, but many little things can drag your credit rating down. Late payments on credit cards or loans, missing repayments and even unsuccessfully applying for credit one too many times can leave a mark on your credit rating, making it difficult to get credit later in life. You can find out how your credit rating stands by applying for a credit report from companies such as Experian or Equifax, who, for a fee, will send you your full credit report, which lists all of your credit activity and gives you an idea of where you stand.

Ways to improve your credit history

Should your credit rating not be looking as healthy as you might like, there are a number of ways that you can begin to rebuild your credit report.

• Bad credit history credit cards

Offered exclusively to high risk customers with bad credit ratings, these bad credit-credit cards give customers a chance to prove that they are capable of responsible borrowing. Giving small amounts of credit with clear repayment terms, spending little and often on a bad credit credit card, and then repaying the full amount (or at least over the minimum) every month, will start to rebuild your credit report and prove that you can make repayments in a timely fashion. The most important thing with this option is to ensure that you never spend more than you can afford to pay back, and stay as far from the credit limit as possible. These cards are exclusively designed to help customers rebuild their credit history and should not be looked at as a form of ‘free money’, or used to get further into debt.

• Check your credit history for discrepancies

Once you have obtained you credit report you should go over it carefully to make sure that everything makes sense to you. Mistakes can be made, and with so few customers checking in on their credit histories you may find that you have been marked down for a loan you haven’t applied for, a repayment noted as missed when it was made in full and on time and so on. Correcting these mistakes is relatively simple and will require you to contact both the lender involved and Experian/Equifax directly. Just one negative mistake on your credit report can drag your overall score down, so it is worth getting these mistakes rectified.

• Keep up to date with current borrowings

It is never to late to start repairing a bad credit rating, so if you still have debt with companies, even ones who have led to a bad mark on your credit report, try to keep up to date with them straight away. If the problem is that you are still struggling with debt, you will find that a lot of companies are very understanding if you call them to explain the problem. You may be able to work out different dates or smaller repayments to bring you up to date. Even if it takes longer to pay off your debt, as long as you are keeping within the limits of your credit agreement, regular repayments of debt can be used to start to improve your credit score. Try to see any current debt as an opportunity rather than a hindrance.

• Stop applying for credit

Every application for credit is noted on your credit score, and affects your rating negatively if you are rejected. If you have applied for a loan and been rejected it is worth getting your credit report and finding out why rather than applying for a loan with a new company. If you need a quick loan, and are in the position to pay it back in full, then payday loans do not require a credit check and can be deposited into your account within 24 hours. If you do need to take out a loan from a payday loans company, make sure that you are able to pay this back in full under the repayment terms (be they 30 days, 60 days or 120 days) and use this as an opportunity to relearn how to deal with debt. Improving your mindset about borrowing can quickly lead to improving your financial situation overall!

Along with moving house and job stress, financial struggles are one of the top reasons for excessive stress in life. We all need money to stay afloat, and managing your outgoings versus income, as well as trying to allow yourself a few of the things you want rather than just what you need all of the time is one of the most difficult challenges in day to day life. However much money you have, you are bound to want more as your threshold for what is in your reach shifts to accommodate your budget, and a common pitfall is spending everything you have every month, leaving nothing over for savings. Not knowing your limits and living right up to what your means allow each month is one reason so many people fall into the devastating debt cycle that can lead to severe financial troubles that can mar your life in the long term. Here we list the top 5 financial mistakes people make – and how to avoid them!

Frivolous spending

In today’s instant culture, money seems far more expendable than it used to. Think about your journey to work, you get on public transport, grab a cappuccino and a croissant, maybe pick up a paper for later on. Without thinking about it, you’ve probably already spent between £5 and £10 on items that not only did you not need, but you could easily have gotten for cheaper or even for free with a little prior thinking. Taking breakfast to work, walking in and checking the news online may mean putting in a little more effort but over the year it will save you hundreds of pounds, without you feeling deprived. This is the same for new technologies like mobile phone upgrades, video games and mp3 players. When they first come out they cost far more than a year down the line, and people will often buy them to stay up to date when they already have older versions of the same technology at home. If you have three old mobile phones lying around you probably don’t need another one until the price drops a bit!

Buying things you can’t afford on credit

Tying in with frivolous spending is buying expensive items on credit just because you can. Consumers often think that because they can get credit to cover a new television or expensive kitchen equipment that they can afford it. The truth is if you need to get it on credit then you can’t afford it. Saving up for a few months with money from your pay cheque means that when you do eventually buy the item it is yours outright, and the financial burden of paying for it has already passed. If you won’t be able to afford it after a few months of saving up, then it’s probably not a purchase that you should be making in the first place!

Subscriptions and memberships

Do you have a gym membership? Most working adults do or have done at some point. And how often do you go to the gym? A large percentage of people with gym memberships go less than once a week, and at a figure of around £50-£80 per month, it would be far cheaper to pay for one off exercise classes, run in the park or take up swimming twice a week. Similarly, if you’re paying for TV or music subscriptions that you are not using but think you might, one day, it is worth cancelling these and paying for them when you really want to use them. Subscriptions and memberships often get lost amongst your monthly spend as it is a regular payment, but it is money you don’t need to spend going out of your account for no reason, often just subscribing to a lifestyle rather than a service.

Living on borrowed money

Credit cards, overdrafts and loans all offer a quick solution to debt or financial struggles. However, these ways of obtaining cash all carry hefty interest rates, meaning although this money is yours in the immediate, in the long run not only do you need to pay this back, but you will be paying your own hard-earned cash out for the privilege. Often it seems like a good idea to take out a credit card when it is offered to you, or take a loan out for general spending, making your bank account look healthier in the process, but these are long term commitments, and if your situation changes you may find yourself living entirely off of money that isn’t actually yours, leaving you very little of your own money for savings and legitimate spending money of your own. It can be quite a negative experience mentally to feel that you have no money of your own, so it is best to avoid overdrafts or loans as expendable cash.

Living payday to payday

It is human nature to live within our means, spending everything we earn then waiting for the next pay cheque to come through for the process to begin again. But this is a dangerous cycle as it leaves you with very little wiggle room should your situation change, and stops you having a chance to save money for expensive purchases in the future. Also, spending that close to the line of your account/overdraft can lead to you accidentally going over your limit and paying excessive and unnecessary fees every month. Try to cut back on spending and save a little money in a high interest account every month. Payday loans can be a helpful way of staying out of your overdraft and away from longer term borrowing commitments, as long as they are used only for one-off times of financial struggle and paid off as soon as your next pay chque comes in. In this case, a payday loan is a short term and helpful way to make sure you stay afloat and that your borrowing ends as soon as the month does. After paying the loan off, look into opening a savings account and saving a little bit of extra cash every month (even just your daily cappuccino) to keep you out of debt in future!

Over the past few years, banks have increasingly come under fire for what have been deemed ‘unfair’ or ‘unexpected’ charges and penalties on customers’ accounts. Until relatively recently banks would apply charges of up to £30 per day to accounts as penalties for going into an unauthorised overdraft or bounced cheques or direct debits. As often this occurred a few days before a customer’s payday these charges would quickly rack up, costing upwards of £100 every time. If this happens more than once in a month, people quickly find themselves spending a sizable chunk of their monthly pay just on bank charges.

The official line from the banks

The banks explained bank charges as being for the necessary ‘administration’ caused by a customer borrowing unauthorised money, but customers soon became wise to the fact that it would cost more to keep charging these high rates day by day than to take a one off penalty payment. Also, if a person is struggling with their finances and unable to make it through the month on their pay cheque, the least helpful thing the bank could do would be to take more money from them, essentially making them even less better off month by month.

This prompted an investigation by the FSA (Financial Services Authority), who deemed the charges excessive and ruled that banks should charge no more than a £12 penalty charge for unauthorised borrowing, and that customers who have fallen foul of these high charges should be able to go to court to claim back their money.

At the same time, an investigation was made into Payment Protection Insurance (PPI) on bank loans. Often this has been applied to loans without it being pointed out to the customer in advance, and adds a sizable amount to the monthly payments, and how much a customer will be paying off of the loan in the long run. In many cases, PPI does not apply to the customer (for example in the case of those who are self-employed), meaning those customers are paying extra money for their loan for no reason.

Of course, PPI is a good idea for those in regular employment that are worried their situation might change, especially with the unstable financial climate making jobs more and more scarce. Payment protection in this case will save someone from having trouble making their loan repayments should they become unemployed, and is a useful safety net for people in jobs which may not be completely secure. However, as the banks have often added this to a loan contract without asking the customer in advance, and have skimmed over the contract before signing, consumers were upset that they had been paying for a service that they didn’t necessarily want. In the small print of these payment protection plans there is often a list of people who will be ineligible should they find themselves out of work, and this was often not discussed either, despite the bank being aware of the customer’s position when selling the loan.

The FSA deemed that banks should also pay back PPI payments to customers who has been mis-sold the insurance, leaving a huge number of consumers going through the courts to take back their overdraft and PPI charges. This is a lengthy process and is not always successful. So what can you do to avoid getting into these situations with the banks in the first place?

Short term cash crunches

If you are hoping to borrow money for a short space of time or unexpected expense, it is worth looking into taking out a payday loan. These loans remove the need for PPI as they are taken out over such a short space of time, and will save you from excessive and unnecessary bank charges by keeping your account topped up until your next pay cheque arrives. You tend to make a payment of around £25 in interest for every £100 taken out, which keeps the process simple enough for your to be able to manage your finances for the next month easily, and as their terms tend to be only a month you stay away from paying large amounts of interest over a long period of time.

Should you be looking for a longer term loan then a bank loan is the safest way to go, but make sure you have the terms laid out unequivocally for you, and that you know exactly what you are paying for. With payday loans the short amount of time and relatively low amounts of cash borrowed means that the whole period of debt is short and painless, but with a larger loan it is a much longer commitment, so it is always worth taking your time and asking the bank to explain everything to you – more than once if necessary!

In recent times, money has become tight for most people. Banks have cut back on lending since the credit crunch, VAT has risen and food and fuel prices are at an all time high. In most cases, people’s salaries are not reflecting this higher cost of living and people are finding themselves living on less cash monthly than ever before, cutting the possibility of savings and disposable income in half.

It is in situations such as these that budgeting becomes not only necessary, but a helpful and proactive way of keeping your money situation under control and stopping yourself from sliding into debt. Budgeting is a relatively simple process to begin with; start by listing all of your income and expenses in order to work out your total disposable income monthly. Sometimes you will find that your income and outgoings do not match up, in the case that your income is higher than your outgoings, it is worth looking into a high interest savings account and trying to put as much into that monthly as you can realistically afford. These savings should rack up quickly and will leave you a safety net of freely accessible cash for financial emergencies, large purchases and investments. In other cases, you may find that your outgoing considerably outweigh your income, and in this case there are a number of things you can do.

Get the pen and paper out

Work out if your outgoings are all completely essential. Once you have covered basic essentials like food, fuel, tax and housing you can look at what else you spend out on monthly. Clothing bills can be slashed by shopping in cheaper stores or using your creative side to make or customise old clothes, gym memberships can be cancelled in favour of running in the park or aerobics at home, and walking to work will give you extra exercise as well as cutting down on transportation costs.

Top Tip

If you are struggling to work out where your money is going, and feel you should have more disposable income, it is worth keeping a note of everything you spend for one week, noting every single time you take your wallet out – even if it’s just for gum in the corner shop. You will quickly be able to identify your week spots when it comes to unnecessary spending, be it a daily coffee, or lunches out at work. Try to separate out your needs from your wants and keep a strict budget for needs, with a little left over for the occasional treat. This is will stop you feeling like you are being restricted and prevent a spending spree on payday!

Another way people find themselves spending more than they can afford without noticing is through debts. Credit cards are a helpful way of obtaining emergency cash, but are frequently seen as ‘free money’, being used for non-essential purchases and then paid off at the minimum amount monthly. As interest racks up, these debts do rise, until your monthly payment starts taking out a large chunk of your income. Cutting up credit cards may seem like a terrifying leap to make, but with small, short term loans being so freely available at the moment, you will always have other options.

Should you use instant credit facilities?

Payday loans are a way to borrow for a financial emergency, and are meant to only be borrowed from payday to payday, meaning all interest and the loan in full is paid back within a month, stopping you from getting into long term debt or having debt creep up on you as it can with a credit card.

Avoid overdraft charges by trying to stay well within your budget monthly, as these charges can also start to take out a large chunk of your disposable income monthly, rising quickly day by day and causing a deficit in your account before your pay even goes in. If you look like you are going to get into an unauthorised overdraft, call your bank to see if you can have your overdraft extended temporarily. This will still cause a deficit, but it will remain static until your pay goes into your account. Alternatively, borrowing a short term payday loan or cash advance is the best way to stay on top of charges, as long as you are certain you can afford to pay them back in full and won’t need to borrow again later in the month.

Should you stick to these ideas, it should be relatively simple to build up a small pot of savings for emergencies, whilst living comfortably but not extravagantly on your earnings.