Stage 4: Draw up a financial statement
A financial statement shows your income, what you need to spend and how much you are offering to pay your creditors each week or month. You send a copy to each of your creditors to show that your offers are the most you can afford.
You can download and print a blank financial statement (PDF) here.
You can also see an example of a completed financial statement (PDF) here.
Write down all your income and expenses on the statement, sticking to either weekly or monthly amounts, and making sure you do not mix the two.
To change a weekly amount to a calendar monthly amount, multiply the weekly amount by 52, then divide the result by 12.
To change a calendar monthly amount to a weekly amount, multiply the monthly amount by 12, then divide the result by 52.
Box A: Income
Enter all take home earnings, tax credits, pensions and welfare benefits that you and any partner get. If a non-dependant lives with you, enter what they pay you for household expenses.
Box B: Expenses
Enter your average outgoings. The only debt payments you should include are monthly instalments to priorities, such as any mortgage or secured loan.
Remember that this is your budget. If you do not allow yourself enough to live on you will struggle later on. If you are unable to make the payments you offered to your creditors the situation will get worse.
Most items are straightforward, but some need working out.
Gas and electricity: Add up your bills for each type of fuel over one year, then divide by 12 if you are using monthly figures, or by 52 if you are using weekly figures.
Food and household items: Add up the amount you spend on your weekly shop and any items you buy in between. If you can afford it, add a small amount for such things as entertainment. Here's a rough guide:
If you are single - £55 to £75 a week or £238 to £325 a month
For a couple - £98 to £126 a week or £426 to £547 a month
For each child under 14 - up to £21 a week or up to £91 a month
For each child 14 to 18 - up to £37 a week or up to £159 a month
For each non-dependent - up to £51 a week or £222 a month.
Every household budget is unique and you may not be able to afford this much or you may need more if someone has particular needs, such as a special diet.
Travelling expenses: Include fares and the costs of running any vehicle, including tax, insurance, MOT, servicing, repairs and petrol.
Clothing: Add up what you spend on clothes and shoes in a year, then divide by 52 to get a weekly amount, or by 12 to get a monthly amount. A rough minimum is £6 per week per person, or more for a growing child.
Other expenses: If you can, set aside an amount each week or month to cover expenses such as birthdays, emergencies and replacing essential household goods.
Box C: Money available for creditors
From your total income, take away total expenses and put the answer in Box C. This is the amount you have each week/month to pay debts.
If your expenses are more than your income, or you have no money left to pay priority debts, check again whether you could reduce your expenses get more money. If this does not help, get advice.
Box D: Priority debts
Contact priority creditors as soon as possible and make arrangements before making any offers on non-priority debts.
Enter the agreed amounts in Box D on your statement.
Box E: Money for credit (non-priority) debts
Take the total in Box D away from Box C. Put the answer in Box E. This is the amount you have each week/month to pay your credit (non-priority) debts. Do not worry if there is nothing for them, we explain later what to do.
Most non-priority creditors want to be paid monthly. If you have used weekly amounts up to this point, change any amount in Box E to a monthly amount (multiply by 52 and then divide by 120. For example, you might write £10 a week = £43 a month.
Box F: Credit (non-priority) debts
List all your non-priority debts in Box F and work out the total owed. But deal with your priority debts before making any offers to non-priority debts.