Re: Overdraft and Savings (Urgent Advice Please?)

scottm426

Hi there,

Don't post much on here but looking for some advice to be honest. I have an overdraft which is around £2,800.00 for the past 3 months now paying around £35.00 per month on fees and interest. I earn a decent income for my age and want to get this all sorted now!! I have around £650.00 left over each month after all sorts of expenditure. The charges don't really bother me by the bank as I know it's they way they work. I'm planning to have a mortgage next year and want to have the overdraft in case of emergencies. I currently have £300.00 savings and want to contribute to this aswell. My question being would it be best to pay the overdraft off ASAP or split the £650.00 between the overdraft and savings for emergencies. This way it may take 7/8 months to pay the overdraft off but at then end of then it will be paid off and I'll also have a lump sum of around £2500 in savings. This may sound a really simple question but I honestly don't know the best way to go about this.

Any help would be greatly appreciated.

Thanks
S

Cyrus

Pay off the OD first, then save.

GettingOrganised

I would also pay the overdraft first then start saving.

downhillfast

use your savings to pay off the overdraft and then save your £650 surplus a month... in 5 months you'll have your savings back to where they are now and you will have saved another £175 in overdraft fees :beer:

downhillfast

scottm426 wrote: »

want to have the overdraft in case of emergencies.

To be honest I wouldn't want to rely on an overdraft for emergencies as the bank can withdraw it at any time. A credit card that you don't carry a balance on (ie don't use it without paying off in full every month) would be better IMO

FireWyrm

scottm426 wrote: »

Hi there,

Don't post much on here but looking for some advice to be honest.

There isnt enough information to give more than basic advice which is common sense really.

scottm426 wrote: »

I have an overdraft which is around £2,800.00 for the past 3 months now paying around £35.00 per month on fees and interest.

So, £420 a year is going down the drain?

scottm426 wrote: »

I earn a decent income for my age and want to get this all sorted now!! I have around £650.00 left over each month after all sorts of expenditure.

What expenditure? I bet you actually have much more than that if you paid attention to your finances. In any case, at that rate, the OD would be gone after 5 months of payments.

scottm426 wrote: »

The charges don't really bother me by the bank as I know it's they way they work.

'They' dont 'work' any way. You are giving them money unnecessarily because you are being lazy and not paying off the OD in full.

scottm426 wrote: »

I'm planning to have a mortgage next year and want to have the overdraft in case of emergencies.

The OD is a safety net, not a target.

scottm426 wrote: »

I currently have £300.00 savings and want to contribute to this aswell.

In terms of a mortgage, that's chicken feed.

scottm426 wrote: »

My question being would it be best to pay the overdraft off ASAP

You're spending £420 a year on absolutely nothing just because you cant be bothered to do something about it. You might as well be standing outside in the road throwing money down the drain.

scottm426 wrote: »

or split the £650.00 between the overdraft and savings for emergencies.

You have an OD for 'emergencies'. Anyway, if you were paying attention to your finances, you would anticipate those 'emergencies' and deal with them in advance. What 'emergencies' were you thinking of?

scottm426 wrote: »

This way it may take 7/8 months to pay the overdraft off but at then end of then it will be paid off and I'll also have a lump sum of around £2500 in savings.

Why would you spend additional money on OD fees for those two months when you didnt have to.

scottm426 wrote: »

This may sound a really simple question but I honestly don't know the best way to go about this.

Pay off the OD. While you are at it, organise a proper budget and pay attention to where you are spending your money. Do you really have so much that you can afford to throw it in the bin willy nilly?

scottm426

Quote:
Originally Posted by scottm426
Hi there,

Don't post much on here but looking for some advice to be honest.
There isnt enough information to give more than basic advice which is common sense really.

That's why I stated it was pretty simple question. It is basic advice I look for.

Quote:
Originally Posted by scottm426
I have an overdraft which is around £2,800.00 for the past 3 months now paying around £35.00 per month on fees and interest.

So, £420 a year is going down the drain?

Technically it's not as the decreases so does the interest.

Quote:
Originally Posted by scottm426
I earn a decent income for my age and want to get this all sorted now!! I have around £650.00 left over each month after all sorts of expenditure.

What expenditure? I bet you actually have much more than that if you paid attention to your finances. In any case, at that rate, the OD would be gone after 5 months of payments.

Trust be I have been through my expenditure bit by bit and there is not. Why would you think that?? Personally I would feel £650.00 left over from fuel to food is a very significant amount.

Quote:
Originally Posted by scottm426
The charges don't really bother me by the bank as I know it's they way they work.

'They' dont 'work' any way. You are giving them money unnecessarily because you are being lazy and not paying off the OD in full.

That is true but it is the way they make money by charging high interest.

Quote:
Originally Posted by scottm426
I'm planning to have a mortgage next year and want to have the overdraft in case of emergencies.

The OD is a safety net, not a target.

This is why I stated for emergencies.

Quote:
Originally Posted by scottm426
I currently have £300.00 savings and want to contribute to this aswell.

In terms of a mortgage, that's chicken feed.

I forgot to state these are personal savings. I currently have around £4,000.00 in a joint savings account with my girlfriend.

Quote:
Originally Posted by scottm426
My question being would it be best to pay the overdraft off ASAP

You're spending £420 a year on absolutely nothing just because you cant be bothered to do something about it. You might as well be standing outside in the road throwing money down the drain.

Again, it's not a year so would not be £420.00. Also, if I planned on doing nothing about it would I even have posted the question or been in this site!!

Quote:
Originally Posted by scottm426
or split the £650.00 between the overdraft and savings for emergencies.

You have an OD for 'emergencies'. Anyway, if you were paying attention to your finances, you would anticipate those 'emergencies' and deal with them in advance. What 'emergencies' were you thinking of?

Does everyone not make mistakes. I'm try to correct this and pay attention to my finances that's why I asked the original question. Any emergencies that may occur in day to day life. Can you anticipate your car breaking down, etc? No. The savings are also for personal goals, etc not just emergencies.

Quote:
Originally Posted by scottm426
This way it may take 7/8 months to pay the overdraft off but at then end of then it will be paid off and I'll also have a lump sum of around £2500 in savings.

Why would you spend additional money on OD fees for those two months when you didnt have to.

Again, why I asked the question. I was looking for the best way to deal with it that is all.

Quote:
Originally Posted by scottm426
This may sound a really simple question but I honestly don't know the best way to go about this.

Pay off the OD. While you are at it, organise a proper budget and pay attention to where you are spending your money. Do you really have so much that you can afford to throw it in the bin willy nilly?

Obv course I don't, neither to most people. Thanks for the advice.

scottm426

Thanks to the others for advice aswell. Appreciated.

FireWyrm

It's hard to figure out where your answers stop and mine begin. I think you have missed out the "[/quote" tag at the end of the sentance.

scottm426 wrote: »

Quote:
Originally Posted by scottm426
I have an overdraft which is around £2,800.00 for the past 3 months now paying around £35.00 per month on fees and interest.

So, £420 a year is going down the drain?

Technically it's not as the decreases so does the interest.

This is where you are going wrong. Excuses. There is no 'technically' about it. You are throwing money down the drain every month - this is a raging 'hair on fire emergency' which you need to deal with right now!

scottm426 wrote: »

Originally Posted by scottm426

Trust be I have been through my expenditure bit by bit and there is not. Why would you think that?? Personally I would feel £650.00 left over from fuel to food is a very significant amount.

Really. Then you could fill out an SOA with accurate details right now? Exactly how much do you spend on food, on fuel, insurances, council tax, MOT etc?

scottm426 wrote: »

'They' dont 'work' any way. You are giving them money unnecessarily because you are being lazy and not paying off the OD in full.

That is true but it is the way they make money by charging high interest.

Because mugs give them money unnecessarily. In what universe is spending money for nothing a good idea?

scottm426 wrote: »

Quote:

In terms of a mortgage, that's chicken feed.

I forgot to state these are personal savings. I currently have around £4,000.00 in a joint savings account with my girlfriend.

And you are STILL paying the bank an OD fee? Are you mad?

scottm426 wrote: »

You're spending £420 a year on absolutely nothing just because you cant be bothered to do something about it. You might as well be standing outside in the road throwing money down the drain.

Again, it's not a year so would not be £420.00. Also, if I planned on doing nothing about it would I even have posted the question or been in this site!!

The answer to the question is obvious. The question is whether you have the will and the means to deal with it. You have not provided any significant or real information on you means and I am still not convinced of your will.

scottm426 wrote: »

. Can you anticipate your car breaking down, etc?
No.

Yes. Along with MOT, insurance for the year, annual payment for communications and a budding 'broken boiler' fund. You can to if you thought about it.

scottm426 wrote: »

The savings are also for personal goals, etc not just emergencies.

You dont have the money for 'personal goals' right now. Leave that for when you are actually solvent.

scottm426 wrote: »

Again, why I asked the question. I was looking for the best way to deal with it that is all.

Pay off the OD completely with your savings and move to an interest bearing current account with a golden hello attached to it.

scottm426

Yes wasn't sure how to reply the way you did as I said I don't post on here much. I have taken on board what you have said and I believe this is the best way forward to pay off the overdraft fee. Yes I could do that right now. I have already planned everything out and this was the last question to ask. I will be looking at this again now and sorting everything from too to bottom now that I know I'm going to pay the overdraft off first. The £4,000.00 is a joint account which has not to be touched. This overdraft can be paid off within 4 months and realistically I can still meet my savings goal so I agree it pretty much was common sense. I suppose when it comes to the crunch you just have to move in with life, accept your mistakes and learn from them. As for the will, I have more willpower than you can imagine and definitely have the means to deal with this. It's not the worst things that's happened to me and there is a few to compete with. This will be sorted now ASAP that I have had the advice and trust me when I say it won't happen again. Thanks for the advice. Cheers S

FireWyrm

There are tools to help you.

Check out https://www.youneedabudget.com

If you really do have the Will, then make it your business to understand and utilise this software and in about a year (if you are prudent) you will not only be debt free, but have a sizeable emergency fund such that you wont need an OD again. More that that, you will look like a good prosepect to a potential mortgage lender precisely because you CAN show them your household finances in detail. The aim is to get to a place where you can not only say how much (to the penny) you spend on food per month, but have emergency funds dotted around and funded for all purposes that are likely to crop up. With an excess of £650 a month and no debts, you ought to have £7800 in the bank at the end of 12 months. With the use of the tool above, I suspect you can do MUCH better than that. You also need to turn your attention to a protected fund for such emergencies as losing your job. You should have at least 3 months unavoidable bills covered to be safe....anything less is living on the edge, precisely where you should not and need not be.