One vicious cycle, which is difficult to break, is the overdraft/overdrawn cycle that can occur once you have overdrawn your account. You may have made an adding error or overspent in a category, and the next thing you know, you have overdrawn your account. You will be hit with overdraft charges, which average about twenty-five dollars per item. Often it takes several days for the notification of this to reach you, and you may be continuing to spend, and racking up many more charges.
This can form a vicious cycle, because it will affect the amount that you next have deposited into your account. It means that you will have less to spend, and it really can be a difficult cycle to break. I have known people who did not bother to open their checking account statements and were in this cycle for several months before they realized it.
If you want to break the cycle, you will need to take drastic, but simple steps.
1) The first thing you need to do is find out how much you are in the negative at the bank. You will also need to determine which checks or items have been returned, and how much you owe to each place. You should make a list of these from smallest to largest.
2) The next thing you need to do is to cash your next paycheck, instead of depositing it. If you have direct deposit, you will need to stop this for a few paychecks. You simply need to talk to your payroll department.
3) After you do this you need to determine what expenses must be covered by this amount. If they are threatening to shut off your power, or turn off your phone, you should take that into consideration. You need to make sure that you have enough money to pay cash for your groceries, and your gas for the week. You should be eating as cheaply as possible, until you clear this up.
4) Take the amount of money that you have left over and begin to pay off what you owe. You should deposit money into your checking account. Be sure to talk to your bank and explain your situation and your plan. Banks can close your account, and report you to Chex Systems have your account in the negative and do not do anything to remedy the situation. Most banks will be willing to work with you. You may need to contact the vendors that you owe money to as well.
5) Continue to do this until you have paid back everything that you are behind on. Once you are caught up you need to keep a running balance of every transaction that you make with your account. You may find it helpful to switch to the envelope system if you consistently have trouble doing this.
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