Economy drive

[Roma]

I think we’re all agreeing about the overdraft and credit card but aren’t doing very well explaining it to each other!

Lily, I think as long as you have a plan to not get into your overdraft and paying £250 off your credit card once your out of the overdraft you’ll be fine.

[rosy]

I heard you! But I didn’t recognise your voice.

I really need to get back to logging into my bank account every day. And to stop buying wine quite so often. I need to save enough money for a return flight to America and a holiday while I’m there (once I’ve seen my eldest get married) in October.

[Leap]

I did much the same as you Lily to get out of the habit of years of always using £100-150 of my OD and it a) didn’t take long, maybe just a few months to get myself back to zero, and b) was relatively easy to stay there once I was out of it and stopped looking at it as an extension to what I actually got paid.

I’ve set up a Monzo account and I’m really keen to fully switch and start setting up pots and things, but I’m saving it until July when I’m back at work as my pay is about to drop off to nothing anyway, and I’m a bit unsure if the switching process will deal with the fact that work do and will continue to pay me as Leap Maidenname, but my bank accounts are all Leap Marriedname. It’s a faff I’d rather deal with from my desk when I’m back in the office than while at home without internal email access etc so I’m just biding my time, although I have moved some savings over to get the slightly better interest rate than where they were.

Otherwise I am now going to do my best to buy ideally nothing in the way of clothes for me, and my SIL has another batch of hand me downs for Hop which might bridge the gap for her for a while.

I’ve also started cooking again, and after stocking up on certain staples from Tesco I’m now going to do some consistent Lidl/Aldi shopping and try to save that way via lower prices and also less choice/distraction in the lack of toiletries and clothing bits.

C will mainly be covering bills while I have nothing coming in, and then we have a holiday booked for just before I go back to work but we have savings earmarked for those things so it’s mainly about tightening our belts now.

[Kenickie]

Oh yes, PG is right as the overdraft is static. Sorry! It's still a red herring though as it has nothing to do with the credit card. ;)

[H1ppychick]

Apologies if it’s been said this way before and if any of it sounds obvious, but this is my take.

Set your budget to be £250 less than your take home pay.
In the first month, clear your overdraft with the money kept back.
Every month thereafter, repay part of your credit card.

Normally I’d say pay the credit card off first so that you minimise the interest incurred as far as possible, but since both are zero interest at the moment the repayment order doesn’t matter much and it would probably be better psychologically to clear the overdraft first do that you have an immediate “win”. In general, you should repay first whichever has the higher interest rate.

If you can manage with a smaller budget still (i.e. more than £250 kept back from your pay), then you’ll clear the card faster.

Once you’ve cleared both debts then you’ll hopefully be in the habit of living within your budget and the spare can be used to build savings.

[Topcat]

£250 a month is a massive amount for most people to cut their spending by.

[Ella77]

Yeah, it’s a bit “simply buy less caviar”.

[smalex]

I thought that too!I can't say I've ever been truly poverty stricken but there's been lots of times even trying to cut £50 out of the budget would've been impossible. That said, obviously if it's possible, go for it and try and get things straightened out as soon as possible.

[Lily]

It is a big amount, but I don't think it is inachievable for me; this month should make it easier as my bonus has already paid off a wodge of c/card and that's where most of my disposable income goes. So I pay off a ton and then I wind up being short of cash within a few days of being paid because I've paid so much off, so then I use it again and on and on we go. But my bonus this month has been responsible for my c/card payments so technically I should be better off.

If I can break the back of this month, and not go into my overdraft once, then next month should balance things out a bit better. If that makes any sense.

[indigo]

£250 a month is a massive amount for most people to cut their spending by.

Yes! There's no way I'd be able to do it. I struggle enough as it is but have got into some bad spending habits when things were ending with Ex MrD; not that it was ever easy to run our household of two adults and two cats on one salary.

[Lola]

I agree £250 is a massive amount to cut down by. I would clear the overdraft & then start to clear your card by £100 per month (for example) and make sure you have enough money spare so you can still buy the odd thing & not run out of money. That way you won’t add more on to the card again. You can always transfer the balance to another interest free card when this one ends.

[ParisGal]

£250 is absolutely a lot of money, but equally spread over a month if you're used to going out for dinner and drinks twice, going to a play or a concert twice, buying a pair of shoes and a jumper, all at nice places, then it can add up quite easily without you being head to toes in designer brands or ordering lobster and champagne.

Or just buying a takeaway coffee once every work day is about £70 a month.

[Skips]

I agree, that is a lot of money to cut in one hit. And while I get what you're saying PG, having all of that and then cutting it out isn't sustainable, you need to have some kind of enjoyment in life while clearing debt. I'd rather still have some treats and holidays and it take a bit longer than go cold turkey and be miserable.

[nineseven]

£250 a month is a massive amount for most people to cut their spending by.

It depends on what you’re overspending it on though. If you’re overspending by that amount just to cover your rent and bills that’s another thing.

[Lily]

I don't have a problem covering my bills and rent - it's just living on a day to day basis after that. But yes, it's about what I spend it on as much as anything else.

[indigo]

£250 is absolutely a lot of money, but equally spread over a month if you're used to going out for dinner and drinks twice, going to a play or a concert twice, buying a pair of shoes and a jumper, all at nice places, then it can add up quite easily without you being head to toes in designer brands or ordering lobster and champagne.

Or just buying a takeaway coffee once every work day is about £70 a month.

Ha! I don't do any of these things.

[nineseven]

I don't have a problem covering my bills and rent - it's just living on a day to day basis after that. But yes, it's about what I spend it on as much as anything else.

Exactly, so it should be much easier to reduce your spending if it’s mainly shopping, car and food.

[ParisGal]

I agree, that is a lot of money to cut in one hit. And while I get what you're saying PG, having all of that and then cutting it out isn't sustainable, you need to have some kind of enjoyment in life while clearing debt. I'd rather still have some treats and holidays and it take a bit longer than go cold turkey and be miserable.

Definitely. But in my imaginary scenario you could only buy one piece of clothing, swap the dinner and drinks out for just one set of drinks out and two meals at home with friends, cut out the takeaway coffees all together, and set a monthly budget for tickets. If you're always at the same level of debt rather than getting deeper and deeper then you only need to make the savings once, and in the future just stick to the budget.

So much of the non-essential spending is just habit really, like dieting in a way. For me it's ingrained that if you're out somewhere in the day, then after an hour or so you find a nice café and have a drink and a snack. Which is going to be a minimum of £5. Obviously sometimes that's a sensible spend and you need somewhere warm to sit down and need to eat something. But sometimes you could just as easily have a sit down on a bench and drink some water. Like buying a magazine for the train rather than bringing a library book.

[H1ppychick]

It’s up to Lily as to how aggressive she wants to be with her budget.

In my example above I used £250 because that’s what people had been talking about further up thread. I wasn’t being flippant or insensitive as to the extent or not of anyone’s disposable income. You could change the value quoted to £100 or any other value and the same principles would apply, extending the time periods for each repayment stage accordingly.

[Topcat]

Sorry H1ppy, wasn't suggesting that it was you, I thought that it was Lily's brother that suggested it initially.

I certainly wasn't having a pop at anybody about any of it, you're right, it is up to Lily how hard she goes at it.