Financial Advice

One of the first steps anyone should take if debts are causing problems is to take stock of their current finances. That may seem a daunting task but it can take as little as five minutes with the right help. A monthly budget is crucial for any successful debt solution.

ClearStart provides a simple monthly budgeting process that helps you establish key facts very quickly:

Your debts: how much you owe and to whom
What you own, your mortgage and any other secured borrowing
Your monthly income, after tax
What you spend each month on basic living costs

Only when you have this information can you work out whether you can recover from debt yourself, or if a more sophisticated debt settlement programme is required such as a Debt Management Plan or an Individual Voluntary Arrangement (IVA).

A typical budget

An example of one typical monthly budget check is shown below, with an explanation of what the figures mean for this individual.

Unsecured debt	Balance	Monthly payments
Credit card 1	£3,400	£170 minimum
Credit card 2	£4,800	£240 minimum
Credit card 3	£1,800	£90 minimum
Bank overdraft	£4,400	£100 interest and charges
Personal loan	£8,00	£100 repayment
Total	£22,400	£710

Income source	Monthly amount
Primary salary	£1,600 after tax
Other income (e.g. benefits)	£50
Total	£1,650

Spending	Monthly amount
Rent	£500
Insurance	£20 contents insurance
Council tax	£90
Utilities / bills	£80 gas, electricity, water
Telephone / TV	£70 landline, mobile, TV licence
Health	£20 contact lenses
Household	£300 supermarket bills
Social / leisure	£100
Secured finance / HP	£100 car loan
Other	£20
Total	£1,300

What it means

This person earns £1,650 a month after tax. They spend £1,300 on everyday things such as rent, leisure and supermarket bills. Unfortunately, this leaves only £350 left to pay off their unsecured debts – which is less than the £710 they actually need.

If the person carried on like this the situation would get worse, with the debt continuing to grow. Quick action is essential.

In this example, a consolidation loan might pay off all debts in one go and result in one affordable monthly payment. Alternatively this person might be able to settle their debts by making payments each month for five years into an Individual Voluntary Arrangement (IVA). The right choice needs careful thought and experienced advice and you can run through your own monthly budget using the ClearStart online application or help line.

Financial Advice

A typical budget

What it means

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