Getting debt-free whilst overdrawn

bitter-roses

Afternoon.

I was wondering what you lot do when you’re trying to get a handle on getting debt-free but are stuck with an overdraft that doesn’t get cleared at the end of the month with pay but seems quite often to get larger.

Would it be worth my getting a basic bank account for the day-to-day stuff – have my wages paid into it, have my direct debits coming out of it, etc. – and then treat the overdrawn account as just another debt?

Or is there a better way? Grateful for ideas.

whatatwit

When your money goes in, you could ask for the limit to be reduced, even if it was by £50.
You can also ask for it to be reduced at any time.

Not sure how the bank would react if you were to stop funding the account. You might find that they remove the OD facility and you are asked to pay it back in a lump sum.

bitter-roses

whatatwit wrote: »

Not sure how the bank would react if you were to stop funding the account. You might find that they remove the OD facility and you are asked to pay it back in a lump sum.

That’s a good point, and one I hadn’t thought of.

To get around that, perhaps getting that basic account (the thing that makes those most attractive to me is the inability to become overdrawn on them), but still route my wages through my current account and fund the basic account by a standing order or something?

The alternative, having used the calculators on my bank’s website, is looking to be a DMP and I can’t imagine the bank would be too chuffed about that either.

I guess I should probably do an SOA and start from there, although I've looked at my bank statements for the past two months and aside from bills most of it seems to be cash withdrawals and I can’t remember what any of it (bar one or two amounts at specific times) was spent on. I suspect that may make creating an SOA more difficult than it needs to be. Any ideas how to get ’round that one?

CLAPTON

yes doing a SOA is essential

start to keep a spending diary.. write down absolutely everything you spend and start to take control of the situation.

bitter-roses

CLAPTON wrote: »

start to keep a spending diary.. write down absolutely everything you spend and start to take control of the situation.

I’m wondering if I should start putting everything on my debit card instead of using cash, and then use internet banking to check when it comes out of my account (I’ve noticed they usually come two working days later, but that’s not always the case) and do an SOA based on what comes out of that?

I know that one of my problems is spending money on food from the supermarket – pre-cooked stuff, mainly, like roast chicken or pasties – instead of cooking at night. I suspect I could probably drop the amount I’m spending considerably if I just had a bit more willpower (although that’s easier said than done, I know.)

What do you reckon to my first suggestion, though – of paying by debit card every chance I get (except for the electricity meter, of course, which is topped up by key and can’t be paid for by debit card)? Would that be a better way to go, rather than withdrawing it as cash and frittering it away like that?

I owe too many people (companies, that is) too much money and I could live without the stress of it.

Honeybee_2

I found when in your situation, I made an agreement with the bank to reduce overdraft by a certain amount each month and got that in writing.

THEN opened a basic bank account elsewhere (making sure the companies weren't linked) and funded that with wages, transferring the agreed overdraft reduction money from my basic account to the overdrawn bank account.

whatatwit

Bitter Roses, doing a SOA won't show you where your money is going....only what you necessary outgoings are each month.

If you have been making cash withdrawals, then these will show as a surplus at the end of the SOA.

Keep a spending diary and allow yourself X amount of cash each week. This will be to cover any expected small amounts, lunch, a newspaper etc.

If you can afford to have unexplained cash withdrawals, then I'm sure that you can soon start to make in roads into the OD.

bitter-roses

Honeybee wrote: »

I found when in your situation, I made an agreement with the bank to reduce overdraft by a certain amount each month and got that in writing.

That sounds like a good idea. Did you do that in writing originally, or did you go in to see your bank?

Honeybee wrote: »

THEN opened a basic bank account elsewhere (making sure the companies weren't linked) and funded that with wages, transferring the agreed overdraft reduction money from my basic account to the overdrawn bank account.

What did you do once the overdraft was paid off? Did you close the basic account, or the one you’d had the overdraft with, or did you keep both?

bitter-roses

whatatwit wrote: »

Bitter Roses, doing a SOA won't show you where your money is going....only what you necessary outgoings are each month.

Which would be a start, since I’m not a hundred per cent sure I know what these are.

whatatwit wrote: »

If you have been making cash withdrawals, then these will show as a surplus at the end of the SOA.

In theory, yeah. I’m certain I’ve paid bills with some of the cash I’ve withdrawn (it can’t all have gone on crap, surely?)

whatatwit wrote: »

Keep a spending diary and allow yourself X amount of cash each week. This will be to cover any expected small amounts, lunch, a newspaper etc.

Sort of a “once it’s gone, it’s gone” mentality? That’s a good idea. I don’t think I’ve ever tried doing it that way before.

whatatwit wrote: »

If you can afford to have unexplained cash withdrawals, then I'm sure that you can soon start to make in roads into the OD.

Thing is, I don’t think I can afford them (and they’re unexplained primarily because I have a lousy memory, more than for any other reason.) They’re the main reason my overdraft’s been steadily increasing month on month.

CLAPTON

bitter-roses wrote: »

That sounds like a good idea. Did you do that in writing originally, or did you go in to see your bank?



What did you do once the overdraft was paid off? Did you close the basic account, or the one you’d had the overdraft with, or did you keep both?

do be careful here.

many people find reducing their OD each month helps but it also tells your bank that you are struggling with controlling your your finances...
in todays financial climate that may not be wise.

The first essential is however, to find out where all the money goes.

If supermarket shopping is a problem then start proper meal planning.. creat a proper shooping list and only buy whats on the list.
Lots of meals ideas on the old style board.

Honeybee_2

bitter-roses wrote: »

That sounds like a good idea. Did you do that in writing originally, or did you go in to see your bank?



What did you do once the overdraft was paid off? Did you close the basic account, or the one you’d had the overdraft with, or did you keep both?

I did it over the phone originally but knowing what I know now, I'd do it in writing, recorded delivery.

I had the option of keeping the original bank account open but instead I closed it in favour of the other bank account. The only features the original bank account had that I didn't have in the basic account is an overdraft facility which I now wouldn't touch with someone else's barge pole, and a cheque book which I wouldn't really find to be of any use now.