Completing an Income and Expenditure
When you experience a financial income shock, one of the first thing you should do is draft a household budget, so you can see what you have coming in and what you have going out.
This is important, as what you want to avoid is a deficit, where you have more going out than you have coming in.
When you are drafting a budget, it is important to ensure you prioritise your expenditure, so certain outgoings are more than others. So for example, examples of expenditure you should prioritise are:
- Food and household expenditure;
- Rent and mortgage payments;
- Gas and electricty bills;
- Current council tax payments;
- Building and contents insurance;
- Life Insurance;
- TV Licence;
- Hire Purchase/PCP agreements for cars;
This is not an exhaustive list, there may be other items. However, all these are you day to day expenditure, that you should prioritise.
You should not prioritise your debt payments over these.
Debt payments should not be prioritised over the above payments, as there are other ways these can be dealt with, if you cannot maintain your payments to them.
The first thing you should do is complete an income and expenditure, as above, then see what disposable income you have left. This is the amount of money you have left after you pay all your essentials.
If this is enough to make all the minimum payments to your debts, then you will probably be able to manage. However, if you cannot maintain all your minimum payments to your debts as they fall due, you may have to look at other options, such a seeking a Payment Break from your lender or seeking debt advice from a reputable advice agency.