Time to be Careful

My sister rang tearfully last night to tell me that she could no longer come up to the smoke for our annual sister bonding shopping trip. She explained that she was up to, and possibly overflowing from, her overdraft limit. This is not a new conversation with Tasha, my much younger ‘shopoholic’ sister. She has absolutely no will power, she sees it, likes it and then, really must have it!

I calmed her down, and eventually managed to drag out of her the true extent of her debt…

She has a £12,000 overdraft limit at Natwest, £8,000 at Lloyds (they really are there for the journey!) She also owes £36,000 on credit cards! Tasha is not a high earning entrepreneur, oh no, she is a primary school teacher. She has become so used to being in debt that she actually sees her overdraft facility as her money.

In real terms what is this actually costing her? Natwest charges 12.73% annually, if my sister exceeds her overdraft limit it goes up to 20.50%. If she writes a cheque, which takes her over her overdraft limit, the bank charges £35 to honour it.

For every ten people there is one (just like Tasha) who lives in the red, pay our banks the equivalent of a kidney each month, and are forced onto the scrapheap of higher rates on credit cards etc.

So I have decided upon a plan of action for Tasha, I am going to take her under my wing.

I have told her to cut up her credit cards, perhaps keep one, with a low limit of say £500.

She needs to be honest with her bank manager; it’s his job to help her. She needs to have realistic expectations as to what she can actually afford to pay back. Tasha effectively needs a payment plan.

I have asked her to write down a list of all outgoings and the amount she has going in. It’s a good idea to go shopping with cash, the amount being spent is much more visual, and when it’s gone, it’s gone!

She needs to take control, admit there is a problem, and start to live within her means and above all walk past those designer shops!!

Eventually, I told her that she may even be able to save a little; well all journeys begin with a single step.

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