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The best way to pay off an overdraft that's got out of control?

(33 Posts)
louiseee123 Tue 03-Nov-15 16:03:45

Just that really for one reason or another - being rubbish with money and not keeping an eye on money being the main reason. We now have an overdraft of 500 quid, but every time we get paid it just eats it back and we're back in the same situation the next month. We get charged 1 pound a day for being in it so have an appointment with the bank to upgrade our overdraft so we don't get charges.

Would taking our money out the account and paying it back gradually, say 50 pound every 2 weeks be the best way without leaving us skint? Thanks for any advice.

InMySpareTime Tue 03-Nov-15 16:33:07

Have you got previous bank statements? Look back through them to identify areas of spending you could cut back on. Usual suspects are:
eating out/takeaway,
supermarket "treat creep" (things that used to be occasional treats start going in the trolley every week)
Old uncancelled Direct Debits

At least 3 months of statements should get a decent overview, ideally a year to catch all the annual insurances etc.
Once you've done that, you can make a monthly budget (annual things should be divided by 12 and budgeted monthly).

iklboo Tue 03-Nov-15 16:43:25

We did a reducing overdraft - month 1 = £500, month 2 = £450 etc until it reduced right down to a minimum. Could you do something like that, with an affordable reduction rate?

overthemill Tue 03-Nov-15 16:47:17

What are you spending your money on? You need to reduce your spending! Write down every single penny you spend for one month. Then you will see. I have no idea what you buy but you don't have enough income for it. It doesn't sound like you are broke just bad at budgeting.

JiltedJohnsJulie Tue 03-Nov-15 16:54:18

Sounds like you just need to budget. Talking to the bank is a good idea smile

MamaDuckling Tue 03-Nov-15 16:55:31

I had to move what I wanted to save each month out of the account. Using online banking I could see my lovely savings, ready to go back in at the end of the month to pay a bit more of the overdraft back.
That really helped motivate me.

As others have said, be strict on coffees/lunches, alcohol at supermarket or if out, just stop buying any new clothes - that's a really easy one to break...

louiseee123 Tue 03-Nov-15 19:29:31

It's random trips to the supermarket and shop for drinks/treats that escalate badly! 342 quid last month!

Can't believe it got so bad, I've just been to aldi and done a big shop so i shouldn't even need to go to a shop for at least 2 weeks! It's been an expensive month for birthday so i know we have money but this month its just gone!

Fluffycloudland77 Tue 03-Nov-15 19:43:41

I'd open another account and pay my wages into then pay what I can into the old one to pay the od off.

JiltedJohnsJulie Tue 03-Nov-15 19:44:52

If supermarkets are your weakness I'd do a meal plan, a shopping list and try to keep to it. Easier said than done but if it gets rid of the overdraft, it'll be worth it smile

Gazelda Tue 03-Nov-15 19:53:16

Meal plan and an online shop,works for me. I don't get tempted by the 'special offers' or new treats.
All of my bills come out by DD and I take enough cash out each week for fripperies. the rest is allocated to either savings or to hols/Christmas/birthdays/treats.
To be fair, this is what I should do. And I have done it in the past to clear my overdraft (took about 6 months). but I've slipped back to old ways. Time for me to get back on the wagon.

ivykaty44 Tue 03-Nov-15 20:04:02

Don't take money out of the bank as that will incur more charges

Do work out all your outgoings, council tax electric, gas, water, house insurance, TV licence, mobile phone, sky, internet, car etc and then see what you have left over

Then cut back on shopping and what you have left over goes into paying off overdraft

See if you can reduce any of your utility bills or change companies to reduce outgoings

I got rid of my land line phone and get broad band on cabel, this saved me £20 per month so £240 over the year. I also dumped the TV as we didn't really watch it and that saved the licence money ,- we use catch up if there is anything we want to see. So that was £145 saved. I changed my house hold insurance and saved ,£10 per month, so another £120 per year. My mobile is with giff gaff and virgin and I pay £20 per month for unlimited text and ,1200 minutes with internet.

You have to work at your finances but I now save £500 each year on my utilities by doing things a bit different.

I phoned the gas and electric two weeks ago and they owed me £250 because they were taking to much money on direct debit and the DD has also been reduced and I got the money back.

louiseee123 Tue 03-Nov-15 21:56:57

ivykaty44 So i will incur charges even if i have money in the bank for my direct debits?
I was going to leave in 100 pound extra as well as the bill money each month to slowly get rid of the overdraft or would it be better to
have the bills go out of a different account?

I know where our money has been going so no more trips to the shop and my husband is banned from buying microsoft points for his game!

ivykaty44 Tue 03-Nov-15 22:27:07

Intrest your overdraft

If you get paid 1000 that means your overdraft disappears and you have 500

Leave that in the bank until you need to spend it, to keep yourself in credit for as many days as possible, incurring as less charges as possible so it is cheaper in the longvrun

Don't take out money on the first of the month that you won't spendvuntil the 21st of the month leaving your account ovetdrawn

ivykaty44 Tue 03-Nov-15 22:29:36

Another trck is to take debit card out of purse and leave in a safe place only take with you for shopping once per week and fuel

That way you can't spend, no cash no card no temptation

louiseee123 Wed 04-Nov-15 13:07:40

I think a lot of it is boredom spending, if me and the kids are stuck at home we'll all go to the shop for a treat, doing that daily sometime multiple times as my husband decides he wants more stuff for the cupboards, it soon adds up.

Now i'm aware of it and cut it out it will just gradually get better wont it? I'm worried that as soon as bill day comes(1st of the month) i'll just be back in it again although it wont be anywhere near the 500 more like 100 if we're careful.

lilacclery Wed 04-Nov-15 16:37:44

ynab is highly recommended for this.
One lady on our frugaleers thread got rid of £3k overdraft within a year of using it, she's called laska

louiseee123 Wed 04-Nov-15 17:18:53

lilacclery i did look into that but i was under the impression you couldn't start in the minus? i might be mistaken and have another look.

lilacclery Wed 04-Nov-15 21:09:22

Think there's a video to do with existing debt?
I haven't spent enough time figuring it out yet

wherehavealltheflowersgone Wed 04-Nov-15 21:22:53

You can start on a minus with YNAB, but tbh I found it much more motivating to open a new current account and allocate £50 a month to my old od using ynab.
My od was £4k if it makes you feel any better blush

louiseee123 Thu 05-Nov-15 10:40:42

wherehavealltheflowersgone Is it easy to open another account and did you incur charges by doing it this way?

I can easily pay the overdraft off in a few months but it get's confusing with direct debits going out of the same account, would you change over all direct debits too?

Lweji Thu 05-Nov-15 10:46:06

Honestly, I'd get the bank to give you a card that doesn't allow overdrafts.
Only use cash and only take out money within your balance.
You do need to exercise self control and go on a strict budget control for the next month or two.

Forget easy fixes like moving bank accounts.

MamaDuckling Thu 05-Nov-15 16:52:59

Can someone tell me what ynab is?

WheresMyBurrito Thu 05-Nov-15 16:57:15

Two things:

1. Budget! Like pp have said, go through your bank statements, get a spreadsheet or You Need A Budget (YNAB) software, create a budget and stick to it.

2. Get a new bank account without an overdraft. Transfer absolutely everything over. Then set an amount to pay each month to clear the overdraft and set up a standing order directly from your new account. This will be easier than trying to leave money in your overdrawn account each month.

wherehavealltheflowersgone Fri 06-Nov-15 23:39:17

Louise it's v easy (and free) to get a new account. Definitely transfer every single direct debit etc over to new account.
YNAB saved my sanity / marriage!

Unescorted Sat 07-Nov-15 13:41:09

We paid back 37.5K of debt over 6 years by doing a proper budget, meal planning, being ruthless with non essential spending and shopping around for utilities.

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