Oh NO...overdraft...

**rachelMcK** · 08-01-2006, 07:38 AM

So rent came out today and we're in the red...i mean overdraft. We don't get paid until friday and we still have one bill to come out for $100 plus our living expenses for the week. I guess we can live on $60 for just one week, but then we are in the red for almost $200...ouch.

I hate months like these.

What do you do to avoid this???

**Daisygirl** · 08-01-2006, 08:10 AM

Oh, Rachel, I wish I had some great advice but I don't. The only thing I can tell you is that it takes time building your frugal habits and getting a step ahead of your bills to avoid this. And then, sometimes something unexpected comes up and you still get messed up.

I know you are fairly new to the frugal lifestyle, so am I. But since making the positive changes I have, I can tell you, thing really do get easier the longer you practice thrift. Also, overdraft is a far cry better than bouncing checks.

Keep your chin up, and keep committed to the process!

**MOMMYDEAREST** · 08-01-2006, 11:03 AM

hang in there....you will get the swing of things very quickly....its just a overdraft.........not death!!!!!

**AirForceWife** · 08-01-2006, 11:26 AM

This may seem like an odd question, but what is the difference between an overdraft and a bounced check? Are there no fees? I'm just curious because I always thought the two terms technically meant the same thing. Thanks!

PS ((HUGS)) months like this are no fun.

**Start-Living** · 08-01-2006, 02:21 PM

rachelMcK, I know how you feel. I feel like crying everytime things like this happen to me. But hang in there.
I'm pretty new to being FRUGAL also. We used to have overdraft almost every month, and that costs us average $200 a month on FEES. We didn't keep track of how much we spend, we just spend and spend until we can't anymore. (especially me, I was the spender)

Ever since I join this board, and look at every penny we spend, we no longer have any overdraft, and that saves us average $200 bank fees every month that go towards bills. It's only been a few months since we got our finance under control, but it's a great feeling. I know you can do it too.

What I do to avoid having overdraft:
1. Keep track of My INCOME, and EXPENSE (down to every penny)
2. I write down every penny that we spend at the end of every day. This gives me an idea of how much we spend on what by the end of everymonth. (I don't go by the envelopes system, but I do have a set budget for us, and try to go under the budget. I always go over a few dollars every month, but having a budget really helps me control my spending)
3. Make sure to always have enough income to cover my bills, if I'm short on money that week, then I wait until next week to mail in the bill (a week or two late at paying my bill, but I don't have to pay any bank Fees) it's $29 each transaction for us.....
4. KNOW my "WANTS" and "NEEDS"....I have stop buying "WANTS" and save that money for "NEEDS". (thanks to all the very helpful people in here!!!)
5. Find out ways to save money......and give it a try no matter how silly the idea sounds.....(most of the ideas here works ! and saves me $$$$)

I'm pretty new still, but I tried...and I failed.... I try again..fail again, but less painful...and try again..it gets better everytime.

I come here everyday, this board is my support system. When I feel like doing something foolish with my money, I come here and read the stuff here, it knocks some senses into my head....

**MrsB** · 08-01-2006, 02:31 PM

Rachel, I feel your pain girl! *Hugs* We're in the same place right now and I feel like crying too. It will get better for us both!!!! Thats the up side of all of this!

**ewokgirl** · 08-01-2006, 04:32 PM

I'm a little confused. When you say, "Rent came out today," do you mean that it was taken from your account automatically? If so, I deal with that by not having anything taken from my account. Well, I did have my gym membership paid that way, but I subtracted that from my account myself while paying bills, even if they weren't going to be taking it from my account for a week or two. I hope that made sense.

My system is that I have the month divided in two. I pay the mortgage, car insurance, cable, water, and newspaper with the first check of the month. Then when DH is paid again (he's paid every 2 weeks), I pay tithe, electric, phone, CCs, my life insurance, medicine, exterminator, and any other incidentals that come up. Groceries and savings come out of both checks.

By dividing my month up like that, I always have a grasp on our budget, even though dollar amounts may change (electric, for example, is never the same). I pay all bills with plenty of time to spare, but it's always on my schedule, and there's never any panic over paying them. If you have a steady income (not dealing with commissions or whatever else might make paychecks vary), this is a great way to go.

**Daisygirl** · 08-01-2006, 04:55 PM

Originally Posted by AirForceWife

This may seem like an odd question, but what is the difference between an overdraft and a bounced check? Are there no fees? I'm just curious because I always thought the two terms technically meant the same thing.

Air Force Wife, the only difference between overdraft and a bounce check is that with overdraft the check goes through and is paid to whoever the check was written to. If it was bounced the check would be returned. With overdraft then you owe the bank money but the person you wrote the check to need never know there was a problem.

**Daisygirl** · 08-01-2006, 04:55 PM

^^^ hehe Yay! I quoted! been trying to do that for a while!

**rachelMcK** · 08-01-2006, 05:28 PM

I'm a little confused. When you say, "Rent came out today," do you mean that it was taken from your account automatically? If so, I deal with that by not having anything taken from my account. Well, I did have my gym membership paid that way, but I subtracted that from my account myself while paying bills, even if they weren't going to be taking it from my account for a week or two. I hope that made sense.

- I meant that cheque that i wrote for the rent payment was cashed today and out of the account but thanks for the tip!

Thanks everyone for your kind words. It is stressful. But I'm determined to get back up and try again. I know I can make myself feel better. There is a movie out in theaters that we want to see...i know, movies aren't frugal...but they are if you win tickets plus popcorn and beverage, FREE from work!!! The day got brighter!!!

**Kelly0411** · 08-01-2006, 06:38 PM

Uh... ok. First of all your talking about a courtesy pay which is the exact same thing as a payday loan. Yes your check is paid, but you are still charged a fee by the bank for clearing your check with your account has insufficient funds. I know that Dave Ramseys plan calls for no more credit...and I do agree, but you need something that makes an acutal LOAN and you only have to pay the interest for a few days until you get paid again. This is so much cheaper than what it appears your doing now. And no, the bank will not automatically suggest this option for you because they make alot of money off of you for clearing those checks.

**ubumartin** · 08-01-2006, 07:05 PM

Hang in there. Hopefully things will get better each month for you. I know that feeling. I had times when I would constantly be calling up my bank account to find out what checks cleared and praying not to go over. It is an awful feeling.

I now give my selfa "buffer" in my account. I keep money which I accumulate by adding up on my purchases ie, if I spend 1.25 I will write down 2.00. Also if I put a check in the bank for 155.00 I will write down 150.00 deposit. I even "borrow from my buffer" If I have a short month I will use some of the money but then I will pay myself back. My husband thinks I am crazy for not just writing what I actually have but this has helped me so I don't bounce checks. I know that even if I go over I still have money in there to back it up on those short months. It is all psychological because I know I have it, but otherwise I would spend every dime. It has taken me a while to accumulate the extra funds but it is worth it.

**Libby** · 08-01-2006, 07:34 PM

Im not sure how it is down in the US but for me, here in Canada it goes as follows (consider this an expansion on why chrysler girl said)

Overdraft - set amount of money that you're bank balance is extended to.

Example - You have $0 in your account. You deposit $200 so now your balance is $200 You have overdraft protection of $500. Total available cash to you is $700. Now you write a chq to pay bills - total of $450. You have now overdrawn your account and owe the bank $250 b/c you never had the whole chq amt to begin with.

B/c you're now in overdraft, some banks charge one flat fee per month, some charge interest per day on the balanced borrowed or overdrawn etc. When you do pay back that $250 your balance goes back to $0 - assuming you pay it back the following wk w/your next pay etc. Or continue to pay interest on it until you do pay it back to the bank. Some banks charge to have that protection and some only charge when you do go into overdraft....check with your bank to make sure.

Some people LIVE off of overdraft as if its really their money to be spending. It does come in handy sometimes but to use it for daily banking purpose is tricky and can get you into far more trouble.

Bouncing chq's - if you dont have enough funds in your account to cover the chq amount, they notify whomever you wrote the chq to to tell them no they cant get their money and then charge you $25-$40/each chq that you bounce.

Where I bank, once you use the overdraft once, its flat rate. I only pay about $5/month if I dip into it...and unfortunately this month, I over debited by accident b/c I groceries and gas and forgot that I had paid one bill twice

Hope that helps - this isnt set it in stone, it was just an example to help get a better understanding.

**AirForceWife** · 08-01-2006, 07:59 PM

Thank you everyone for the info! I never knew such a thing as overdraft existed! It seems kinda like a never ending cycle, kinda like the pay day loan analogy!!

Rachel, my apologies if you think in any way I hijacked your thread! I really wasn't sure what it meant. I guess I was typing faster than I was thinking. Can you ask your bank to stop letting you overdraft? Maybe if that safety net isn't there, you will find it easier to keep track of your spending. At least the fees would stop!

That would be some extra bucks! Or would it be possible to go cash only for a period of time? A lot of people get a handle on things that way!

Whatever you decide, enjoy your free movie!

We spent $40 on movie and popcorn a few weeks ago to go see Pirates of the Caribbean 2! And that was a matinee! It was worth it, but man it's expensive!