AIBU? to be living of your overdraft all the time

[LidiaM]

hi ,
Me and my husband have planned overdraft of £2000 , my partner works full time , I dont work due to having baby and my materninty has finished few months ago,
We dont get any benefits or help from family.
We are renting and are fine with bills etc but we end up using our planned overdraft every single month and it feels like we are always in debt.
My partner comes home with £2,500 a month but despite that l, we always end up with £-2000 at the end of each month . the salary goes in and 3 days later the same thing happen over and over again

It makes me feel shit and I wonder if we are the only one?
:(
I am going back to work in Jan2020 so hopefully it can improve our situation with the overdraft but right now I am so nervous as this is not a guaranteed credit and Im just worries that they can take it away and what are we going to do :((((

"We are renting and are fine with bills etc but we end up using our planned overdraft every single month and it feels like we are always in debt."
That's because you are always in debt. You aren't "fine with your bills" because you would not be able to pay them if you actually lived within your income.

You need to produce a Statement of Affairs - put together a spreadsheet detailing Income and Expenditure. Analyse your bank statement to see exactly what you are spending on and then eliminate all unnecessary expenditure. Cut back as far as you can on outgoings and then see what can be done about increasing income - part time work, 2nd job for partner, move to a rental in a cheaper area.

Do you have other debts as well as the £2k you continually owe the bank?

when I said "fine with the bills" I have meant that we are not in debt with other things. We only have 1 credit card with a limit of 1000 that we do not use.

You're not fine with bills if youre 2k overdrawn everymonth.

Can you list what outgoings you have. Where do you think it goes? Can you cut back at all? A lot? It will vary for everyone, but if eacg week you overspent by 50 less than you so currently, youd be straight within 10 months.

We’re also constantly in our overdraft too, I don’t think it’s too uncommon. We go into credit when the wages go in and then I pay the bills and we’re back in the overdraft.

I’d love to find the extra £2k to get out of it and then cancel it but we never quite make.

I've been there before. You feel like you are doing fine because you have the same coming in as going out and you are not sinking further into debt. But it only takes one unexpected bill or an emergency and you are screwed because of the lack of safety net.

I lived that way for a few years as I only had enough to cover that months bills and nothing left to start paying off the overdraft.

One way you could work on fixing it is using another bank account and putting a small amount each week into it. Whatever you can afford (if you can). Never withdraw from it, just add in any leftover cash when you can.

Once it's built up to 1k (or 2k if you can do it in a reasonable timeframe) transfer it back into your main account to pay off the overdraft. From then on be very strict about your use of it. If you don't have enough in the bank, don't buy anything at all (baring emergencies).

It's easy to get stuck feeling like the overdraft money is just your day to day bank balance money and it doesn't matter if you spend that last £20-30 since payday is coming. Having it in a separate account that you can't touch makes it harder to spend it. - Just make sure you don't go further into the overdraft while saving.

I used to be like this (but was only a £500 overdraft).
I ended up writing a budget down each month and sticking religiously to it (budget did include some "fun" money). So rather than not knowing where money was going, I was telling it where to go.
I cut £10 then £20 a week off our food shopping budget. As we had a loan at the same time, as well as a credit card, we went full insect busting mode for a fee months knowing it'd only be short term.

Part of my budget was putting away £50 a month into a separate account (though I actually ended up putting £100 in there) - this was aimed to eventually get to £500 so I could then put that money away to cover the overdraft and no longer be living in it.

I had another account where one week I'd put in £1, then £2 the next then £3 the next.... I didn't know what that money would be for, was more of just a fun thing to do.

I know this part won't apply to you as you're not using your credit card, but I used to make the minimum payments on it while paying off my loan with overpayments. The loan was only a tiny one. Once the loan was paid off I smashed out the credit card.

Honestly, as cheesy as it sounds, budgeting definitely worked for us. Even though now we are very comfortable I do still budget, I like to know where my money will go before I even get it. I love watching our savings grow and am so much more conscious about what I spend money on.

Imo £2500 take home pay anywhere within an hour or two of London is not enough to live on comfortably especially when renting.

If you have no savings, and £2k of debt you have no contingency if suddenly find yourself in dire need of emergency funds.

That said you are going back to work soon, and that will be hard emotionally but you really need to as children get more expensive as they get older.

In yiur situation I would create a joint spreadsheet of income and expenditures, and thrash out a plan to save money and pay off this debt.

I would also not rush into having another child until you have better financial security, and by that I mean no debts (OD is a debt) and at least 3 months take home pay put by in savings.

thank you, makes me feel a little bit better knowing that Iam not alone and theres way to get out of it somehow.

Overdrafts are evil things so hard to get out of.,

I've been the same in the long distant past, but not the same amount although would be equivalent to around £1000 now.

Eventually I got it sorted but it was bloody hard! And that was when I was earning ok and didn't have a child!

In more recent years I've had to manage on a tight budget and have learned to haggle, get good deals and time purchases for best economy.

I use spreadsheets and soa's and while it's not as busy as it once was the mse site is excellent for tips and tricks, not just the chat forums but many articles on the main site.

I learnt so much from it.

Planning and sticking to a realistic budget really is the key, a bad habit of mine until I learned better ones was making crazy overly strict budgets that were impossible to stick to and didn't take into account things like birthdays, Christmas, summer holidays (dd in school at the time and I'd always forget that her being on fsm meant my food bill went up in holidays, also that not ever doing anything that costs anything even bus fares makes for an incredibly stressful and miserable holiday)

It's like dieting, if you're too strict and deprive yourself too much you'll get fed up and "Rebel"

Yes you need to keep costs down wherever possible but you and your family also need a life.

Stupid that I used to get "caught out" by Christmas, as Martin Lewis says it's every year on the same date it's not a surprise! So now I start saving in January! Not a huge amount, but it does make things easier.

Was particularly hard for me this time of year because dds birthday is just a few weeks after Christmas so I really had to get organised.

Actually to be honest I start saving in January but when dd was school aged what I saved from jan-jun was to cover extra school holiday expenses (and I'm not talking huge luxuries here, just the extra food costs, bus fares to go eg to beach or nicer parks, occasional trips to cinema or swimming, Ice creams from the van...)

And then jun-dec was for Christmas and dds birthday.

It's habit now I have a standing order set up to transfer from current account to savings. So it's just like having another bill.

But I've also spent time over the years shopping around to make sure I keep costs of bills down, I'll challenge a company I'm with if they bump up my bills a lot and I'm not afraid to haggle or even threaten to leave to get a good deal. And I will leave a company if they're taking the piss.

Loyalty is a fallacy in consumer terms, private businesses exist to create profit for their shareholders their only real interest in the customers is how much money they can make from them.

Keep an eye on your direct debits and don't be taken for a mug.

Also check your seemingly smaller expenditures. I'm not really a Starbucks type person but when I am going out and about (currently housebound) I've a bad habit of not making sure I have water on me (meds dry me out) and ending up buying bottles at premium prices - stupid! Doesn't seem a huge cost at the time but it really accumulated over a month/year.

Eg say £1.20 for a bottle of water 4 times a week over a year is almost £250 a year!

An ex colleague was often badly organised with travel fares, she was MUCH better off getting a monthly bus ticket but regularly either forgot to get it or to make sure it was in her bag so sometimes she was effectively paying twice, eventually she hit a really skint period and got herself much more organised and set reminders for herself on her phone and computer at work to both buy it and make sure it was in bag ready each day.

Also (and I still have to remind myself on this one) it's easy to get into a rut buying the same groceries each week, and not taking advantage of special offers but it's good to look for the offers and plan accordingly.

One tip on mse that really made a difference to me was switching down one "brand level" to find products that tasted/worked just as well as the ones you're used to. Martin Lewis was advocating this long before eat/shop well for less came about though they do a similar thing.

I've never been a brand snob as such but I was wary of the budget ranges in the supermarkets but I saw this on mse years ago and gave it a go and found for most things I didn't really notice a difference. Some items weren't a success and I stayed at my usual brand level, levels being:

Named brands

Premium supermarket own

Regular supermarket own

Budget range

The idea is if you normally buy eg premium you try regular, if you're ok with regular you then try and go down to budget and if you still like the quality/taste you're saving good amounts of money but if eg you move from premium to regular and that's fine but upon trying the budget you don't like it you go back to regular but not premium

Sorry bit waffly but hope it makes sense.

Like most people there are certain things I won't compromise on eg fairy liquid but I've also often been pleasantly surprised and been able to make savings.

So yea, budget, shop around, haggle, be a wised up consumer.

Even when I'm paid I'm still well into my overdraft, it's not just you

We used to do this and we managed to stop, it's been life-changing and we worry so much less about money.

We reduced our overdraft limit each month so over a year it was halved to £1000.

Every day we checked our bank balance against the last month, had we spent more or less so far and what was the difference. This showed up a lot of unnecessary spending.

Before we bought anything unplanned we took a few minutes to decide if we actually needed it or wanted it. This cut spending too.

After a year we were no longer using our overdraft all and haven't for 5 years now. Even just being in credit makes you spend less as you are much more aware it's your money you are spending.

Write down all your spending. Go through bank statements.

Honestly you'll be amazed at the amount of random direct debits or expensive coffees you find on there that are easy to eradicate

Overdrafts are horrible to get out of. If you use your £2k overdraft and your takehome wage is £2.5k, you effectively have to live on £500 one month to make sure you're out of it the next month, which isnt really viable.

Just cut back on things and do it slowly.

Mumsnet is full of people who never have debt, never use their overdrafts, have £100k etc in savings and can’t understand how anyone can ever need to buy anything on credit. It’s like a different world.

My own circle and real life is that most people do use their overdrafts. Most people have some debt and it’s not unusual to purchase stuff on credit. The key thing is to ensure that you are actually paying some of it off every month and aren’t adding to it month by month. As others have said do a statement of affairs and work out where you can cut back etc.

If you are down by the same amount every month you are just about living within your means, but at some point in the past you werent so you're already starting from -£2000 each month.
Make some cut backs each month, if you can. Aim to have your overdraft at -1900 one month, -1800 the next and so on.

Overdrafts are hideously hard to get out of. I know, we had one for years when we were married. Paid it off once a year, only to fall back into maxing it yet again.

It’s just a sign there aren’t enough money to go around, it’s as simple as that I’m afraid.

I seem to remember the interest on overdraft is quite hefty. You might be better off halving your credit card limit, put all the groceries and transport on that and set up a direct debit to clear the balance every month. It gives you a month leeway, without the overdraft charges.

Another crucial aspect is having you H on board. I didn’t and I cleared it out, only for him to max it again.

Also, every 3 months call the bank to reduce the overdraft. And when it’s clear, change the bank account to a new one, without overdraft.

HTH

Surely if you're minus 2k every month, the 2.5k only results in plus 500 once you're out of overdraft. So no wonder you're going back into it. Speak to a financial consultant about how to get out of this cycle.

I don't know if this is counter intuitive but it worked for us.

We took a small loan to clear the overdraft, then closed the overdraft. We set up a d/d for 170pcm to repay the loan which was much more manageable that trying to slowly dig our way out of a 2k hole.

You know what Op, I’ve learnt that maternity leave and babies are an extremely expensive part of life and sometimes you’ve just got to accept it and be kind to yourself. You can come back to paying off the over draft in a year or two when finances will likely be better. Over drafts are a cheap form of debt luckily x

Moneysavingexpert has a budget planner.

I was like this a few years ago. I used to go up to £1500 overdrawn every month.
You just need to decide every single month you are going to not go as far overdrawn and then never go below that again! Even if it’s £50.
There’s always somewhere to save a little bit of cash and you need to do that.
It took me a long time. I’m well into the black now and won’t go under again.

I was in the same position, I would get paid and then be at the bottom of my £2k overdraft and getting charged £36 a month for the privilege.

What worked for me was getting a 0% (over 20 months) bank transfer credit card that cleared the debt and then I pay into it monthly. I'm well on my way to clearing it now and I just set the direct debit up to go out when I get paid.

Do you pay fees on your overdraft and if not, does it really matter that you’re overdrawn?

I found money saving expert really useful in a similar situation. But you and partner have to be on same page. So cheap jacket potato meals a couple of nights a week. No takeaways . But leave some treat money. Just to build a buffer.

Being -£2000 every month is debt and is no different to it being on a credit card. You may be better off moving it to an interest free credit card and treating it as a loan to pay off (ie don't add to it) come up with a repayment plan eg £100 a month, it's really hard to claw out an overdraft when it's your every day money too, if you move it you can treat it like a bill.