After almost a year of reading books on money and trying to educate myself, I am still making school boy mistakes.
I have had an overdraft since I was 18 and have spent around 95% of my time in it up to my mid-30s. Must be the fact that I have always felt like it was free money. The truth is that it 100% is not free money.
This was maybe ok when I had a £1500 overdraft attached to my current account. Not that I have ever checked percentages and exact figures but I’m almost sure that I used to get charged around £20 pcm in fees for having the overdraft and being in the overdraft (Charges for the facility and interest on the amount I was in there).
Being out of work earlier in 2019 and having a renovation to do (rental 4) left me in a shitty financial situation so I had to extend my business overdraft to give me some breathing space. The Overdraft was extended to £25,000.
Although I never quite reached £25,000 (in the red), I have been at or around £15,000. The charges and interest didn’t even enter my head. All this year I have been watching my current account like a Hawk in the hope that I can trim my budget down. I haven’t been watching my business account. Mainly because I’ve been in Tunisia and not getting paid into my Ltd Company.
Anyway, I was using my Business account the other day to pay my accountant fees for the year and come across some hefty direct debits that I was unaware of.
2 direct debits totaling approximately £200 pcm had been coming out for most of the year. Although I had a feeling, I knew what they were, I called the bank to confirm. Yes, they were a combination of charges and interest for my overdraft.
I was pissed off with the money I had spent without realizing but it didn’t surprise me going on how poor I have been with money. Fuck paying £200 pcm in overdraft charges and interest.
To get rid of my overdraft I got a £15,000 loan so I wouldn’t have to pay the £200 pcm. I would have to pay some money in interest but nothing like the £200. With an interest rate of 6.6% I will pay a total of £17,570. This means that I will pay £2570 in interest and this works out at around £42 a month.
I might be still paying £42 in interest for a loan that only cleared my overdraft, but it is still better than £200. Plus, I am taking money out of my existing house and rental number 4 so I have the option of wiping the loan out and not paying any interest.
The lesson from another one of my financial mistakes is to get your head around your finances. Spend less than you earn and invest the difference. If like me you see your job as a means to an end, push towards your FI (financial independence) and get some FU-money (Fuck you money). With FU-money you might be able to work in a less paid job that you enjoy and in general will give you more freedom to do the things you love (me personally its rolling round trying to choke people and trying not to get choked – BJJ).