Step Two – Budgeting and Financial Statement

When putting together a financial statement there are a few areas that are essential to note:

1. Can you reply upon your income?
2. Is your income stable?
3. Is your income likely to change in the short/longer term that you are aware of?
4. Can you list all of your living costs
5. Are there any areas of your living costs where you can cut down?
6. Prioritise the priority debts (rent, mortgage, council tax, utilities, car hp)

How to put together a financial statement

Work out your monthly income

Firstly enter all your earned income – then put down all your benefit based income. Finally add another other income such as rent from lodgers or children.

Work out your monthly living costs

List your priority bills. Mortgage, rent, council tax, water, gas, electric and any hire purchase agreements.

Now list all your other living costs such as telephone costs, internet, life insurance, car insurance, petrol, food, clothing etc.

Remember YOU DO NOT INCLUDE PAYMENTS TO YOUR CREDIT CARDS AND LOANS AT THIS STAGE

Disposable Income (DI)

This is how much you can afford each month.

For example

Income £1500

Living costs £1200

Disposable Income £300

****Hence Disposable Income = Income minus Living Costs****

You can adjust the figures as your situation changes for the better or for worse. You must expect creditors to question any living cost which are higher than average or any expenses they feel may be excessive.