If you’re lucky enough to have money left over at the end of the month or if you get a bonus through from work, what should you do with the extra money? Of course, many people will be tempted to spend it on nice things like clothes or gadgets, but realistically the two best options for that money would be to either use it to pay off some of your debt or put it away as savings.
What would be the best option?
One of the biggest arguments for saving your money is that you are covered should a financial emergency pop up. Also, by doing this, you could try to prevent getting into debt in the future. However, the difficulty with doing this and not paying off your debt, is that the interest on things like credit cards will increase, leaving you paying off more money that you might have done before.
Paying Off Your Debt
Paying off your debts is important as the longer you leave it, the more interest you will pay, so it’s a good idea to get rid of the debts as quickly as possible.
However, if you decide to use the money to pay off your debt, you could leave yourself at risk if a financial emergency appears. If an unexpected expense does pop up, then you might find yourself relying on credit cards to cover the costs, which could make the debt worse.
Why Not Try Both?
I think realistically, it’s important to do both. It’s a good idea to be able to find a good balance between paying off your debts, but trying to set some aside in case of emergencies. So, maybe if for example, you were lucky enough to be given a £500 bonus at work, then it might be worth putting £250 into a savings account
Obviously, this does depend on your circumstances, as most people aren’t lucky enough to have money left over at the end of the month. If your debts are more urgent, like a utility bill and you don’t have any spare case and don’t want to use credit cards, what are your options?
If you have no emergency fund and an unexpected finance does come up, then you might consider a short term loan like a payday loan. It’s possible to apply for anything from as little as £50 to as much as £1250, which you borrow until your next payday.