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31st January 2018
We’ve all been there - your bank balance is running a little low and before you know it, you’ve gone over your account limit and you’re left with an unplanned overdraft. Whether it’s unforeseen circumstances, forgotten direct debits or simply overspending, it's easy enough to find yourself overdrawn.
However, it’s not a habit you want to get into - with informal overdraft fees varying between banks, you can find yourself racking up some serious charges on your current account and may find it hard to break the cycle of debt.
But don’t panic. We’ve put together our top tips on how to keep on top of your spending and keeping a safe distance from any unplanned overdraft issues.
Find Out Why You’re Overspending…
We’re all guilty of overspending from time to time, but it’s important to see if there’s a pattern with your financial behaviour. Maybe going over your overdraft is a one-off, or do you have payments leaving your account before you get paid, regularly leaving you in the red? Looking at the cause can really give you some insight into your shopping habits, as well as working out if you could be avoiding all those excess fees.
Then Speak to Your Bank
Speaking to your bank is an intimidating prospect, (probably on par with a visit to the dentist!) but there’s nothing to be scared of; the long term benefits of taking control of your immediate finances could be well worth it. From possibly refunding bank charges, setting up a new overdraft (or expanding your current limit) or giving your finances an MOT, your bank is there to help to keep you from making the same mistakes again and again. Take a deep breath and pick up the phone - you can do this!
Consider a Loan to Break the Cycle
Debt in the form of loans is not something to take on without some serious thought, and unplanned overdrafts are no different. It’s easy to fall into a pattern of going over your limit and getting charged by your bank, and with some banks charging astronomical fees for informal overdrafts, things can quickly spiral out of control. If you’re struggling to break the cycle, it might be worth taking out a loan to get out of the initial situation, allowing yourself the chance to get on top of your finances.
There’s an App For That
There’s an app for everything these days, and chances are your bank has one too. Having 24/7 access to your account information at the click of a button can really help you to monitor your finances and not only that, many banks now offer a service to notify you when, for example, you’re close to going over your permitted balance. Not the most fun text to receive, but helpful nonetheless.
Give Yourself a Budget
So you’ve identified where your money’s going (and the damage it’s doing), but what now? A budget, of course - who doesn’t like writing a list? Once you’ve worked out necessary payments, you can work out a budget that keeps you up to date and out of the red. It might not be the most thrilling task, but by getting into the habit of tracking every last penny in your account, you’re less likely to end up getting into any more problems with your overdraft.
Give cash a try
Nothing helps you keep within your budget like using cash. Try taking out the amount of money you can afford to spend in a week and limiting yourself strictly to that amount. It can really open your eyes to where you might be overspending and racking up bank costs.