Economy drive

[Lily]

Have you worked out what it's going on?

I'm stupid, basically. But learning my way through it.

[Kenickie]

It's not stupid. It can be hard to keep track when expenses come at different times.

I still don't get the maths though - currently you spend £3k a year going into an overdraft, so a £3k overspend, so if you stop doing that it just brings you back to zero, so there's not another £3k around to pay off your cards (which would be an additional £3k overspend unless you pay them in full)?

[nineseven]

I still don’t understand the overdraft thing To stay out of it will mean spending £250 less a month.

[nineseven]

What Ken said. You need to spend £500 less a month (£6k a year) to stay out of your overdraft and pay off your credit cards in one year.

[Kenickie]

I think the credit cards are a red herring, as I can't see what they have to do with the overdraft, unless you spend £250 a month on a credit card and use the overdraft to pay it off?

It's just a coincidence that the two debts are the same over a year.

I think the confusion might be coming from thinking that not getting £250 overdrawn a month = £250 in your pocket, whereas it actually just means £250 less debt so takes you to zero rather than giving you £250. I'm not sure I'd make your brother a director on the basis of that maths! ;)

[Lily]

It's a bit hard to explain and now you're saying this I don't know if he was being a mathematical genius or he was just pointing out that it is a bit spooky that both figures are around £3k. I will have to ask him now. My mind was just blown by the £3k = £3k thing. (I often wake up at 0300 so maybe Three Is The Magic Number.)

I think I got into a cycle of gentle despair thinking this is how life always is, so I just resigned myself to being shit and worrying about money All. The. Time. This has become an entirely normal way of living for me. Now I've realised it doesn't have to be, and I'm working a way through it which makes me feel in control for the first time in my life.

My grandparents' legacy will come in soon too and I really, really don't want to fuck that up. I've got a Help to Buy ISA I opened years ago (in a hissy fit, when my landlord wouldn't let me have a house rabbit - "I'LL BUY MY OWN HOUSE AND SHOW YOU!") which had about 76p in it, so I will shove it all in there and give the login to Bruv until I can trust myself not to spend it all on hats.

[Roma]

I think there was possibly more to Lily‘s conversation with her brother? He may have pointed out that if Lily gets to the point of not using her overdraft she’ll instead use that £250 to pay of her credit card, she’d be debt free after a year?

So as others have said she needs to reduce her spend by £500 a month. Ideally get rid of the overdraft first and then the credit card as long as that’s on 0%

[Lily]

That makes a lot more sense, thank you Roma I think that is what the poor bloke was talking about!

My credit card is on 0%, which helps - and I did that thanks to posts on here too.

[Kenickie]

I think there was possibly more to Lily‘s conversation with her brother? He may have pointed out that if Lily gets to the point of not using her overdraft she’ll instead use that £250 to pay of her credit card, she’d be debt free after a year?

But there's no £250 to use instead. It's not like you start off with £250, and can spend it on eating out, and if you don't, you have £250 to spend on something else like paying off a credit card. If you overspend by two lots of £250, they don't cancel each other out if you stop one over spend!

[Roma]

I know what you mean Kenickie, but the point I think her brother was trying to make is that Lily now has a negative balance of £250 on her overdraft. She should work on reducing this and once her overdraft is clear she can use the money she is not spending on overdraft interest to clear the credit card by paying off £250 a
month until she’s debt free.

I think he was going to get her to the point of getting out of the overdraft and saving £250 instead to pay off the credit card so she’ll then be debt free.

[ParisGal]

Spending £250 less every month is a big change, £500 less is huge.

But, if you're going £250 overdrawn every month and then paying it back each payday, you'd only need to save £250 once to get back to zero, and then you shouldn't need to make huge changes to remain in credit from then on. If you were over-spending by £250 every month (ignoring credit cards) then you'd be £250 further into your overdraft every month, so overdrawn by 3k by the end of the year.

This is one of those scenarios that should be ultra-simple but somehow gets really confusing, like working out how to split a bill when people don't have the right change

[Skips]

I think he was saying what Roma said and essentially once the overdraft is paid off snowball the money she isn't spending onto the credit card.

Checking in sounds good, Lily. If nothing else it'll help keep us on track when we're flagging.

[Montana]

Yes, PG has just posted what I was thinking (but not quite daring to post in case I was completely missing the point). If Lily's overdraft limit is £250 but she goes up to the limit every month then she only needs to spend £250 less than her income once to clear her overdraft. Then if she continues to spend £250 less a month in subsequent months (while also not adding to her credit card debt) she can redirect that money towards her credit card. So total current debt £3250.

[Roma]

I agree, suddenly spending £500 less a month is a huge change and may be to difficult at first. £250 should hopefully be easier, it all depends how much disposable income is available in the first place.

Overspending with a high disposable Income is a lot easier to deal with than having just enough to live on and going into the overdraft to make ends meet. Hopefully that is not the case with Lily though.

[nineseven]

Yes, PG has just posted what I was thinking (but not quite daring to post in case I was completely missing the point). If Lily's overdraft limit is £250 but she goes up to the limit every month then she only needs to spend £250 less than her income once to clear her overdraft. Then if she continues to spend £250 less a month in subsequent months (while also not adding to her credit card debt) she can redirect that money towards her credit card. So total current debt £3250.

No. If Lily earns (for ease) £2000 a month, she’s spending £2250 every month to get into her overdraft. If in the first month she only spends £2000, she’s out of her overdraft. Then the next month, to start clearing her credit card, she’s still earning £2000 a month but has £1750 spending money and £250 for her credit card. That’s a reduction of £500 spending money compared to what she was spending in the first month when she was going into her overdraft.

[nineseven]

Now I’m questioning myself Montana is correct. Sorry!

[Froozy]

But she only needs to not spend the overdraft £250 once, then she’s back to using the £250 she would use on payday for the overdraft to cover her usual £2000 costs. Then she only needs to save £250/month to put towards her card.

Maybe

[nineseven]

You are right

[Edith Bacon]

[Lily]

I don't know anymore! I just thought "oooh, he's so clever."

Which is normally what I think about my brother about most things.

But, yes, if I can avoid spending an extra £250 this month, then that's a massive step in the right direction too. I have already done it by saying no to a theatre ticket UNLESS I get some extra money by next week.

One thing I have learned is that Lidl feta really, really isn't very nice. :sad:

OH I forgot to tell you if you heard anyone talking about living on credit cards on You and Yours on Radio 4 a few weeks back, that was me! :toot: I gave a false name though, having learned the hard way that you really don't want your real name being read out on national radio when you are talking about something sensitive and embarrassing (I'm looking at you, Jeremy Vine).