Breaking the Charges Cycle 31 January 2011 at 10:31AM edited 30 November -1 at 1:00AM in Budgeting & Bank Accounts 3 replies 643 views

glitter123

Any tips for getting out of the overdraft/charges cycle? I want to try to help my son.

He is up to his overdraft limit which is the same amount as he currently earns so each month on payday he just returns to break even (for about one day) then he has DDs - mortgage, council tax, utilities, insurance (all the stuff we all have). Pretty quickly he's back up to the overdraft limit and :eek: even beyond which of course means more charges.

Anyone managed to escape this cycle, is it just a case of chipping away at the overdraft to get rid of it which is pretty difficult in the current climate of price rises - transport etc.

zppp

I suggest that first of all he does a Statement of Affairs. If he is going overdrawn every now and again, he may have too many commitments vs income. When you work out his in/outgoings, yo may want to post the SOA on the DFW board, who ca make suggestions on reductions.

You also then need to find out how much it is costing to keep his account. Cancel any monthly subscription for bank account, find out how much interest he is paying and the amount in charges. With all of this information, I suppose it is up to your son on whether he moves banks, stays put and budgets by changing direct debit dates etc.

Re the overdraft, overdrafts can be reduced free of charge by most banks, so I would suggest he may want to pay back x per month, and reduce the overdraft regularly to get himself out of that.

CLAPTON

basically he needs to learn to budget
get him to fill in a budget sheet to find out where all the money goes
http://www.makesenseofcards.com/soacalc.html
try keeping a spending diary and write down everything he spends

consider increasing income ..part time job
try a no spend month... eat from the freezer, no going out, no newspapers, cut down on the mobile, etc .. so that there is a little buffer in the OD at the end of the month so no charges and then build on that

DrSyn

1. Learn to budget so he has more coming in then going out.
There is a "Budget Planner" in the banking section on this site.

2. Maybe changing to a bank with lower charges might help.

3. Look into would joining a "Credit Union" could be of assistance to him. They should be better known than they are. The banks will never tell him about them. Of that you can be sure.

www.moneysavingexpert.com/banking/credit-unions

4. Get a second job?