Make an asset out of your overdraft

Dennis was genuinely confused. His overdraft had doubled in the last 12 months - with the bank manager's full agreement - and now, without asking, the bank's credit card operation had increased his credit card limit.

"I would have thought they would want to hold down my credit card spending since I'm nearly pounds 5,000 in the red on my current account," he says. But when he went on to say how much his bank balance had fluctuated over the year - between pounds 5,000 overdrawn and pounds 8,000 in credit - the explanation was simple: Dennis is a good customer who makes money for the bank.

When his account is in credit the bank earns interest lending his money to others - and when he is overdrawn it earns interest lending other people's money to him.

There were some other points in Dennis's favour. After almost a year out of work in the early 1990s he had found a good job in the computer industry and had been promoted twice, so that his salary now was 50 per cent higher than when he joined the company three years ago. He also earns a second income from consultancy work on days off and holidays - the source of the "peaks" on his current account.

Even more importantly, he has always kept the bank in touch with what was happening - a habit which he had acquired from his ex-wife, who had worked in banking for many years. It was a habit that was to stand him in good stead when he was made redundant early in 1992.

"By the time we closed for Christmas the order intake was almost non- existent - so when I was in the bank with a query over the holidays I took five minutes with the manager to warn him that the writing was on the wall.

"I also cancelled a holiday planned for the end of January, which saved me pounds 1,000 - and it was just as well, because that's when the cuts were announced."

At first Dennis was worried that he had made a mistake putting all his eggs in one basket, with his current account, credit card and mortgage all arranged through the bank.

"I thought they would want the lot off me, but I sat down at the computer, worked out the figures and went back to see the manager," he said. "I went over all the details with him - how much in redundancy and so on, and how much I was going to cut from my spending. His attitude was basically, 'OK, if you stick to the plan, I'll stick by you,' and I did my bit, so he did his."

It was, he admits, a struggle, but each month he went through his bank statement, looked at the outlook for the following month, updated his financial model and sent the figures off to the bank.

With "a little bit of hard work and a lot of luck" Dennis was out of work only a few months before he was offered a couple of days a week doing consultancy work, which before the end of the year led to the offer of a permanent job with his present employer.

Once he was back in full-time work, it took a few months to put his finances back in order - and then his top priority was to put money every month into a regular savings plan - as a safeguard for another rainy day.

But even now, with his money worries long behind him, he still takes a couple of hours each month to look at his finances, check his statements and update his financial model.