Making the best of bad decisions

Managing your money can be a challenge, and high living costs in the UK mean keeping your personal finances in order could be harder than ever.

But youthful missteps don’t have to consign you to a future of financial ruin. We share how overcoming an overdraft and dealing with debt can pave a path to better spending and saving habits.

Stay aware of your spending

'After university, I was saddled with the usual debts: student loans and overdraft,' says Anthony, 47.

'But it was easy to ignore them. I got paid cash in hand for DJ gigs, cashed my jobseeker’s allowance cheques at the post office and my housing benefit went directly to my landlord.'

Ignoring your problems often seems like the easiest solution, but, as is often the case, it can’t make them go away. Instead, it can risk damaging your credit score.

And this can make it more difficult to borrow in the future, harming your chances of acceptance for loan or credit card applications as well as the possibility of increasing the rate on offer for credit.

Confront your situation and get the details

After getting a job that would pay his wages into a bank account, Anthony finally visited a branch to check his account status.

'The cashier looked at her screen, got a pair of scissors out of a drawer and promptly cut my card in two,' he says.

It was a difficult moment, but it forced Anthony to look at his situation and get the information he would need to turn it around.

'My debt had been sold to a debt collection agency,' Anthony says. 'I would have to pay off my overdraft before I could hold an account with my bank – or almost any bank in the country – again.' Nowadays, it should be easier to have a basic bank account than it was for Anthony.

If you’re in debt, communicating with your lenders can be key to getting yourself back on track. If you’ve missed repayments, contact your lenders directly to discuss making up the shortfall, find out if you’ll face any penalty charges and learn about alternative options that might be open to you.

Make a plan – and don’t be afraid to ask for help

Armed with the information, Anthony was able to take the first steps towards changing his situation.

'My overdraft wasn’t a huge one – around £1,500 – but at the time (the late 90s) it was enough,' he says. 'A repayment plan was set at about £40 a month, and I finally managed to pay it off in about three years.'

Repaying small amounts each month can be more manageable. It can be useful as well, since paying back sums regularly – instead of a lump sum – can improve your credit score.

Maintain the momentum

Settling one debt can make it easier to tackle others. 'When I found myself earning enough to pay back my student loans, around £7,000 with interest, I started putting £100 a month towards them,' Anthony says.

'I largely forgot about it until six years later, when I received a letter stating that I had paid off the amount in its entirety.'

The average amount of student loans for borrowers entering the 2022–2023 academic year over the course of their studies is forecast to be at least six times Anthony’s figure from the late 1990s. But scheduling monthly payments when your budget can comfortably accommodate them can be a beneficial approach in many situations.

Develop good habits and plan ahead

Today, Anthony holds several accounts across a few banks – all of whom, he says, are happy to have him.

Each account corresponds to a particular goal or function so he can manage his monthly outgoings, save for the future and even keep a dedicated record-buying budget.

He even has access to an overdraft, but he doesn’t use it. 'I’m determined not to fall into that hole again,' he says.

With Chase, you can open extra current accounts in seconds, for free. Use them to spend from, pay bills with Direct Debits, budget and set aside money in a way that works best for you.

18+, UK residents

Recommended reading

• Let's talk about debt
• Budgeting your student finances
• How does bad credit affect your mortgage chances?

Disclaimer: The Hub is intended as a knowledge portal to provide information on a range of topics, including financial products. Articles may reference products and services that Chase UK does not currently offer. This article is for information only and does not constitute financial advice.