spend capital and avoid overdraft or vice versa?

laurenced

Hi all

I will receive a reimbursement on my Young Students Bursary of £2400 in the next few days. I'm currently just under £1000 overdrawn, and my O/D limit is £1000. The potential limit is £2100.

On the 22nd I have to pay the deposit and first month's rent of my new flat, which is £800.

So I have two options. Either I spend a sizeable lump of the reimbursement and invest/save the rest and my overdraft remains at -£1000, or I save most or all of the £2400 reimbursement and use the additional £1100 of potential overdraft to fund my deposit/rent.

Which do you think is the better option? Am I being naive in feeling uncomfortable at the prospect of being ~£2000 overdrawn? Or should I use the capital immediately as disposable funds and maintain my debt in the position it is now?

Any help or advice would be appreciated

Savvy_Sue

If it's an interest free overdraft (for now), and you think you can keep a sufficient eye on it NOT to exceed the limit, and you'll be able to get at funds in order NOT to exceed the limit, then keeping the overdraft high and the savings high is the most cost-effective way to go.

But if you don't feel comfortable doing it, or you're not well organised and disciplined, don't do it!

laurenced

Hmmm.. I can't decide whether I'm disciplined or not. Another consideration is the end of the overdraft. Since I'm going into 4th year, I think I'm only eligible for the Overdraft for another year (interest free, that is) and so I'll have to pay it off quicksmart sometime at the beginning of 2008 (they allow you to have it for 12 months after you finish studying). I suppose having 2 and a half years is long enough to work out what to do, even if it's using the original £2,400 capital to pay off the O/D and keeping what it has earned over and above.

It also depends I suppose on any return I can get on the £2000 - since it's 'free money', if I can't increase it by a decent amount through investment/saving then it might be simpler just to use it. Obviously if the return is good then I would be stupid to miss the opportunity.

I'm thinking of going to speak to a Halifax financial advisor - I know my mum did it and she's extremely happy with their management of her money. Do you think this is a good idea or am I wasting my time with a 'mere' £2000/1000?

charlie007

i put all my free money in a high intrest savings account and lived on the edge of my overdraft - it was intrest free