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 :((((

Second the MSE recommendation a thousand times over.

Before you think about any loans or credit cards, do the Money makeover and do everything that is relevant to you, ie cut as many bills as you can, cut down discretionary spends, food and drink out of the house especially can add up enormously and vow to clear the OD.

Is it costing interest and charges? How long has it taken to get that big? If it's built up slowly over time, you might just need to make a few changes and have a lean few months to get rid of it in no time. Also sign up to the weekly email for ongoing tips to make a bit of extra cash and save money on your normal spending. As suggested it might be worth converting to a loan or credit card balance transfer if this reduces the interest/charges, MSE has details on which cards are suitable.

But if you do this you MUST MUST MUST not run the OD up again, or else you’ll end up in position where you have the big OD and have other debt too – not good. You might find it helpful to split your money into several accounts on payday:

regular direct debits
savings for annual and irregular expenses like insurance, broken washing machines etc but while you are trying to get out of debt, maybe leave this money in the bills account as it will mean that the OD is lower and cheaper.

Do not do any day to day spending from your bills account, but move a budgeted amount for essential expenditure like food, travel, DC expenses to another account to spend on a when it’s gone it’s gone basis. If you are disciplined, you could use your credit card because if you pay it off in full every month, it costs nothing and at the same time reduces the OD, saving interest/charges.

Finally, you need to make sure your DP is also on board with budgeting, and you both stick to a budgeted amount for personal spending, otherwise he will be undoing your good work if he is spending freely at an unaffordable rate.

Without any details on your spending it's impossible to say whether you can get out of your overdraft.

Have you done a full list of what you spend each month?

Bad seldom leads to this initially but once you are in the cycle it can be hard to break out. Speak to your bank about a gradual reduction £50/£100 a month, it will take a while but it's less noticeable in small chunks

Glad I'm not the only one. I never had an overdraft in my life and swore I'd never get one but circumstances changed and now we're basically living in it. We have a plan of action to get out involving new bank account for bills etc that we will put X amount in each week (husband paid weekly, I'm paid 4x weekly but mine goes on rent) to help us keep on top of things. Our baby's first Christmas this year and I keep thinking we may as well cancel it, he'll have a few presents probably from 2nd hand shop but I don't even want to put the tree up. Just feel like a failure as a mum and wife - and it's not even like we've been irresponsibly buying luxuries etc we never do that.

Pretend that your overdraft limit is being cut by say £200 each month. So next month it's £1800, the month after £1600, etc. Don't stop when it hits zero, the month after that make £200 the minimum balance you allow yourself to have in your account. Keep going until you regard yourself as "broke" and unable to voluntarily spend if you have less than maybe £5000 in your account. At that point you can decide what to to with the "extra" £200 you'd have if you decided to stop saving.

The thing is if you need the overdraft every month to live turning it into a loan and repaying that isn’t an option is it? How would the monthly payment be met?

The overdraft is likely to be cheaper than anything but a 0% credit card- can you even pay off a overdraft with a credit card?!

Yes you can pay an overdraft off with a credit card, providing you can qualify for one that does this as an offer - 0% with as little fee as possible.

But yes, the OP first needs to work out her budget and whether she can afford to pay back a loan/credit card - hopefully when she goes back to work she will be earning more than the cost of travel+childcare so their disposable income will increase.

It's a hard position to be in, I've been there after buying a house on my own and the boiler packed in the day after completion.
It takes self control, but it can be done. You need to look at your spending - go through your statement with a fine tooth comb. Cut your outgoings to the essentials and say, allocate £100, £150 to paying off the overdraft. I did £200 per month until the £2k was paid off.

It's unlikely OP will get a 0% credit card, she is living in her overdraft.

Living in her overdraft won’t stop her getting a 0% credit card, they don’t care about that. As she has a decent credit rating and earns enough it should be fine

Living in her overdraft won’t stop her getting a 0% credit card, they don’t care about that. As she has a decent credit rating and earns enough it should be fine

Living in your overdraft affects your credit rating, so those lenders will care.

@changeforprivacy living in a planned overdraft won't have an adverse affect on her credit rating, that reason alone would not stop her getting an interest free credit card. An agreed overdraft is no different to using a credit card. If she went beyond the planned over draft, that's when it would start to affect her rating.

The overdraft is likely to be cheaper than anything but a 0% credit card- can you even pay off a overdraft with a credit card?!

Of course you can, you just do a money transfer with an interest free period (there will be a small fee). Op would need to look at finances and work out what extra they have a month to pay it back within the period, she says she's going back to work in Jan.

An agreed overdraft is no different to using a credit card.

Well they are only the same if you are living in the cars and paying all your wages to it at the end of the month.

Having any kind of debt does affect your credit rating and any offers that may be available. How you use your credit is a huge decider and if you are barely scraping g the month without using your OD to the max you won't be considered for top level 0% offers/.

Yes I used to be like this. I have a £1000 overdraft on my personal account which my pay barely covered, so I was pretty much in it from the moment I got paid. I have a joint account with DP now which doesn't have an overdraft because I refuse to get into that cycle again. I paid £100-200 into it a month to pay it off and haven't touched that account since. I would recommend budgeting so that at the end of the month you always have £100 or preferably more leftover, whatever you can afford. Do that each month and you'll have it paid off. If you think you may spend it, then it may be better to put the money into a savings account then once you have the £2000, pay it off in a lump sum. Then when your DP gets paid, look at it as having £2500, NOT £4500. The overdraft is a debt.

The overdraft is not your money so therefore you are not fine with bills. I would really look at how to cut back on spending.

I managed to clear my £2000 overdraft at the beginning of this year, but a combination of a holiday, birthday and now Christmas has put me back into it by £500. I'm confident that if I reduce my spending, I can be clear of it by the end of January.

I kind of like having the overdraft there for months, like this one where I have had 3 "extra" things to pay for, as long as I'm strict with paying it off and then getting back into saving mode the other months of the year.

I did spend about 10 years in the cycle that you are... So far into overdraft, that even once paid, you end up back in it again and it is a hard cycle to break. Don't put too much pressure on yourself, think what cutbacks you can realistically make and reduce it slowly.

@changeforprivacy I’ve lived in my overdraft for 20 years (it’s free so free money) it doesn’t even appear on my credit file.

My husbands does, but doesn’t affect his rating in anyway

@orangeteal my concern is that doing that is a cash payment which isn’t often included in 0% offers (and cash payments are expensive) but if this is commonplace then fair enough

Try and get hold of a book called the barefoot investor.
It’ll teach you how to put money in pots for all your bills, and fun money.
Basically you get the salary paid into another account instead of the overdraft one and then pay the overdraft off like you would a credit card. Get rid of it once and for all. Then ditch it

I had this problem for years and then a letter from the bank telling me they would put my overdraft usage fees up. So I booked an appointment with the bank and asked them to help me work it all out.

They offered me a bank loan to pay off the overdraft and then close it (the loan was refused initially but he forced it through because of the reason for it) and we worked out what I could afford to pay back each month. I never missed a payment and had it come out the day after I got paid. There was interest, but far less than the overdraft fees were costing. 14 months later and it was all paid off and my credit rating also improved. Maybe this is an option for you, if you can afford to pay it off each month?

@Passthecherrycoke I've done it a few times myself instead of bank loans as it's cheaper, so yes I think it is quite common place (there is usually a small transaction fee but usually less than 4% of the sum)

“Basically you get the salary paid into another account instead of the overdraft one and then pay the overdraft off like you would a credit card.”

Be REALLY careful doing this. The bank gave a right to recall an overdraft at any time and if they stop seeing your salary going in monthly, they are likely to do so. I would phone them first and ask whether this would be possible

@Passthecherrycoke it's a money transfer similar to a balance transfer, it has to be actioned by the bank, it's not the same as taking cash from a credit card which no is not a good idea, expensive. Money transfers often have 0% deals too like balance transfers.

Thanks both

Hi op i am also living in my overdraft on mat leave!