There are lots of places on the net where you can find a budget planner tool to look at how your monthly income compares to your expenditure. National DebtLine’s My Money Steps is good. But Debt Camel suggests you use this free calculator. It was specifically designed to let people enter details which they could then post on internet chat boards such as Money Saving Expert’s Debt Free Wannabe Forum.
It has the major advantage that it looks not just at the money that you have coming in and out each month, but also at your assets: the size of the debts (mortgage and consumer) and the value of the house are essential bits of information for someone trying to see their full financial picture, not just their cash flow situation. And it can be used to calculate pro rata offers to creditors if you need a Debt Management Plan.
It isn’t a comprehensive list of incomes & expenditures, but you can add extra lines that are important for you. It is a monthly calculator, so you have to convert all figures to monthly equivalents:
- To convert weekly figures to monthly figures – Weekly figure x 52 (weeks) divided by 12 (months)
- To convert fortnightly figures to monthly figures – Weekly figure x 26 (weeks) divided by 12 (months)
- To convert quarterly or annual figures to monthly figures – divide by 3 or 12.
You can knock up a quick-and-dirty version in about 5 minutes. Getting it more exact will mean looking at your bank and credit card statements to get accurate figures and also spot things which you may have forgotten.
When you have entered all your income(s) and expenditures, hit the green Calculate button. Then have a look at the warning messages that appear, as these will pick up if you have missed out anything very obvious.
After that, look at the Summary of Monthly Income, expense and surplus and Personal Balance Sheet Summary sections that have appeared at the bottom of the calculator page. Do these look realistic? Focus on the Surplus (shortfall if negative) £ figure. If this says £560, it means that you have £560 left each month after paying any secured debts (basically mortgage and HP) and your living expenses. So the calculator thinks you have £560 to pay off your credit cards – but do you? If you are automatically paying off the minimums each month and these add up to £150, this suggests that you should have £410 ‘spare’ in your bank account at the end of the month – if this seems very wrong, then something is probably missing from your expenditure list…
Things people often get wrong:
- miss off groceries completely, or put in what they spend each week, not working out what that adds up to in a month
- thinking about what they spend on food but not all the other stuff they buy in a supermarket – toiletries, loo rolls, bleach, lightbulbs etc;
- put petrol costs in but forget the other expenses of running a car. (If you always get a couple of parking tickets each year, put them in too!);
- put the value of their house in as 155, when it is 155,000;
- don’t include child benefit or child tax credit. Even if you think you always use this money to pay for the children’s clothes and lunches at school, it’s better to put the income in and also to put the expenses in;
- missing off things like clothes, haircuts and entertainment because they think they can manage without them. Which of course is possible for a month or two, but not for the length of time it’s likely to take to clear your debts.
When you are happy that the figures are reasonable enough for a first pass, then save them so you can come back and rework them later without starting again from scratch. You might also want to print out the Financial Summary so you have it handy for the next stage – Discover your Debt Options.