Borrowing Money and Budgeting for It

By borrowing money you are basically gambling that your future income will be sufficient to make the payments on the loan. That gamble takes on a more serious meaning when you take out a secured loan. In essence you are saying “I bet my house that I can make the repayments on this secured loan.” If you can’t make the payments the chances are the loan company will repossess your property in order to sell it and recover their debt. Even if you don’t take out a loan secured on your property and go for an un-secured loan, if you default on the payments the finance company may still put a charging order on your house, which means that when you sell it they will have the right to recover their debt from the equity in your house.

But secured loans are not all bad. Like most things in life, if used sensibly they can be beneficial :- the interest rates on secured loans are generally lower than for un-secured loans and money can be borrowed over a longer period, both of these will make the monthly payments lower. This will help if the secured loan is used for consolidating existing loans and credit cards’ as it will allow you to free up some of your income. The wise thing to do with some of this spare cash is to save it for a rainy day, so that if things go wrong in the future you will have money to fall back on, which will help prevent you from borrowing money at bad times and / or protect your credit rating by allowing you to continue making the payments on your secured loan.

Running your family is like running a business and no business can be successful without planning and budgeting. We have included a sample of a budget sheet for you to use or adapt to your own requirements.

BUDGET

Income                                    Planned                                  Actual

Expenses                                Planned                                   Actual

This budget can be used for a week, a month or a year. But however you use it you need to review it regularly and adjust it to your changing circumstances.