Home Budgeting – when in Debt

People understand earnings. It’s simply money coming in or what one earns. Wages, salary, pension, child benefit, tax credits, dividends, interest on deposit accounts are all sorts of income. People also appreciate expenditure of money. It’s merely money going out or what one spends. Some spending is done with cash, some by credit or debit cards, some by cheque, some by standing order mandate, some by direct debit mandate and so on.

When we bring together the two words ‘Income’ and ‘Expenditure’ however, people may scratch their heads. An Income & Expenditure Statement (I&E Statement) is simply a summary of one’s income during a given timeframe (usually a month) and what one spends in the same period.

All you’ve got to do is to list your income from all sources for one month and to tot up these sums. You then write down your expense items for the same month and the amount of each and tot them up. Now you have two total monetary amounts. Subtract one total from the other and, assuming that your total income exceeds your total expenditure, the difference is your Disposable Income (DI). This DI is the amount of money available to you to do as you please with. You can save or spend it or give it away as a present or do a little of all three actions – the choice is entirely yours.

To compile an I&E Statement if you’re part of a couple with or without children is a bit more complicated but only a little. You must provide all sources of earnings and all items of expenses for yourself, your partner and any dependent teens. Dependent children will in most cases be living with you although not always. For instance you could have a child who is going to boarding school. This is what is known as a family I&E Statement. Furthermore ,, items of expenditure may vary from month to month. You could pay particular items for example car insurance annually. The answer is to calculate the average monthly sum you have to put aside to enable you to pay the yearly sum when it falls due.

Probably the most major problem however is when your expenditure exceeds your earnings and you have negative DI. You now are living beyond your means. You are having to pay more than your income. If the month for which you compiled your I&E Statement is typical of the year as a whole, then you need to take steps to deal with the overspend. Otherwise you end up in debt that could get bigger in size as each month passes. If this has been taking place for a long time you could possibly already be significantly in financial trouble. What can you do?

A good beginning is to examine ways of minimizing your spending and after that following through with actual cutbacks. This can be easier said than done. You could possibly look at smoking, consuming alcohol, socializing and holiday expenses. You could look at the cost of utilities and switch to less expensive providers of electricity, gas, telephone and mobile phones. You might choose to avoid using credit cards and perhaps cut them up.

You could examine different ways to raise earnings. Is it possible to take in a paying lodger? Could you or your spouse take on a second or part-time job? Do older children living along with you contribute their affordable amount to the household budget? Do you really obtain every one of the benefits you might be eligible for for instance tax credits and housing benefit? Could you downsize to a cheaper more cost effective car? Just as before, you have to follow through with things to do – it’s not enough to determine what you should undertake.

We call all these matters and the follow-up steps ‘budgeting’. If you find this process is too challenging or stressful for yourself or your family, do take advice. If you’re presently experiencing difficulties re-paying your debts you could be insolvent. Should you wish to determine this one way or the other, do look at going to CCCS, CAB or any professional commercial provider of insolvency services and receiving specialized help and advice. Generally there you’ll get assistance, that’s usually cost-free to begin with, and assistance in putting together your family I&E Statement and you will definitely understand for sure if you might be insolvent or otherwise.

Any reliable Insolvency Practitioner (IP) will analyse if you’re insolvent. Should you be, it is possible to explore and have explained to you the potential solutions to your circumstances. All available alternatives will be defined. These sorts of choices may well include Bankruptcy, Individual Voluntary Arrangement, Debt Management Plan, Debt Relief Order, Administration Order, Debt Consolidation or some other financial solution. You can make your mind up should you wish to proceed further. You commit to absolutely nothing at this stage and can walk away and ‘sort out’ your own finances.

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