Unless you have been transplanted to another planet for the past few years, no one need tell you that the world has been stuck in a fluctuating recession. With that in mind its little wonder that many of us have been forced to work out way into our overdrafts to make ends meet. In fact it’s rare to come across someone who isn’t struggling.
With dwindling credit available, rising interest rates, and an all-round economic stunt, finding a way out of the overdraft can seem completely impossible. Though the light at the end of the overdraft tunnel may seem far away, working your way out of the red is entirely possible.
Scrutinise Incoming’s and Outgoing’s
By working out what’s coming in and what is going out, you can clearly see what is left over each month as so called ‘disposable income’ if anything at all. Anyone who wants escape their overdraft should consider doing the same. It might be the case you discover some unexpected outgoings each month which you could really eliminate.
Sometimes it’s the small extras which add up, food shops here and there to grab those forgotten groceries, soon add up. By really assessing your incoming’s and outgoing’s, even if the end result indicates you are in trouble, allows you to clearly understand the state of your finances, it is best to do this now rather than continually ignore it.
Identify Where Savings Could be Made
Go through transactions on your account bank statements, and see how often you’ve used your card for ‘consumption’ purchases, then add them up. Would the thousands that have been spent in bars, restaurants, and clothes shops be better suited to paying off your overdraft? Are these purchases really necessary? What can you really eliminate? Sure we all love to socialize, but if you can rein it in and even eliminate it completely for a short period to gain control of your finances, then surely it’s worth it.
Check all your Direct Debits
Direct debits can be secretly draining away funds each month. Make sure you know exactly what you are paying for. Are you paying for a gym membership you don’t use, a magazine subscription you don’t really need, or maybe you can find a better deal for your monthly mobile tariff? Cut back on the unnecessary and see if you can hunt out a better deal for those direct debits you still require. The advantage of a recession is that businesses value your custom, so you are in a better position to get money off products or tariffs, it is definitely worth a try.
Have a Spending Account
Some are couples use one joint account for bills, household buys, and nights out together, keeping their own separate money in their own account. Others use a pair of accounts because it’s the only way they can keep an eye on their spending.
To manage your monthly income, different accounts could work for you. If your wages are paid into the account that you’re trying to rid of an overdraft, each month pay your bills from that account, and then leave enough for your direct debit payments, plus an amount towards paying off your overdraft. Then transfer the remaining money into another account; this could become your spending money for the month. By keeping things separate, it’s easy to see what you have left to spend. If it helps, leave the card for your billing account with a trusted friend or relative so you’re not tempted to withdraw from it when your spending account runs low.
In truth, there’s no magical way to get rid of your overdraft. The only way to work your way into the black is to change your own spending habits, and attitudes towards money. If you really want to escape from the clutches of an overdraft, you need to be sensible, make cut backs and make sure your lifestyle matches that of your earnings.
About the author: Kirsten works for Letterbox Toys and works hard to source affordable toys for families. She has a background in family and personal finance.