How to work out your living expenses with a Trust Deed
Having a Trust Deed will bring you into contact with many new experiences. You will have to operate on a cash basis most of the time, as you will not be able to rely on cards. You will have to downgrade what may have been a very good lifestyle. You may have to learn how to cook inexpensively from scratch rather than relying on takeaways or convenience food. But by far the biggest new experience you will have to face – and possibly one of the toughest – is crating a workable budget for yourself and your family and sticking to it.
You may never have had to do this before, so here is a handy guide to what should go into your budget based on the advice and experience of Insolvency Practitioners.
NB: Before you start you will need as many bills, statements and receipts detailing your living expenses as you can possibly find.
If you pay rent weekly, multiply by 4.33 to get the average monthly payment.
If you pay your council tax bills annually, you need to divide by 12 to get the average monthly payment. Unlike most other bills, with council tax if you pay monthly you get a payment break in January and February. It might be better for your budgeting to ask the council to switch your payments to 12 payments rather than 10.
You may pay your water bill annually, six monthly or monthly. If you pay annually, divide your annual bill by 12. If you pay twice a year, divide your six-monthly bill by six.
These can often be tricky to work out if you pay monthly on account, as providers often increase and decrease your monthly payment depending on your usage. The best way to tackle this is to work out how much you have actually used over the previous year using old bills and divide by 12. If you only have a few bills to work this out from, be careful that you are not relying on summer and autumn figures, which tend to be much lower than those in winter and which leave you short of money to pay your bills after the Trust Deed starts.
This includes food, toiletries and cleaning products, and there are general maximums that many Insolvency Practitioners keep in mind when evaluating your housekeeping budget.
- Single person £100 - £200
- Couple, no children £185 - £325
- Each additional child £55 - £80
While these may be lower than what you are used to, it is important you find ways to reduce your housekeeping bills to fit into this range. You are asking creditors to accept reduced payments and they will want to see you are doing everything possible to pay as much as you can.
If you have a mortgage you have to have buildings insurance as a condition of your contract with your lender, but have you got the right amount of contents insurance? As tempting as it may be to skimp on this, it is vitally important you protect your belongings. A fire or burglary could see you lose them with no way of replacing them. If you pay your insurance annually, divide by twelve to get the monthly payment.
You will be able to include meals eaten at work and school by you and your family into your budget at the following costs:
- Single Person £36
- Couple No Children £36 each
- Each additional child £35 (Max)
This will always be a low expenditure category because creditors will not accept you having a good monthly clothing allowance yet be unable to pay off more of your debt. They consider clothing and footwear a luxury, so you may have to be quite creative!
- Single Person £12 - £30
- Couple No Children £22 - £47
- Each additional child £9 - £13
Again this is a low expenditure category for the reasons outlined above in clothing and footwear.
- Single Person £11
- Couple No Children £20
- Each additional child £4 - £6
Food and insurance for your furry pals will be allowed at a cost not exceeding £23 a month, and creditors may accept an increase if you have more than one pet.
This includes any amount you pay through a private arrangement or through the CSA, multiplying by 4.33 if you pay weekly to get a monthly figure.
This includes landline, mobile and Internet connection
- Single Person £46 - £54
- Couple No Children £57 - £70
- Each additional child £6 - £7
Perhaps surprisingly creditors do not consider Sky/cable TV and associated costs as a luxury.
Sky/cable £23
TV licence £12.13 (annual £145.50)
This is possibly one of the biggest expenses in your budget and also one of the most important if you are to earn the income to pay your Trust Deed.
Public transport: if paid daily, multiply by the number of days a month your travel.
Car - petrol per car:
- Single Person £130 - £167
- Couple No Children £130 - £167
- Each additional child £0
- Insurance: divide by 12 to get your monthly payment
- Road tax: £17 per car p/m based on a standard annual car road tax of £205
- Maintenance: £22 per car per month Including spares and servicing.
- Hire purchase: as per your agreement
It is unusual to have hire purchase agreements on goods other than cars. They are usually financed by loans, which will be treated under a Trust Deed as a negotiable debt and should not be included in your budget.
As per your agreement with the retailer. If paid weekly, multiply by 4.33.
Children
Child care: If paid weekly multiply by 4.33
School travel (bus) There are only 38 weeks per school year so to find the average monthly cost of travel for budgeting, multiply the daily cost by five (weekly cost), multiply by 38 (annual cost) and divide by 12 (average monthly cost)
You may find that the following costs are very low, especially if you need treatment, so you may have to make up any difference from the rest of your budget. Ideally you should find an NHS dentist if possible as private treatment may be prohibitively expensive.
Dental / Optical
- Single Person £14
- Couple No Children £15
- Children are free on the NHS
Medical / Prescriptions
- Single Person £8
- Couple No Children £11
- Children free on NHS
You can include more than one prescription per month but be prepared to justify them.
Creditors accept that people have interests outside of work and it is demoralising to be paying back debt for long periods of time with no opportunity for rest and relaxation. However, you may have to get creative on this little budget!
- Single Person £11 – £17
- Couple No Children £16 - £22
- Each additional child £6 - £11
You must include something in your budget every month for basic home repairs, such as boiler servicing or a tradesman to fix an urgent problem.
- Single Person £15
- Couple No Children £25
- Each additional child £0
There will always be some events that you cannot account for so always build in a little contingency plan for those. Perhaps you are late to pick up your child from after-school club and incur an extra charge. You have a car emergency that your maintenance budget will not cover. You miss the last bus home and have to get a taxi. This little pot of money will help you during these times.
- Single Person £11 - £12
- Couple No Children £16 - £23
- Each additional child £6 - £11
Creditors accept that there are other necessary expenses that fall outside of normal budgeting categories, and make an allowance for them. But they are very little allowances.
Laundry and dry cleaning £10
Newspapers and magazines £5
Childs pocket money £11/child
Tobacco £60, although justification must be given
So that’s it, your first budget! You might find that not everything is a neat fit and you need to juggle things around. |
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