Keeping your finances in order as a mom isn’t an easy task. Here’s some advice on budgeting as well as basic information on loans.
Keeping your finances in order as a mom isn’t an easy task. You have recurring expenses and many unexpected ones too, so how do you keep up with it all? To help you tidy up your finances, Castle Finance Direct has put together advice on budgeting as well as basic information on loans.
Budgets help you identify areas that you could save money or cut back on your expenses. Seeing as the average person’s bills come out on a monthly basis, it’s often advised that you make all of the suggested figures you’ll find below monthly ones.
Putting Together a Budget
In order to get started, you need to first put a budget together. For anyone that is a novice at this, it’s going to require that you gather as much information as you can about your outgoings and income.
- Income: This should probably be the easiest step unless you have an overwhelming number of income sources, which is a good thing. Explore every source of income that you have and include it in the income section of your budget whether pensions, benefits, wages, or passive income.
- Expenses: Knowing how much you spend every month can be tricky as you have a range of expenses. You may have monthly bills while you also have one one-off and annual expenses like Christmas or car repairs. For the less frequent bills, divide them by twelve so you get a monthly figure you can use in your budget. For anyone who can’t say how much they spend monthly, you can try monitoring your expenses over time or using your bank statement.
- Calculate: One you’ve completed the first two steps, you need to calculate your budget. This is done by subtracting your expenses from your monthly income. When you have money left over after paying the listed items, you’ve got a ‘budget surplus’. In the case that you don’t have any money left and are spending more than you make, that’s called a ‘budget deficit’.
Loan Types
Now that you know how to budget, you’ll find basic information about loans here. Knowing how to budget can help you borrow responsibly, which keeps your finances healthy. Before going into loan types, it’s crucial that you understand how they work. For loans, each one has different terms agreed on by each party in the transaction.
Secure vs Unsecured
The first thing to know about loan types is that you have secured loans as well as unsecured ones. When it comes to secured loans, this means that there is collateral backing the loan such as a car or house. When there is no collateral involved, that is what’s known as an unsecured loan. You will find that for the latter which could be a credit card or signature loans, interest rates tend to be higher.
Revolving vs. Term
When it comes to the repayment length of a loan, there are revolving vs. term loans. This is essential when it can be spent, repaid, and spent again. An example of this type of loan is both a credit card which is an unsecured revolving loan and a home-equity line of credit with is a secured, revolving loan.
On the other hand, a term loan is one that’s paid off in equal monthly payments over a set period. Examples are a car loan which is a secured term loan and a signature loan which is an unsecured term loan.
Finally, note that all loans have varying interest rates and the higher the rate, the more you’ll pay back over time. If you get a loan with compound interest, you could even be paying interest on top of interest whereas simple interest loans only require interest on the principal loan.
You can get more detailed information on loans and budgets when you contact Castle Finance on Linkedin.
