Good planning (or good anything for that matter) starts from a solid base. If you are in your overdraft, it’s impossible for you to have a baseline to build from, because you don’t start from zero. It’s hard to have an idea how much money you really have left, because it’s confusing to work with a balance that frequently shifts between positive and negative.
Money with a minus sign in front of it is demoralising. Working hard all month to just to get back to zero isn’t exactly a good feeling. We know that poor financial health and poor mental health are linked, so get that happy feeling back and get rid of your overdraft when you can.
You might be tempted to stick your head in the sand if your money situation isn’t good, and ignore your bank statements or not check your banking app. Doing this might mean you miss other things, such as an increase in your bills rising or even fraudulent activity on your account. Even if it’s a bit scary, always pay close attention to what goes out of your account to stay in control of your finances.
Overdrafts can feel like ‘free’ money. They are designed for short-term emergency borrowing, so the application process is usually much shorter and less intensive than arranging a personal loan or applying for a credit card. A few clicks of a mouse or taps of your phone screen can conjure up money in seconds – but beware, overdrafts are a bit like sinking sand - quick to get into, much, much harder to get out.
Lending people money is risky business, which is why lenders charge varying rates of interest to cover that risk. ‘Low’ risk people can borrow at a better rate than someone viewed as ‘high’ risk. If you live in your overdraft, it looks to a potential lender that you may not be able to manage your budget which is likely to lead to you being classed as a high-risk person to lend to. This will therefore lead to you being charged a higher interest rate, or you may not be accepted for a loan at all.
Guest post from: https://www.neonfp.com/
New changes to how banks charge for overdrafts are coming in April. The move was designed to simplify charges, but the unintended consequence seems to be that nearly all of the major banks are increasing overdraft borrowing rates to a huge 40% per year. That’s a very expensive way to manage your finances, and if that’s not reason enough for you to make a change, here are 5 more:
Being in debt can be a bit scary, but don’t panic. Money certainly isn’t everything and help is always available to fix things.
If you want to learn more about managing your finances then talk to us today. Having a plan in place can give your life direction, bring confidence and provide a feeling of wellbeing.