Method
A household budget that an adviser can read without translating it.
Free debt advisers in the UK often work from a Standard Financial Statement. We do not reproduce that form, and we do not use its trigger figures. We do use the same idea: income, priority costs, ordinary living, then whatever is genuinely left.
Write income as it arrives
Use net pay, the amount that lands in the account, not the salary in a contract. Add child benefit, Universal Credit, pension income, maintenance you actually receive, and any regular help from family if it is reliable enough to plan on. If overtime appears twice a year, do not treat it as a monthly salary. Self-employed income belongs as a cautious average of recent months after tax set-aside, not as last Saturday’s best takings. Business Debtline is the better reader of a sole trader’s books than a household blog.
Priority bills, ongoing and arrears split
Put each priority bill on two lines if you are behind: the amount that keeps next month current, and the arrears. A council tax payment arrangement is not the same number as this year’s instalment. Rent arrears are not “included” because you paid this month’s rent. Energy arrears can sometimes be added to a repayment plan with the supplier while you pay for what you use now. Ask the supplier before you invent a figure, and ask about any help you might qualify for. Schemes such as the Warm Home Discount have eligibility rules and application windows. They are not a line you can assume.
Usually priority
- Rent or mortgage, and secured loans
- Council tax
- Gas and electricity
- Court fines
- Child maintenance
- TV licence
- Hire purchase on goods you need and could lose
- Tax debts if you are self-employed
Usually non-priority
- Credit cards and store cards
- Catalogues and buy-now-pay-later
- Unsecured loans and overdrafts
- Payday lending
- Money owed to family and friends
- Water arrears in England and Wales, where supply is not cut off for debt, though court action is still possible
Living costs have to be believable
A budget that starves food to flatter a credit card fails in week three. Include food and household goods, travel to work, childcare, school costs, phone and broadband, contents insurance, clothing, prescriptions and modest personal costs. If you have a car, include fuel, insurance, road tax and a slice of MOT and servicing. If you do not have those costs, do not invent them. If a cost is annual, divide it by twelve and move that amount to a separate pot the day you are paid. Christmas, birthdays, dentist visits and a broken kettle are not surprises. They are infrequent, which is different.
The Lark sketch
Lark is a composite single adult renting in Bath, invented so the lines have somewhere to sit. Lark is not a client, not a case study, and not a recommended lifestyle. Net wages are £1,920 a month. There are no benefits in the sketch. The month looks like this.
| Line | Pile | Amount |
|---|---|---|
| Net wages | Income | £1,920 |
| Rent | Priority | £910 |
| Council tax | Priority | £152 |
| Gas and electricity | Priority | £115 |
| Water | Household | £36 |
| TV licence set-aside | Priority | £15 |
| Food and toiletries | Living | £250 |
| Bus travel | Living | £68 |
| Phone and broadband | Living | £42 |
| Contents insurance | Living | £11 |
| Clothing and haircuts | Living | £35 |
| Health costs | Living | £18 |
| Seasonal pot | Set-aside | £30 |
| Left for non-priority debts | Surplus | £238 |
£1,920 minus £1,682 of costs is £238. If your town’s rent is different, the surplus is different. That is the point of doing the sum yourself.
Suppose Lark’s non-priority minimums add up to £190. Then about £48 is truly extra, and the snowball or avalanche conversation can start, using Lark’s own rates rather than the Rowan illustration. The Rowan illustration is a different composite with a larger payment toward debts. Do not staple the two together.
Suppose instead the minimums are £310. Lark cannot keep every non-priority account current and also eat. That is not a character flaw. It is the moment the sheet gets taken to a free adviser, because offers, a DMP, or a relief route may fit better than a private promise to “try harder”. Cutting the food line to £150 in order to manufacture a surplus is how the sheet lies.
A pro-rata offer, and why it is not DIY law
Where an adviser helps someone make reduced offers, non-priority creditors are often offered a share of the surplus in proportion to the balance. Imagine three debts: a card of £2,000, a loan of £1,000 and an overdraft of £1,000. Together they are £4,000. If the safe amount for all of them is £160, a pure pro-rata split is £80, £40 and £40. Creditors do not have to accept it. Interest may not stop. A county court claim can still arrive. The value of the sum is that it is explainable. The risk of sending it without advice is that you offer money which was supposed to clear council tax arrears.
What to bring to the first advice appointment
- Photo identification if the agency asks for it, and proof of address.
- Two or three months of bank statements, including the account wages are paid into.
- Tenancy agreement or latest mortgage statement.
- Council tax bill, and any reminder or liability order.
- Energy and water bills.
- A list of debts: who, account number if you have it, balance, and whether anyone is joint.
- Court papers, with the dates on the front. Deadlines are real.
- Wage slips or, if self-employed, recent invoices and a note of tax due.
You can draft that list on paper tonight. You do not need our permission, and you do not need to email it to Bath. If an enforcement agent is already at the door, use the free advice numbers the same day and do not sign a walking-possession style agreement you do not understand. Priority remains the word that matters.