The Big Guide to Becoming Debt Free

Clarie_2

bump! Well written guide.

tbourner

Another little helpful thing to remember, is The Three Levels of Budgeting, you have an amount of money coming in, and you need to take off the following levels of payments in this order:

Level 1: Important Bills.
These include:

• Rent or mortgage
• Council tax
• Electricity and gas/oil
• Water rates
• TV Licence
• Road tax
• Car insurance *
• Car maintenance (including MOT)
• Telephone *
• Internet Services *
• Pet insurance/vet bills *
• Other insurance (buildings & contents, life, etc.) *

* Check these regularly and try to get as cheap as possible.



Level 2: Monthly Spending.
These include:

• Groceries
• Clothing
• Petrol/diesel
• Car parking
• Other travel
• Childcare/nursery/etc.
• Medical (prescriptions, dentist etc.)
• Satellite/Cable TV
• Presents (birthday, christmas etc.)
• Haircuts
• Entertainment
• Holiday

Now in my opinion, level 2 is the most important, since this is where you free up most of your money to pay off debts.
It's on these points that your SOA and spending diary are golden. Post them on DFW and people will point you in all sorts of right directions to cutting them or removing them completely.
If you get in real trouble, you'll want these to be reasonable for your situation otherwise creditors will laugh at you for spending £150 a month on haircuts when you should be paying them!!



Level 3: Debts.
This is the last level, anything left over from the first 2 levels goes here (see Step 7 in the original post). If you've been accurate, honest and reasonable in level 1 and level 2 then the figure that's left for level 3 needs to be divided up fairly amongst everyone you owe money to.
Write to them if you have to and tell them how much you can give them (ask about DMPs etc. on the board) - it's literally all that's left after you've paid for your life, so it's tough if it's not enough for them!
If you need advice on plans and how to divide up the remaining money then either ask on the board, or ask your advisors who are helping with the DMP. You may need to pay priority debts first if not paying them would result in harsher punishments, such as council tax debts and court costs, but please seek professional advice if you're in a position where you don't have enough to cover at least the minimum amounts being asked for.



It's these 3 levels that have given me my tag of 'Many bank accounts make light work', as I have different accounts which these 3 levels come out of, so I always know how much I've got for the important things, and how much is left for overpayments.

Pott5y

Great post. Great info

As to being a sticky - Gets my vote :T

tbourner

Bumpity bump.

curlytop12

like it,you could just print out the post and stick it up somewhere.
that didn't come out right but you know what i mean....

MiaowMiaow

Really like this, easy to understand and definitely worth going through. Thanks!

dancingfairy

Can I suggest a few additions/ammendments etc?
It may be worth putting a link up to free sources of help after people have completed their SOA for those that haven't seen the other thread (which I presume it's in).
Also I would subdidve the debts category referred to in post 13 - into priority debts - ie if you're behind on council tax, rent, court debts (ie form CCJs etc) etc and non-prioirty debts eg credit cards, unsecured loans etc.
df

tbourner

dancingfairy wrote: »

Can I suggest a few additions/ammendments etc?
It may be worth putting a link up to free sources of help after people have completed their SOA for those that haven't seen the other thread (which I presume it's in).

Maybe I could add this link:
http://www.moneysavingexpert.com/loans/debt-help-plan
In there somewhere, at the top probably. I didn't think adding links to places like CCCS was a good idea (if that's what you mean?) as some people might go there when they don't need to, so posting on the forum would give better initial advice?

dancingfairy wrote: »

Also I would subdidve the debts category referred to in post 13 - into priority debts - ie if you're behind on council tax, rent, court debts (ie form CCJs etc) etc and non-prioirty debts eg credit cards, unsecured loans etc.

I don't really know enough about priorities and DMPs and stuff to put anything useful in! I'll try and rewrite it now, see what you think.

tbourner

Bumpity bump.

GeorgieFTB

bumbpty... bump!