When your account is in the red, you may be tempted to take out a loan to raise your balance and avoid harassment from your banker. Or even, yes, it has been seen, it is HIM who offers you this credit.
Before signing up, here are 4 reasons why taking credit for your overdraft is a bad idea.
Filling your overdraft with a credit: the wrong plan
1) You will not know why you are exposed
There may be several reasons for the overdraft.
You may be overdrawn because you had a large expense that was not budgeted for: a car repair, an emergency purchase of household appliances, or even a drop in income – for example sick leave.
Another reason for the overdraft is improper management. Your expenses are more important than your income and mathematically, it no longer does at the end of the month.
If you settle this overdraft without knowing why it happened, the situation can repeat itself after a few months.
2) An additional charge on your budget
If you are overdrawn due to excessively high charges, adding a monthly payment will not help, quite the contrary! You will have even less margin and risk being exposed again very quickly. Unfortunately, I see budgets that are already over-indebted and are struggling to be balanced, so if another loan is added to it, it becomes unlivable.
3) Less money available for your projects
An additional monthly loan is less money available for your projects or for your savings. We reach point 2 there. Remember: there is never magic in a budget.
4) Bad habits
Taking a credit to report an overdraft is a bit like waiting to win the lottery to raise your account. If your discovery comes from a lack of management, you do not change the bottom of the problem and will continue to spend more than you earn … miscalculation.
So okay, taking a loan to make up for your overdraft, you understand, is a bad idea. But how do I do then? (if I hear you behind your screen!)
How to fill your discovery
The first thing to do is to accurately estimate the amount of the overdraft (ouch, it can hurt).
To do this, take your last account statement. If you received your salary at the end of the month, you deduct it from your bank balance on the last day of the month.
If you have a deferred debit card, it would also be ideal to deduct all expenses for the current month from your bank balance. The deferred debit card is a cash facility, it can be super practical, but you have to know how to handle it…
Now that you have the amount of your current overdraft, if it is too large, you divide it into monthly payments that go into your budget, and reduce your future expenses by the same amount.
And the most important step, the one that should limit the breakage in the future, and make you take the situation back in hand, well it is to optimize the management of your budget! Learn how to do your accounts what;)
Do you want to become a budget pro, no more stress for your money in 10 days? I present to you “My Zen Budget in 10 days”, an email challenge that teaches you how to put money back in its place: a tool for your projects. 10 days to tame your budget without being afraid, take stock of your relationship with money and finally learn to manage better.