New borrowing habits to help save money now and build a rainy-day fund for the future.

It's generally worth having three to six months’ worth of expenses put aside in savings in case of an emergency. Certainly, for loans, mortgages and other fixed repayment borrowing.

It might not feel like you’ve got enough spare cash to be able to set this much aside, but there are things you can do now to change your borrowing habits to free up cash to set aside and reduce your monthly outgoings at the same time, so that you don’t need as much to cover the essentials…

  • Start by listing all of your current debts, be it credit card debt, student loan debt, or a car loan, and figure out the minimum amount you owe to remain current with each debt.

  • Then you can curb your spending on expensive forms of borrowing like credit cards to help get your finances in order. Go on a spending fast — which is when you stop spending on your credit cards for a set period of time. Often, these are month-long periods of curtailed spending that will mean your credit card bill isn’t going up every month.

  • You could also look to reduce the interest rate on your debts by consolidating multiple debts into one debt. This can save you interest and also means you have a fixed repayment each month so you can plan and budget knowing what it will cost you, rather than being surprised that your credit card bill is costing you an extra £50 this month.

  • Transferring high-interest debt to a low-interest credit card, such as a balance transfer card. There are a number of products where this is possible: introductory 0% credit card offers and 0% overdrafts. This will save you interest, see you pay down the balance faster and reduce your monthly repayments. Just remember to have it paid off before the interest kicks in.

  • You can also get 0% purchase offers on some credit cards, so any spending you do won’t come with an interest charge, meaning your monthly repayment will be lower and all of what you pay is going towards paying down your balance. Again, just remember to have it paid off before the interest kicks in.

Now’s the time to create some new borrowing habits…

Just like all of those great habits of not spending that you’ve been forced to get into during lockdown, you can create new borrowing habits to go with them. With the easing of lockdown, keeping those new habits going will mean a brighter financial future, where you enjoy borrowing less and paying off sooner giving you the chance to build up a rainy-day reserve.

To make sure you always Borrow Well, soon ilumoni will be able to help you do this, letting you see your borrowing in a new light. ilumoni analyses your spending and borrowing to find smart ways to repay and highlight better deals, just for you. Helping you to manage your payments, simplify your borrowing, pay less interest and clear your debt faster. To hear more about our app, register and we’ll keep you up to date with all of our latest developments. The app is completely free, completely secure and you are under no obligation to share or do anything you don’t want to.