Overdrawn and don't know what to do

[overdrawn]

I'm a regular poster on MN but have NC for this post.

I'm self employed and the last two financial years earned a good income compared to what I had earned when employed full time (up by around 40%). At the end of last year I had what can only be described as a kind of breakdown. DP and I found out we can't have children and I fell into a deep depression. I found it incredibly difficult to keep up with work and just spent all day crying. I have sought help and am on antidepressants now and having counselling through the NHS. In the midst of all this we also moved house, which was expensive. I hadn't previously done tax on account and was paying it as it came up, but had to do tax on account the previous financial year. It was a large amount and so I split the payments over 12 months and am currently paying c. £1.5k / month to HMRC. I am still trying to catch up with work and my income has been barely anything this year. I have gone through any savings with these monthly tax payments and contributing £1.8k / month to shared household expenses. I have also put £8k on a balance transfer credit card and am paying back £500 / month. Today I have woken up to a notice on my bank app saying I'm overdrawn by £1.1k on my account and I feel so panicked. I don't know what to do. I've never been in this position in my life as I've always been fairly responsible with finances but this past 8 months has just destroyed me. I'm sitting here crying and I just don't know what to do. I can't ask DP for help even though he has a lot more money than me as he is paying for the house, which is very expensive. I've basically just been putting off this situation by using my savings, but they are now all gone. I've also lost a lot of clients due to how unreliable I have been in the past months. I used to be so reliable and so on top of things. Does anyone have any advice? I don't know what to do about the overdrawn amount.

Sorry to hear you've had a rough year. I think if you're close enough to your DP to want dc with him, surely he can help you financially - I'm assuming here that he has the means to do so even after bills?

If so, talk to him first. You shouldn't carry this burden alone. I wouldn't want to see my partner struggle if I knew I could help them.

I'm sure another poster might come along with a bright idea to save money, consolidate your debt etc but I would absolutely start with your DP.

@Abfab63 thank you for your post. Things have been difficult between us as well. I just don't feel like I can ask him for money. He already feels like he is supporting me financially (through the house) even though it was his choice to get such an expensive house.. I just don't know what to do. Is there a way I can pause any overdraft fines? I'm going to go through all my invoicing today but it takes about 30 days to get paid..

Does anyone know if I can pay off an overdraft with an existing credit card? I've tried googling and it looks like I should be able to but when I try to do it, it won't let me...

I think if you can't speak to your husband about things like this you've got bigger problems than just money issues.

@andleow we aren't married. and yes - I know that we have problems. It's part of what caused the mental health issues that have so badly affected my work and resulted in these financial issues. But that is not what this post is about. It's asking for practical advice on how to solve my immediate financial issues – so your response is entirely unhelpful and only contributing to making me feel more stressed.

if anyone has any advice that would be so appreciated. I've requested an arranged overdraft from the bank but apparently it will take a few days to come in. I've managed to rinse the rest of my savings to get it down to £680. I have about £1k in premium bonds that I will take out to cover this. I'm going to get on top of invoicing today, cut down on any and all unnecessary spending, and put together a proper budget of outgoings. I feel so stressed but am hoping I can get on top of this again.

See if you can increase your overdraft with your bank. If you're overdrawn without their permission, it will cost you more. I'm not sure if that will work or help, but that was my first thought.

Can you look into getting a job rather than being self employed? This is too much pressure for you, and now you don't have a financial buffer, it's really going to be tough. Be as kind to yourself as you can, you've been through a lot and deserve kindness.

If you can't bring this to your partner, that's another issue to deal with, I'm afraid. It sounds like money is a tense topic between you two? This is common in couples, it's not the end of the world as such, but it does need to be worked through together.

You're paying 2k total towards debts as well as 1.8k towards household expenses, is that right?

https://www.gov.uk/government/publications/self-assessment-claim-to-reduce-payments-on-account-sa303

Do your payments on account make sense if your income has reduced? If not, you can reduce them.

Have you sold any old clothes or other items, that might help clear the current overdraft.

Do you have a car? Could you reduce your commute/ transport costs in any way?

Hope things improve for you soon, sounds like you have a good business essentially but are having a temporary period of adjustment which is very understandable!

@CommonVetch thank you for replying. Yes - that's what I'm currently paying and I'm just not bringing in nearly enough. Before my MH issues, I was bringing in enough (and obviously didn't have the £8k balance transfer debt which is the result of moving house and paying towards bits of renovations – it's a tiny fraction of what partner spent) but I'm just not earning enough to pay for all of this now. My partner owns his own business and it's very successful. The house we're in is beautiful and anyone looking in on the outside would think I have no financial worries at all. I feel like I'm drowning though. Household expenses have increased dramatically with the new house - particularly energy costs – and I'm struggling so badly. I've also been in charge of all the life admin associated with moving and renovations as partner is paying for the house itself, and this is also impacting on my ability to work effectively. I'm obviously not eligible for any help either despite me not personally having any money as my partner earns too much.

@Kawaii50 thank you so much for that link. I will look into it now. I'm praying I can reduce the payments on account as my income has reduced by over 50%. I work from home apart from one day / week so I don't have any commuting costs (and generally walk everywhere). I had a clear out of things when we moved and am now kicking myself that I didn't sell it. I do have quite a lot of clothes that I could sell though. I'm going to get on top of my invoicing first thing today, and try to catch up on my outstanding deadlines. Then later this week I'm going to look at what I can sell.

I'm sorry you're struggling. That's a huge financial commitment to cover, no wonder you're stressed. Is there any way you can rejig things with your partner until you're back on your feet financially? I couldn't bear it if my partner was struggling without me knowing, and got into debt when I had enough to cover expenses.

On paper that doesn't sound like it would take long to sort out your overdraft.

You also come across as ready to get things sorted out, so two positives!

Can you do any casual work or a weekend or evening job for a bit? Hospitality is crying out for staff and it can be a good way to keep busy and sociable if you are the kind of person who would find distraction like that helpful with stress. Or if you like animals, dog walking or cat feeding or other pet sitting might be nice?

I completely understand how you can get into a muddle with self employment and payments on account, plus moving house and the admin and expense that comes with that. I do it myself almost every January and July when the next payment in account is due, and despite being v intelligent, struggle to get my head around what years tax I'm paying!

Firstly I would stop worrying about the overdraft, you've spoken to the bank and arranged an agreed overdraft that is going to be in place as soon as they can do it, and reduced it as much as possible using your savings. So they are steps forward.

Next, how much do you have outgoing over the next 3 months, add up everything that needs to come out of your account, tax, bills, groceries, petrol, social activities you've already committed to.

This is where I find being self employed both a blessing and a curse, because as long as your mental health allows, what happens next is in your control! You know how much you need to earn, you know how much you already have, you know how much you charge, how many outstanding invoices you have to be paid. How many days do you need to work to make things right for the next 3 months, is it achievable? If it is, go for it, prioritise getting back on track, meeting your obligations and paying the minimum on credit cards until your cash flow is in a better place. If it isn't achievable, how can you make it so? Do you need to discuss it with your partner to get their input into restructuring things (even if they don't have a financial input), do you need to speak to the bank about restructuring your debts so they become affordable, or would your mental health be better off for closing the business and becoming employed and reducing your stress that way?

I think for me it can sometimes feel insurmountable but by taking a 3 month view of my finances and working out what I need to achieve I can normally start to the see the wood for the trees!

You can definitely reduce payment on account. I’ve done it twice over the last 12 ish years. It’s pretty simple to do, I think I clicked a few buttons on the online portal and had no questions asked.

another thing to consider, have you filed your 2022-2023 tax return yet? Deadline is January 2024 but can be filed any time from April 2023 of course. It might be worth looking into that, working out how much you owe & how much you’ve already paid with payment on account. If you’ve overpaid and will be in credit, I’d look into getting the excess refunded? Def worth checking out?

On your credit card you can draw out cash. You can then pay this to your bank account to pay off overdraft. You will still have to pay interest though on credit card but I think you get a bit of time, about a month, before you have to start to repay.

@HappyPurrrsday thank you. I've just applied to reduce payment on account – does it mean that the monthly payments will automatically be reduced? I haven't yet done taxes for 2022-23 financial year – but sadly I don't think it will be much reduced. The beginning of the year was really good and then from November to April was bad. I do need to look into it though. I think first thing today I just need to get invoices up to date. I'm still finding it really tough to work effectively. It's like I have a total mental block – which is crazy as I have always been known for being on top of admin and turning work around really quickly. I'm so angry with myself for letting this happen. I just buried my head in the sand and have lost all my savings in the process.

I'm pretty sure this will be a BAD idea! The rate of interest you pay on cash withdrawn on a credit card is nearly always higher than any kind of arranged overdraft/debt!

There are always helpful people over on the forums at MoneySavingExpert who will give you help and advice if you're willing to share details of your situation, but I think other posters here have also given good advice - it sounds as if you have a good sense of the steps you need to take, and are ready and able to get on top of this!

I would work your way through the most likely solutions in order:
Take out your premium bonds asap
Ask your bank to increase your overdraft
Ask your DP to pay the overdraft
Ask your parents to pay the overdraft
Get a payday loan to cover the overdraft (although obviously calculate beforehand which interest is cheaper - the overdraft or the payday loan).

Your problem isn't anywhere near as bad as you think it is. Many people spend years and years doing free balance transfers with credit card debt.

Selling your stuff I would say is a last resort as it takes up a lot of time if it's stuff worth like £30 each. If you have one big thing worth £100s that you absolutely don't want, sell that.

But ultimately it sounds like most of your problem came from moving house and paying for renovations you can't afford, so just be totally honest with your DP and say "i can't afford the bills". I am sure they will understand until you get back on your feet

@overdrawn, please talk to your partner. If he loves you and you have a future together you need to be ho ext with each other and support one another through the tough times.

Keeping this to yourself is not good for your mental health recovery, it is yet another thing you are beating yourself up for. Your partner needs to shoulder some responsibility here. Surely he can understand that if you are not working you are not earning (or that your earning power is diminished). He may be waiting for you to open up to him, or he may be a twat who knows but doesn't care (or somewhere in between the two), but he can't help and support you if he doesn't know you need help.

Talk to HMRC about your repayments, they may be able to help. Do you/your partner have an accountant who could look at your business finances and make sure you are as tax efficient as possible as this may help reduce your tax burden.

Talk to your bank, they may be able to suggest alternative ways of paying back your unauthorised overdraft that are cheaper than putting it on a credit card (I'd only do that if it was a 0%).

I think you need to take stock and be realistic about whether your business is a going concern or if you have little to no chance of recovery due to lost clients, reputations damage due to missed deadlines/failure to deliver work etc.

Whatever you do brings you back to the fact that you need to discuss this with your partner, not hide it from them ( if the roles were reversed and you found out he had hidden debt and was struggling- what would you do? You'd help him as much as you could. He, if he's a decent human, would do the same for you)

No point in being angry, what’s done is done & all you have to do is remain calm and figure a way forward.

I never paid monthly for POA, so I can’t answer that question. I applied to reduce mine when the lump sum was due and they accepted & I didn’t have to pay. But it was literally a tick box to say I wasn’t paying my lump sum POA because I had earned less, if you see what I mean? I never had any follow up from HMRC (presumably because my next tax return reflected that I was correct, I had earned less).

nov-April is still 4.5 months of lower income, a quarter of the year. Get your invoices in order and have a rough estimate. Even if they owe you back a few hundred quid, it might help somewhat.

Don’t draw cash out on a credit card 😳 it will cost you loads…! (Replying to the person who suggested it).

You can apply for a 0% money and balance transfer credit card if you have reasonably good credit and then you can do a transfer into your own bank account to clear the overdraft. Cut up the physical card so you can’t spend on it and add to the debt and then pay the balance off monthly, always paying more than the minimum. I’ve done that a few times now when I’ve been in desperate times and it’s fine. You just have to be really strict with yourself to make sure you pay it off and don’t add to the debt.

And don’t be so hard on yourself - in the current financial climate a £1.5k ish overdraft is absolutely nothing. Seriously. You work, you have an income, you can pay it off.

It if makes you feel any better dh and I owe about £7k in various debts / credit cards etc and we’re fairly low income and a lot of our income
comes from disability benefits. We don’t have a mortgage though and so we just use credit cards / overdrafts etc to manage. It’s just what life is for us right now and we don’t worry about it. We owed a lot more at one time and we’ve managed to slowly pay a lot of it back (house repairs / son with disabilities meaning reduced income etc all floored us). I’ve currently got £200 left of my £2500 overdraft to last till next week 😳😆🙈

Sorry, haven't RTFT and I'm no money expert but can't you tell the bank you are struggling? I went overdrawn recently and got that message on the app and it really spooked me, so can imagine how you feel. I did notice that there was info on the app about if you are struggling and how to contact them etc I didn't look into it as I knew I had funds coming in but surely they can help you in some way? It sounds like you are really struggling generally financially with all this debt and I feel so sorry for you. Could you not contact someone like Stepchange and ask them to help you sort out your debts? They will even get your creditors to leave you alone for a while to give you chance to get back on your feet (including your bank). A friend of mine once contacted them and they arranged everything on her behalf. Good luck with it all, money worries can be so devastating.

Just to make it clear that you don't actually have to take out an IVA or anything with Stepchange, I realise not everyone wants to do that, but they can arrange for everything to be put on hold for a while (three months I think) whilst you sort yourself out.

Why can't you ask your do for help?