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The mistakes to avoid, and the tricks to help keep your funds going until the end of the month.

When you’ve had an expensive month or there’s been an unexpected cost, the knock-on effect usually means there’s very little left in the bank to get you to payday. It’s at it’s worst in January as people often get paid early in December, but it can happen all year around.

So what do you do? Well it’s very easy to get high-cost loans and hope it’s just a one-off. But this isn’t a good solution. First, I’ve shared the things you shouldn’t be doing. Then you can find a few things you can do to help that cash stretch a little further as well as a few cheaper alternatives for borrowing money.

What not to do when you’re out of cash

Don’t get a payday or guarantor loan

You know that payday loans are bad for you. Despite many of the big lenders going out of business, it’s still possible to take out payday loans, and they will cost you a fortune in interest charges. Guarantor loans are also bad for your wallet and your credit rating. Avoid both of these types of loan, even if you’re desperate as there are cheaper alternatives (more on those below).

Don’t use your overdraft

Unless you have 0% interest overdraft the chances are that using one is costing you a lot more money than you realised – and they’re about to get even more expensive with many banks already announcing rates of close to 40% from spring 2020.

Don’t put it on credit

It’s tempting to put the things you can’t afford on a credit card, or buy things via “easy” credit such as Klarna or using retailers like Very. But this isn’t just delaying dealing with the problem you’re also adding to it with extra interest and charges added on top of the amount you borrow.

What you should be doing to reach payday

Do work out a budget

Yes, this might sound painful, but it’s essential to find out exactly how much money you have and where it’s going. Here’s how to do it.

Do use cash

You’ll need to budget the money you have left and a simple way to do this is to only pay with cash. Withdraw the money you’ll need (and can afford), say for a week and then split it into different expenses. Then only take with you the cash for that activity. This prevents you spending more than you intended and stops any impulse spending. You’ll need to leave your debit cards at home.

Do cutback and shop around

Very simply, buy less. If something isn’t essential then you need to be strong and not spend money on it. This could mean you buy less and go out less.

When you do have to spend cash, look for the cheapest options. At the supermarket, trade down to own brand equivalents. When you travel, find the cheapest fare. At lunch bring in sandwiches rather than eating out. It’s all obvious stuff, but you have to follow through and actually do it.

Don’t forget to check around the house for things you’ve already got that can prevent you from buying something new.

Do use your savings

If your bank balance hits zero then the first place you should go is your savings. This is better than borrowing money where you’ll be charged interest as that rate is almost certainly going to be higher than what you’re earning on your savings.

You could also see if friends or family will lend money to you, but make sure you all know upfront the terms of lending the cash – you don’t want it to be the cause of any animosity later on.

Do consider a 0% purchase credit card

Another option is to look into a 0% purchase credit card. For a limited amount of time (it varies depending on the bank and card) you won’t get charged any interest on your purchases. This is the cheapest way to borrow money.

Of course, it’s not that simple. You will have to make at least the minimum repayments each month on the card and clear the balance before the 0% period ends to avoid any interest at all. And if you don’t think you can cope with this, or think you’ll be adding to the balance every month, then they’re best avoided.

Do find the loans with lowest interest rate

If you don’t have savings and can’t get a 0% credit card, then you can still borrow money without resorting the charges you’ll get from payday loans and overdrafts.

See if you have a local Credit Union, The Finding Finance site will help you find responsible lenders. For bigger costs you can’t avoid then check out comparison sites to see what you’d get charged for a loan from a high street bank. It’s often possible to get less than 5% APR.

But only, and I really can’t stress this enough, borrow money in this situation if you really have to. And if the situation appears so bad that you can’t see a way out, then you absolutely should seek some free debt advice.

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