Overdrafts

How to use an Overdraft to your Advantage

An overdraft facility is provided alongside many current accounts. Most people will have an agreed overdraft amount with their bank and will be able to borrow this amount and be charged interest on that borrowing. If they borrow more than this or do not have an agreed overdraft, they will be charged a lot more in fees as well as interest. Although overdrafts always have charges, there are times that they can be really worthwhile.

Running out of cash

The main reason that people use an overdraft is for when they run out of cash. This could be at the end of the month when they are waiting to be paid or if they get unexpected bills. If you have money in a savings account and do not have time to transfer it over before you need to pay out for things, the overdraft can help to keep you funded until the money arrives. As an overdraft is expensive, it is best to do this as infrequently as you can. You want to have it there as a backup, just in case you do run out of money, but it is much better to carefully budget and make sure that you have the money available when you need it.

As an alternative to more expensive borrowing

There are many different ways to borrow money. They all have costs and some are much more expensive than others. It is good to use the cheapest possible option available for you. If you need money really quickly, you do not have time to organise a personal loan, which can be a cheaper way of borrowing then using your overdraft can be a solution. Obviously it depends how much money you need, but it could provide some money while you are waiting for a loan application to be processed. If you have a poor credit record and cannot get a cheaper loan and need money quickly then an overdraft could be a cheaper option than some other types of borrowing. It is worth investigating the costs though as an overdraft can be very expensive particularly if it is an unauthorised overdraft.

For peace of mind

Having an overdraft facility can give a lot of people peace of mind. Knowing that there is money there that you can spend if you need it can be very reassuring. Many people never use their overdraft facility because they budget well and ensure that they do not spend more money than they have in their account. However, they do enjoy the peace of mind that they get knowing that they have that option there if they need it. It means that if they ever are in a situation here they need money and they do not have it, they have a loan that they can use without having to arrange anything. It is instant and therefore you know that it will be there when you need it.

Disadvantages

There are a lot of people that do not use overdrafts like this though. They use them when they do not bother to budget or if they want to treat themselves to a few things but cannot afford them. This is not a good way to use them. The cost of an overdraft is high and although it will be repaid as soon as money enters the account, it still can last quite a long time and the costs will mount. You are charged daily and so the sooner it is repaid the better. Some people find that they get overdrawn every month because they keep spending more than they earn and they use the overdraft to help them. This can lead to them borrowing more and more money or getting overdrawn sooner and sooner after they are paid and this can lead to big problems financially.

Overdrafts are an expensive way to borrow and so if you can find an alternative you will be much better off. It is worth researching costs of borrowing as soon as you can and then if you do need money you will be aware of how much different options will cost you. Remember to consider how much you are likely to borrow and how long for as this will have a significant impact on the total cost.

So only use an overdraft if it is the cheapest option that you have available to you. Only use it in an emergency and make sure that you pay it back as soon as you can. Use it as peace of mind rather than a resource that you keep tucking in to and you should spend as little as possible on it. It can be tempting to think that it is just money that is available for you to spend and although it is, you will have to repay it and pay back fees and interest as well, so it is an extremely costly way to buy things.

Save Money

How to be Generous and Save Money

Some people can worry a lot about not being able to be generous enough to others if they are trying to save money. They may feel that they will be seen as tight and that they may not get so much pleasure from giving because they will not be giving so much. However, there are ways that you could still be generous without spending too much money.

Give Time

If you like giving to charity then it could be possible for you to give your time rather than money. Donating time can actually be more valuable than money in some cases as there may be no alternative. There may also be things that you can do that are worth more than the money that you may have given. Whether you can give time will depend on what you are giving to. If it is gifts to friends and family then you may feel they would rather a gift than your time. However, it may be possible that they would appreciate you doing some housework, gardening or babysitting for them rather than you giving them a gift. It can be worth discussing this with them or trying it out.

Seek out bargains

If you still want to buy items then you might be able to buy as many things but also save money if you look for bargains. This may mean that you will need to spend a lot more time shopping as you will need to look into different shops and see what is available and how much it is. You should compare prices and you may be able to buy things in the sales as well. It can be wise to start shopping well in advance so that you have lots of time to get everything that you need.

Cut spending elsewhere

It could be the case that you will be able to cut spending in other areas so that you can still give just as much. You may have luxuries that you buy for yourself and you could go without those. You might even be able to cut the amount that you are spending on necessities as well by switching suppliers or retailers. Do be careful about value for money though as if you get something which is very cheap it may not last as long or taste as good and so could end being thrown away or replaced very quickly which will end up costing more money and not less.

Buy second hand

Another option is to purchase second hand goods. These are usually significantly cheaper and so can help you to save money. You may not like the idea of giving people second hand goods, but you could consider buying them for yourself so that you save money that way. Some good sin second hand shops are actually brand new and some have had very little use and so no one would even know that there were not new.

Alternative

It is also worth thinking about the fact that people that you give gifts too would not want you to spend more money than you can afford. They would be keen to make sure that you are not suffering just to give them things. Of course, some people do not think like that and are rather selfish and would be happy for others to suffer for their benefit. However, this is rare, particularly with people that are close to you as they will care about you and would not want to think that you are struggling for them. It may even be that they do the same thing when they are buying gifts for you and it could be better to have a no gift pact where you agree to spend no money on each other and therefore not struggle to manage. If that is not something you want to do then you could have a limited budget so that you do not feel that you have to spend a large amount but can spend a more manageable amount.

It is also worth thinking about whether you are giving so much because of pressure from the media and shops rather than because that is really what you want to do. Retailers want us to think that if we don’t give very much then we are being mean, but they only say that to try to get you to spend more money with them. In fact research has shown that people tend to remember what they are given more if it is just one present rather than if it is a lot so do not feel pressured to buy lots and lots of things. Also think about whether you are giving to make you feel good or to make others feel good. If it is for you, then ou might be better off spending less and making sure that you have enough money for essentials, but if it is for others then try to find some ways to give which do not cost so much money or save money in other ways.