Break the Payday Loan Cycle By Lowering Monthly Bills

Monday, December 10, 2012

Many people know that payday loans are most frequently used to pay off monthly, recurrent debts, such as car payments and utilities. Less people know how to break the cycle of monthly payday loan usage. Because payday loans provide instant financial relief, many people repeatedly use these services to cover bills that arise in between paychecks. While using these services responsibly can help an individual out in a pinch, the repeated use of such services is very costly and may encourage a cycle of borrowing that is financially damaging.

Making ends meet can be hard when expenditures outweigh revenue. Though it may be difficult, in order to break the payday loan cycle it is necessary to figure what expenses can be reduced or cut. Often, one's monthly recurrent bills can be reduced to better fit one's income, while other, nonessential expenses can be cut altogether. Although monthly bills are generally the reason that one borrows a loan, many factors may influence why one doesn't have the money to cover the monthly bills. While the bill itself might be the motivation for borrowing a loan, pre-bill spending on nonessential items is often the reason that a loan is needed in the first place.

Rather than overspending early in the month only to be surprised by a nearly overdue monthly bill individuals need to plan ahead to break the payday loan cycle. This may mean that said individual will experience a few financially tight weeks during the transition period, but the aftermath of consistent financial independence should be worth the temporary sacrifices.

The first step to break the payday loan cycle is to comb over all recurrent monthly bills to determine their average payment amounts and their due dates. Gather copies of all your bill statements and record all due dates and approximate payment amounts in a ledger. This ledger can be a simple notebook or word document, but it should be used for the sole purpose of tracking financial transactions. Once you indicate all approximate amounts due and the due dates, you can create a check list on the side to keep track of outgoing income. This will keep you from encountering any surprise bills; by and large, most bills can be anticipated and tracked by using this method. After you determine when and how much must be paid, you can correspond your paycheck dates and amounts.

For most people, paychecks are relatively stable, with a similar amount being paid on a predetermined schedule. Thus, if you know you get paid biweekly, you can be sure to cover expenses for the first half of the month with the first check and the second half with the second check. If your bills aren't so evenly distributed, you must save the required amount from the check that covers less in anticipation of upcoming bills.

Only after all the essential monthly bills are paid, should money be allotted to other typical but unnecessary expenses, such as the amount spent per month on entertainment and shopping. In order to break the cycle of using payday loans to cover recurrent monthly bills, individuals must check their extracurricular spending. While the initial transition phase may be fiscally tight, and the individual might have to reign in bad spending practices, in the long run the amount that the individual saves will allow for a more financially liberated life. An individual will start to have extra spending money, instead of paying interest on a loan month after month.

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