Flowcharts are a great way to explore what your debt options are as they give you a feeling for WHY some routes are being ruled out or are being suggested. There are four here, but most people will only need one or two.
The numbers you will need
If you haven’t done a Financial Summary yet this would be a good point to do it! But if you want to dive in and look through the flowcharts to get a feel for them, you can come back afterwards and work the numbers out.
This picture highlights the four numbers that you need for the flowcharts:
1 is the amount that you could pay to your unsecured debts. It’s your total Income less Expenses (NB expenses includes mortgage and HP repayments as these must be paid before you pay anything to credit cards, unsecured loans etc)
2 is the total of the minimum monthly payments on your credit cards and loans
3 is the ‘budget surplus’ left after making the minimum payments. It may be negative – this means you don’t have enough money to pay your debts
4 is the total amount of your unsecured debts
If any of these figures look “wrong” to you, then go back and have another look at what you put into the Financial Summary: perhaps you missed something out, or put an annual expense in as though you paid it each month?
How the flowcharts work
The following four flowcharts are PDFs. This makes them easy to save on your PC and simple to print out. If you have a printer accessible, then a good approach is to print them out, get a big black pen and go through crossing out all the boxes and routes which are clearly wrong for you, so it’s easy to focus on the likeliest routes.
The boxes are colour-coded. If your route ends up on a green box then this is highly likely to be the best option for you; if it ends up at a yellow box this is a way forward that you should look into but there may be alternatives for you. Think of yellow as being “suggestions” and green as being “recommendations”.
Sometimes the boxes contain numbers that are defined by law – for example you cannot get an Administration Order if your debts total more than £5,000 no matter how much you think this might be a good option for you. Sometimes the numbers are those that Debt Camel feels are generally suitable. When you look at the alternatives in more detail in the Debt Options section of this website, it emphasises which numbers are set in stone and which are for you to consider.
Initial Debt Diagnosis Flowchart
The debt diagnosis flowchart is the basic starting point for debt advice. Everyone is divided into one of three categories:
- not enough money even if you pay nothing towards your debts - if this is you, then you need to read Not enough to live on? and then look at how you can Improve your Finances, because you can’t start to clear your debts until you are in a more secure place
- enough money for monthly debt payments – that’s great because you are looking at your finances before your debts have got too bad. You need to “Snowball your debts” and make this go faster by Improve your Finances. You don’t need the other flowcharts, although the “House Owner chart” below might be of interest.
- not enough money for monthly debt payments – you don’t have enough money to Snowball so you are going to have to take action to deal with your debt problem. The next three flowcharts will help you decide what to do.
Debt Management Plan Flowchart
A Debt Management Plan is the commonest method of tackling a debt problem, so check this first. The DMP flowchart looks at whether one might suit you or if you should look at other choices.
House Owners Flowchart – housing options
Owning a house or having a spare room gives you some additional options that you may want to consider. None of them may work for you, or even if they do you may not want to take them. But have a look what they are on the house owners flowchart.
Formal Debt Solutions Flowchart
If a DMP isn’t right for you and if your house doesn’t add any attractive options, then you need to consider one of the formal insolvency options. The Formal debt solutions flowchart works through which one(s) you should look at in more detail.
Obviously these flowcharts are simplistic. The complications are usually of three sorts:
- you may not have a good long-term budget – if the numbers coming out of your Financial Summary aren’t realistic, then you have to rework them so that they are.
- you may expect your situation to change significantly over the next few years. This is usually best handled by accepting you are a “sheep” at the moment and need to look at the sheep’s options, but don’t choose anything that will wreck your life when you turn into a “goat” next year.
- you may be borderline between two options – in which case read up about both and see if any of the comparisons in Hard Choices helps you.
At this point you should have a good feel for your situation. You may know what you most likely way forward is, or you may want to look at a couple of alternatives in more detail. Find out about the pros and cons of each option and how to set them up here: Debt Options Explained.