So, you should be sitting down to this having completed a budget analysis form and now know whether you have sufficient income coming in to cover your outgoings, or whether you have a shortfall.
If you have sufficient income coming in – YAY – you just need to budget better. An easy way to achieve this is to live on just cash for a few months until you are back into the habit of monitoring your spending.
Make sure you have one main bank account that all of your income goes into and all of your bills come out of.
Once all of your income has been paid in, check the total amount due to be taken out (for bills, rent/mortgage etc – but not including money for food, petrol, clubs etc), add at least £50 to that figure (for contingency planning) and then withdraw the surplus. So if your income is £2000 and all your bills come to £1100 – you can withdraw £850.
Then split that £850 into 4 envelopes and seal them! Write week 1, week 2, week 3, week 4 on them and have one per week to spend. After a few months of doing this you should be back in the habit of living within a budget.
The £50 contingency is there to provide a buffer for any unexpected increases in your regular bills.
If you are left with a shortfall – ie your outgoings are greater than the money you have coming in – then we need to look at whether we can increase your income or decrease your outgoings.
Let’s start with income: Silly question but does anyone owe you money? Be it a friend, relation, employer, benefits agency, ex-partner/CSA – if someone owes you money and you can’t pay your bills then you need to be following it up.
If you have an ex-partner who should be paying maintenance, get onto the CSA. If your case is already with the CSA but no payments are coming through yet – chase it up! I know first hand how soul destroying it is to phone the CSA but it’s the only way to get things moved along. They are dealing with millions of cases; if your ex is being evasive then your case will get overlooked if YOU aren’t on top of it. It’s not right, but it’s the way it is. Did you know that you can email the CSA for chase ups? I found this quite useful on days when I simply couldn’t face phoning them! The link to the email page is here.
Make sure you are claiming all the benefits to which you are entitled. You can do this via this website or by calling your local benefits office. Even if you are employed, you may find that there are benefits out there that you aren’t aware of.
If you are employed, can you do an extra hours at work? Or is there anything that you could do at home to generate more income? The slogan ‘every little helps’ is so true in this situation, you may find that bring in an extra few pounds here and there makes all the difference. Could you rent out a room? Did you know that you can rent out a room (up a value of £4,250) tax free! In a lot of towns you can take in forgein language students for a few weeks at a time – this would enable you to get a quick burst of extra income without any long term commitment.
One last thing to consider is whether or not a family member might help you out?
Onto reducing your outgoings: Assuming you’ve managed to do some of the above, you may now find that you don’t have as vast a shortfall as you started with. If there is a massive shortfall, you need to decide whether this is a temporary problem or one that is simply not going to go away without intervention. If it’s temporary – ie you’ve got a lump sum due to you or your wages were less than usual this month, then simple budgeting should see you through. You could also phone your council tax department and see if they will let you skip this months payment (and add it onto the outstanding balance) as a way of temporarily easing the situation.
If it’s a much bigger problem, I would urge you to consider contacting the CCCS or your local citizens advice bureau – both of these will offer you free, impartial, non-judgmental advice.
If you decide to go it alone, you can consider whether you want to:
* freeze all your (unsecured) debts and offer a nominal payment amount
* offer reduced settlement figures
* go bankrupt
There may well be more options available than these, a quick phone call to the CCCS should help you to establish all of the available options before you proceed.
Whichever option you go for, you need to contact ALL of your creditors and advise them that you are currently experiencing financial difficulties. Most of them have a separate department for this who may even be able to offer you different terms – generally speaking they will want to discuss your current income and outgoings so it will be useful to have your budget planner to hand when you call them.
If you can’t pay your unsecured debts then make sure you deal with all of them equally, to give yourself breathing space before rushing into a decision like bankruptcy, ask all of them to freeze your account, freeze the interest and offer to make them interim token payments of £1 a month. This demonstrates to them that you are not running away from your responsibility to the debt, it shows that you are aware and in control. If they don’t accept it over the phone – put the suggestion in writing.
If you have decided that you want to file for bankruptcy rather than follow a debt management programme, I would again urge you to make a quick call to either the CCCS or the CAB, just get their impartial opinion. Don’t think that they will judge you or push you into doing something that you don’t want to, because they won’t. In fact when I rang both of them at a time when I was experiencing financial problems, they both recommended bankruptcy!
This post, like all my #MoneyMonday posts, is based upon my personal experience and opinion. Please seek as much advice and assistance as you can from other reliable sources before making any rash decisions. Any questions, feel free to ask.