How to handle life’s money curveballs

Life has this way of catching us off guard. Unless you’re well set up with money, unexpected costs can be overwhelming. 

There are a variety of different scenarios that can pop up, so it’s worth considering what they are and what the options could be to deal with them (without making things harder in the long run!).

Unexpected expenses

One of our customers shared how life catches them off guard: “Unexpected expenses often drop in before payday (car repairs, white goods, contributions, birthdays, weddings, etc ). I often use credit cards, but with credit cards not only is interest much higher, but often it does not get paid back in full in the same month so can cost a lot more.”

If you find yourself with similar unplanned costs, consider what options you have available:

• Use your savings if you have them. Sometimes if savings have been built up, you are reluctant to 'dip into them'. But it's important to remember this is exactly what a rainy day fund is for. Use your savings and make a plan for how you can top the account back up for future curveballs
• If you must use a credit card, ensure it's 0% interest of that you are certain you can pay it off in full. Credit cards can be a great short-term resource, but you could get stuck in a loop of making minimum repayments
• Overdraft - Many banks and building societies will provide an interest free overdraft buffer. This is an agreed upon amount of money that you can access without incurring interest charges, as long as you stay within the limit set. You will need to check this directly with your account provider. Beyond that, overdraft balances are charged anywhere between 20-40% APR (and in some instances more), which makes overdrafts an expensive way to borrow money.

Advance from Salary Finance - You might be able to access some of your earned pay ahead of payday. Find out if this is an option for you here

Managing bills and payments that are not close to payday

Bills are often paid on the same day each month. If you get paid weekly, monthly, or 4 weekly, it can be pretty hard to have all of your necessary bill payments scheduled on the same day or aligned with when you have money coming in. 

A Salary Finance customer explains it like this, “As I get paid every 28 days, some bills come in monthly making it a bit of a juggling game as higher costs leave less in reserve.”

If you find yourself with bills out of sync with payday, these are some things to consider:

• If it's a one-off bill, or an unexpectedly high bill, always speak to your provider. They may be able to arrange a payment holiday, or a change in payment date. As long as you are notifying them ahead of time (rather than after you've missed a payment) they'll want to work on finding a solution and it will ensure you avoid additional late fees. It's important to consider that repayment arrangements may be reported to the CRA so can affect your credit score. However, its better to not miss a payment as this will have more of a negative impact.
• What would moving your bills look like and can you afford it? Where possible if you can align your expenses with payday, you can avoid the gap. But this can come at the cost of paying the 'gap' upfront.
• If you're ever at risk of not being able to afford a bill, it's important to avoid delayed or missed payments. This can negatively affect your credit score, which can make it harder for you to borrow money or access financial products in the future.

Cost of Living expenses and rising prices

Post-pandemic, inflation has been much higher than we were used to. This means that our basic food shop, family expenses, and unavoidable costs are all more expensive. 

A Salary Finance customer explained how they have used earned wage access to help cope with living cost pressures, “I took advantage of Salary Finance to take care of some unexpected expenses. It’s an incredibly useful tool to have and so straightforward to use.” 

If life’s necessities are causing you budgeting issues, a few things to consider:

• Be brutal - can you put some of the 'nice to have' living costs on pause to make it easier to pay for the essentials?
• Have you checked what state benefits you might be entitled to? Salary Finance makes available the Better Off calculator, designed to help you find out if you are eligible for extra support. It's easy, free to use and could make a big difference to your wallet.
• Make sure you're making the most of your employee benefits - check if you have access to deals and discounts, you may be able to get money of your food shopping or get access to a better phone contract deal.

Ultimately, the answer to being able to deal with the unexpected is to have a plan for building savings, avoiding and repaying expensive debt, and managing your spending. The Smart Spending System is a good place to start. This video explains how it works and you can download the PDF template here