As recent statistics¹ reveal the growing number of insolvencies in the UK, leading debt management company, EuroDebt, is advising consumers on how to manage their monthly budget.

"There have been a number of recent news announcements about the growing number of families in serious debt and the alarming rise in the number of personal insolvencies", confirms Kevin Still, Director, EuroDebt. "But I firmly believe that if we can get consumers to start thinking about their monthly budget before they have any serious problems with personal and household finances, then if things do get very difficult, this will go some way towards helping them avoid the problem escalating out of control."

It is easy to get overwhelmed with the numerous outgoing payments that are usually required to keep the household afloat on a weekly, monthly and even annual basis. Budgeting from wages or monthly salary can require careful forward planning, especially when annual bills arrive for things like car and home insurance, water rates, etc. Keeping track of what is due to be paid and by when helps individuals put their true financial status in perspective. In times of difficulty it can also be important to prioritise which debts need to be paid first and help understanding the potential consequences of not meeting these payments.

PLANNING A REALISTIC MONTHLY BUDGET

OUTGOINGS

When thinking about monthly expenditure it is important to try to remember all weekly, monthly, quarterly and even annual outgoings, including:

• Household Expenditure

Rent, mortgage, garage or ground rent, National Insurance (for the self-employed), council tax, water rates, gas & electricity bills, telephone bill, any cable, satellite or internet subscriptions, TV licence, contents and buildings insurance, etc.

• Travel Expenditure

Any petrol or diesel costs. Annual costs like car insurance, car tax, MOT and servicing also need to be accounted for – and for each car. Plus your budget should include costs of parking or public transport costs, like season tickets and railcards.

• Child Care Costs

Child minding fees or nursery fees, or payment of school meals, travel to and from school. Plus, there may be child maintenance commitments, as result of a divorce or separation.

• Health Costs

Any dental, optician, health insurance or other reasonable medical expenses.

• Leisure Costs

Any clothing, meals out, tobacco, alcohol, and any other hobbies, etc.

• Housekeeping

Any clothing or food costs, making adequate allowances for less frequent purchases like uniforms and shoes for the children.

INCOME

Individuals need to thoroughly assess all their sources of income including any wages, salary, bonuses/commissions, tips. Other sources of income should also be included, such as:

• Part-time work by any family member at the household
• Income from renting properties or sub-letting rooms in the house
• Any type of benefit including; working tax credits, child benefit, child maintenance, single parent benefits, job seekers allowance
• Maternity pay, statutory sick pay or any other financial support they maybe receiving, which may include payment protection insurance (PPI) on some credit agreements.

"Once you have identified all your outgoings and income, you should be in a much stronger position to determine whether there is a serious gap in your finances" confirmed Kevin Still. "This is where outgoings amount to more than your total monthly income or the level of disposable income is minimal. Equally important is to map out the timing of income and payments over the month to identify when your finances are at their most vulnerable and, therefore, may require careful cashflow planning. Facing up to the grim truth is often the key to taking back control of your finances and perhaps your whole lifestyle."

"Realistic budgeting is a great first step in helping families move forward in a positive way and see light at the end of what may seem a very dark tunnel."

1 - Credit Action Statistics, February 2007

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