How to get out of the overdraft cycle??

I have a £300 overdraft. While it’s a pain for reasons I’m about to get into, I’d rather not get rid of it as it has helped me out in some hairy situations.

Earlier this year I had about 5k in savings. I was learning to drive and then bought, insured and taxed a car. So now my savings are sat around 1.2k. I’m 25 soon and really wanting to build a house deposit in the next couple years with my partner. But my current system of saving just clearly isn’t working..

I take home about 1.9k a month, my outgoings are slightly over 1k a month. At the moment, I’m trying to put about £2-300 a month away each month but it’s just not working out and I was ending up transferring back everything I put into savings, sometimes more, by the end of the month. To avoid doing that, I started utilising my overdraft and often end the month at about -£270 ish. The issue then is when I get paid, I’m already almost £300 down and the cycle just continues.

How do I stop this? I’m debating paying myself back to zero just before this payday and starting from scratch? Would that work? I really don’t think I’m a frivolous spender, I think it’s more that I’m unrealistic about how much things actually cost and don’t budget realistically. I’ve been trying to sell lots on Vinted and I’m looking to sell some electronics I don’t get much use out of to give myself a bit of a cash boost. For context also, I use the Chip saving app and their instant access account with 4.80% interest. There is an option for their 90 day access account but I’m apprehensive as I like the safety net of instant access cash if I need it but maybe I need to get strict…

If you're taking home £1900, that suggests you're in employment and not a student. You talk about using your overdraft -- are you paying interest on that overdraft? Standard overdraft rates are in the 35-40% per annum ballpark. You really, really, don't want to paying that. The concept of simultaneously putting money into a savings account AND using an overdraft in the same month is a really bad idea. You're making yourself worse off.

You say you have £1900 income in the month, and £1000 of outgoings. Clearly by "outgoings" you mean "bills" -- anything else you're spending in the month is also "outgoings" by definition. Have you sat down and worked out where all that money is going? £900 a month is £30 a day. That's a lot of (presumably) discretionary spending.

Your regular overdraft use will be a red-flag to a lender, and is going to be a problem when you come to get a mortgage. Regular overdraft use says "I can't manage my money", and a lender will start to wonder if they can rely on you to have the money each month to pay the mortgage.



An approach I've taken in the past is to look at my bank balance immediately before my wages come in, and transfer anything in excess of £1000 to a savings account. That way, I know that at the start of the month I have my monthly income there, plus a cushion for anything unexpected that might come up. Perhaps £1000 might not be the right amount for you; maybe £500 is. It's something you'd need to judge.

But I think you seriously need to sit down with your last few months of bank statements and a calculator and figure out when all your money is going. And then you need to be strict with yourself about what you spend.