On overdrafts

I am a freelance creative person living in London. In my parents’ eyes, I spend my days floating around huge airy offices with ergonomic furniture and ‘break out’ rooms, eating free pastries and putting important information into my top-of-the-range mobile phone. They imagine I am friends with an array of exotic personalities, and that in the evenings we swan around the capital’s fashionable party hotpots and talk about plans for the next big thing and have adventures and ride bikes by the Thames.

My folks live in a rural backwater where the (only recently installed) broadband is powered by mice in windmills, and therefore they have a skewed perception of life for young people in the swarming metropolis of this fair city. Which, of course, could not be further from the truth.

The reality for myself and many of my compadres is one of living hand to mouth, with plates of value pasta heaped with cheese in between. A far cry from the trendy bars of central London, we are more likely to frequent our questionable local pub, lament the extortionate prices and then get so smashed in despair that one of us puts a card behind the bar and wakes up to an impending month of famine.

We are not alone. The city is bursting with creative types – writers, artists, film makers – that subsist on an erratic income, every month paying through the nose for the privilege of living in a city that offers a faint glimmer of hope for career development. And those not lucky enough to have a foot in the door of an established company, or those that have long-since relinquished their chequebook for the Bank of Mum and Dad, have a very similar financial story. Probably not unlike this one, in fact, penned by a friend who – *gasp* – is not taking great pleasure in being in an unrelenting avalanche of debt. Go on, read it. It’s full of LOLs. And then come back here. I have wisdom to impart. I’ll concede it’s not the most ground-breaking advice, but it helped Becklaa a bit and maybe it’ll help you, too. HELPING!

I was sad to hear that her bank had offered her such appalling advice. No doubt the drone dishing it out has relayed the same FSA-approved speech to countless others, who have all gone home equally dejected and miserable.

In any case, I was pleased to be able to offer her a small nugget of overdraft-related insight, which, by her own admission, proved way more helpful than anything the bank said (although I didn’t say anything about her hair. BECK YOUR HAIR LOOKS GOOD BTW).

If you’re living out of your overdraft, it’s bloody hard work keeping up with what’s going in, what’s going out, how much money you have, and indeed have access to. You’re living in a world of negative numbers and the backwards crawl towards zero is a tough, miserable slog. Any feeling of accomplishment in making a payment towards the black quickly evaporates when your phone bill payment comes out, or you end up putting your card behind the bar because you drank yourself into an inane, grinning oblivion.

So, PRO TIP: open another account. Just a basic current account. No frills. NO OVERDRAFT. Just the most standard, non-singing, non-dancing account you can find. Put your wages or salary into that one every month, and move your direct debits and standing orders over too. In a sense, abandon your debt-ridden overdraft account, so that nothing – not one single bean – is coming out of it.

Now, in this new account,you have the benefit of seeing, in actual real positive numbers, how much money you have, and how much money you have at the end of the month, if any at all. It will at least afford you the opportunity to see what you’re actually spending, and how that makes a dent in your income, which might at least prompt a rethink about your spending habits.

From this new account, siphon off as much as you can spare into your old overdraft account. But that’s it. Put money in where you can, even if it’s just a fiver a month, and don’t take anything out. This way you have a much clearer and realistic picture of your debt, plus a framework for hitting debt-shifting targets. Instead of floating around in an intangible red sea of constantly escalating and declining numbers, you can see, at a glance, where you’re at with it, and – importantly – are able to potentially gauge a date for that happy moment when you’re out of your overdraft. It might be next year, it might be in ten years. Doesn’t matter. At least you’re in control of it.

And once you’ve cleared it, ring up your bank and tell them to close the account. Get CLOSURE on your debts. And if you’re with the same bank as my girl Becky, tell them to go fuck themselves, too.

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4 Comments

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4 responses to “On overdrafts

  1. financialfreedomeplease

    Smart idea and good advice! Overdraft can be killer if used incorrectly. I was once living in overdraft and it took me awhile to get out of the vicious overdraft cycle.

  2. The only issue with this is that sometimes it’s hard to get a new bank account BECAUSE of your high overdraft on your existing one. That was the issue I had when I was really struggling (and also had £14,000 of credit card debt).

    What I ended up doing was making a spreadsheet with all of my direct debits and outgoings, and tracking my payments in and out every day so I could see when my account had money and when it didn’t. I’ve paid off £7000 of that debt in the last two years so it’s definitely helped! 🙂

  3. chris

    As Rachel’s Dad I can report that I have no such misapprehensions about young folk living in the City. I admit to living in the sticks, but tbf we do look after the mice powering our windmills vey well. In return they give me lots of good financial advice like “42” …………

  4. Pingback: Americans Carry an Average of $4,284 in Credit Card Debt

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