Really needing help with debt spiral

theoretica

jmb1 said:

My problem is this. I am trying to work out my minimum likely self employment take home pay per month so that I can then see what surplus there is after all outgoings (with drastic cut backs on unnecessary spending), to then pay that surplus toward paying off debts. This generally seems a rationale approach? Rightly or wrongly, I'm going on the assumption that my sales will be roughly equivalent for this tax year as last.

So my annual take home pay (after tax, NICs and business expenses) for 2018/2019 was £23519, £1959.91 per month. HOWEVER. The problem is, my sales fluctuate, particularly at Christmas time (Nov & Dec) when sales increase substantially. So averaging the annual total per month as I am doing now, obviously inflates the monthly figures for the other 10 months Jan to Oct, giving the impression I have more income in those months than I actually do. So what is the best way to allow for this, so that I am budgeting using a more realistic monthly take home pay? Considering both tax and expenses also fluctuate considerably each month depending on sales, I don't know where to start to calculate the take home pay individually or do an SOA / budget for each month!

So far I've looked at overall sales figures for last year (i.e before tax nics, expenses) which are:

Sales JAN to OCT 2019 = £40,785.97, averaging £4078 monthly

Sales NOV to DEC 2019 = £17,920.35, averaging £8960 monthly.

Therefore an average percentage increase of 119% per month for those Christmas months. Could that be used, and if so how?

Otherwise can you give any pointers how I could go about this to achieve the original goal?

What I would do in your position is budget monthly on something a bit below your Jan - Oct figure and consider the extra an end of year bonus to either go straight to debt, or a bit to presents. I suggest budgeting on below your normal average earnings so fluctuations aren't too much of a challenge to cope with, extra can always be put towards debt.  You would then need to keep an eye on your real earnings and that you were earning this much and if you earn more one month put it aside for a month when you earn less. Possibly easiest to keep your self employed money separate from spending/living money except for a definite amount you transfer to yourself.

monetxchange

Okay, I get it. If the accountant helps with peace of mind, then it’s best to keep them. I know it’s a lot, but was just floating a few things so that while you’re debt clearing, you’ll still be accounting for and saving for your future tax bills so you don’t end up back to square one with the debt. From experience, getting my HMRC debt cleared and working out how to budget to save enough to catch up AND have adequate for future bills too was the hardest thing to get sorted.

DrEskimo

jmb1 said:

My problem is this. I am trying to work out my minimum likely self employment take home pay per month so that I can then see what surplus there is after all outgoings (with drastic cut backs on unnecessary spending), to then pay that surplus toward paying off debts. This generally seems a rationale approach? Rightly or wrongly, I'm going on the assumption that my sales will be roughly equivalent for this tax year as last.

So my annual take home pay (after tax, NICs and business expenses) for 2018/2019 was £23519, £1959.91 per month. HOWEVER. The problem is, my sales fluctuate, particularly at Christmas time (Nov & Dec) when sales increase substantially. So averaging the annual total per month as I am doing now, obviously inflates the monthly figures for the other 10 months Jan to Oct, giving the impression I have more income in those months than I actually do. So what is the best way to allow for this, so that I am budgeting using a more realistic monthly take home pay? Considering both tax and expenses also fluctuate considerably each month depending on sales, I don't know where to start to calculate the take home pay individually or do an SOA / budget for each month!

So far I've looked at overall sales figures for last year (i.e before tax nics, expenses) which are:

Sales JAN to OCT 2019 = £40,785.97, averaging £4078 monthly

Sales NOV to DEC 2019 = £17,920.35, averaging £8960 monthly.

Therefore an average percentage increase of 119% per month for those Christmas months. Could that be used, and if so how?

Otherwise can you give any pointers how I could go about this to achieve the original goal?

OK, that makes sense. At the moment, I think your SOA is overestimating your total outgoings.

One possible way to budget for this is to redo the SOA, move the HMRC debt payment plan into your other debts and remove the business expenses. Then include the lowest self-employment income you have (after tax/NI and accountant deductions). This is to ensure you are able to budget for all of your monthly outgoings during the 'worst-case scenario' month.
If you are able to achieve this, then you can use any additional funds for clearing the debt.

Over time you would look at adjusting the budget each month as your income fluctuates. The most important thing in doing this though, is to make sure you set aside additional funds on the better months to cover you for the lesser months. 

jmb1

DrEskimo said:

jmb1 said:

My problem is this. I am trying to work out my minimum likely self employment take home pay per month so that I can then see what surplus there is after all outgoings (with drastic cut backs on unnecessary spending), to then pay that surplus toward paying off debts. This generally seems a rationale approach? Rightly or wrongly, I'm going on the assumption that my sales will be roughly equivalent for this tax year as last.

So my annual take home pay (after tax, NICs and business expenses) for 2018/2019 was £23519, £1959.91 per month. HOWEVER. The problem is, my sales fluctuate, particularly at Christmas time (Nov & Dec) when sales increase substantially. So averaging the annual total per month as I am doing now, obviously inflates the monthly figures for the other 10 months Jan to Oct, giving the impression I have more income in those months than I actually do. So what is the best way to allow for this, so that I am budgeting using a more realistic monthly take home pay? Considering both tax and expenses also fluctuate considerably each month depending on sales, I don't know where to start to calculate the take home pay individually or do an SOA / budget for each month!

So far I've looked at overall sales figures for last year (i.e before tax nics, expenses) which are:

Sales JAN to OCT 2019 = £40,785.97, averaging £4078 monthly

Sales NOV to DEC 2019 = £17,920.35, averaging £8960 monthly.

Therefore an average percentage increase of 119% per month for those Christmas months. Could that be used, and if so how?

Otherwise can you give any pointers how I could go about this to achieve the original goal?

OK, that makes sense. At the moment, I think your SOA is overestimating your total outgoings.

One possible way to budget for this is to redo the SOA, move the HMRC debt payment plan into your other debts and remove the business expenses. Then include the lowest self-employment income you have (after tax/NI and accountant deductions). This is to ensure you are able to budget for all of your monthly outgoings during the 'worst-case scenario' month.
If you are able to achieve this, then you can use any additional funds for clearing the debt.

Over time you would look at adjusting the budget each month as your income fluctuates. The most important thing in doing this though, is to make sure you set aside additional funds on the better months to cover you for the lesser months. 

Thanks I'll try that. Why remove the business expenses though? Ie where will that be accounted for? 

theoretica

jmb1 said:

Thanks I'll try that. Why remove the business expenses though? Ie where will that be accounted for? 

We are suggesting two budgets - a business budget which includes all business expenses, tax etc before any of this money reaches your personal budget.

DrEskimo

jmb1 said:

DrEskimo said:

jmb1 said:

My problem is this. I am trying to work out my minimum likely self employment take home pay per month so that I can then see what surplus there is after all outgoings (with drastic cut backs on unnecessary spending), to then pay that surplus toward paying off debts. This generally seems a rationale approach? Rightly or wrongly, I'm going on the assumption that my sales will be roughly equivalent for this tax year as last.

So my annual take home pay (after tax, NICs and business expenses) for 2018/2019 was £23519, £1959.91 per month. HOWEVER. The problem is, my sales fluctuate, particularly at Christmas time (Nov & Dec) when sales increase substantially. So averaging the annual total per month as I am doing now, obviously inflates the monthly figures for the other 10 months Jan to Oct, giving the impression I have more income in those months than I actually do. So what is the best way to allow for this, so that I am budgeting using a more realistic monthly take home pay? Considering both tax and expenses also fluctuate considerably each month depending on sales, I don't know where to start to calculate the take home pay individually or do an SOA / budget for each month!

So far I've looked at overall sales figures for last year (i.e before tax nics, expenses) which are:

Sales JAN to OCT 2019 = £40,785.97, averaging £4078 monthly

Sales NOV to DEC 2019 = £17,920.35, averaging £8960 monthly.

Therefore an average percentage increase of 119% per month for those Christmas months. Could that be used, and if so how?

Otherwise can you give any pointers how I could go about this to achieve the original goal?

OK, that makes sense. At the moment, I think your SOA is overestimating your total outgoings.

One possible way to budget for this is to redo the SOA, move the HMRC debt payment plan into your other debts and remove the business expenses. Then include the lowest self-employment income you have (after tax/NI and accountant deductions). This is to ensure you are able to budget for all of your monthly outgoings during the 'worst-case scenario' month.
If you are able to achieve this, then you can use any additional funds for clearing the debt.

Over time you would look at adjusting the budget each month as your income fluctuates. The most important thing in doing this though, is to make sure you set aside additional funds on the better months to cover you for the lesser months. 

Thanks I'll try that. Why remove the business expenses though? Ie where will that be accounted for? 

Yea as theoretica says, your business expenses (Class 2/4 NI, income tax and student loan deductions, along with accountant fees) would be reflected by having a reduced self assessment income. I.e this figure is your net self assessment income after deducting these expenses. 

The only thing you would have to include is the HMRC payment plan for the arrears you owe, but just treat that as a debt. Might be some logic in concentrating on paying that down as quickly as possible first, as it may be treated different to other debts. Not sure though. 

Putting together a plan of which debts to pay down is the next step though!

jmb1

DrEskimo said:

jmb1 said:

DrEskimo said:

jmb1 said:

My problem is this. I am trying to work out my minimum likely self employment take home pay per month so that I can then see what surplus there is after all outgoings (with drastic cut backs on unnecessary spending), to then pay that surplus toward paying off debts. This generally seems a rationale approach? Rightly or wrongly, I'm going on the assumption that my sales will be roughly equivalent for this tax year as last.

So my annual take home pay (after tax, NICs and business expenses) for 2018/2019 was £23519, £1959.91 per month. HOWEVER. The problem is, my sales fluctuate, particularly at Christmas time (Nov & Dec) when sales increase substantially. So averaging the annual total per month as I am doing now, obviously inflates the monthly figures for the other 10 months Jan to Oct, giving the impression I have more income in those months than I actually do. So what is the best way to allow for this, so that I am budgeting using a more realistic monthly take home pay? Considering both tax and expenses also fluctuate considerably each month depending on sales, I don't know where to start to calculate the take home pay individually or do an SOA / budget for each month!

So far I've looked at overall sales figures for last year (i.e before tax nics, expenses) which are:

Sales JAN to OCT 2019 = £40,785.97, averaging £4078 monthly

Sales NOV to DEC 2019 = £17,920.35, averaging £8960 monthly.

Therefore an average percentage increase of 119% per month for those Christmas months. Could that be used, and if so how?

Otherwise can you give any pointers how I could go about this to achieve the original goal?

OK, that makes sense. At the moment, I think your SOA is overestimating your total outgoings.

One possible way to budget for this is to redo the SOA, move the HMRC debt payment plan into your other debts and remove the business expenses. Then include the lowest self-employment income you have (after tax/NI and accountant deductions). This is to ensure you are able to budget for all of your monthly outgoings during the 'worst-case scenario' month.
If you are able to achieve this, then you can use any additional funds for clearing the debt.

Over time you would look at adjusting the budget each month as your income fluctuates. The most important thing in doing this though, is to make sure you set aside additional funds on the better months to cover you for the lesser months. 

Thanks I'll try that. Why remove the business expenses though? Ie where will that be accounted for? 

Yea as theoretica says, your business expenses (Class 2/4 NI, income tax and student loan deductions, along with accountant fees) would be reflected by having a reduced self assessment income. I.e this figure is your net self assessment income after deducting these expenses. 

The only thing you would have to include is the HMRC payment plan for the arrears you owe, but just treat that as a debt. Might be some logic in concentrating on paying that down as quickly as possible first, as it may be treated different to other debts. Not sure though. 

Putting together a plan of which debts to pay down is the next step though!

OK thanks. Also "think your SOA is overestimating your total outgoings.". Great if true; what are you seeing to suggest that? 

DrEskimo

jmb1 said:

DrEskimo said:

jmb1 said:

DrEskimo said:

jmb1 said:

My problem is this. I am trying to work out my minimum likely self employment take home pay per month so that I can then see what surplus there is after all outgoings (with drastic cut backs on unnecessary spending), to then pay that surplus toward paying off debts. This generally seems a rationale approach? Rightly or wrongly, I'm going on the assumption that my sales will be roughly equivalent for this tax year as last.

So my annual take home pay (after tax, NICs and business expenses) for 2018/2019 was £23519, £1959.91 per month. HOWEVER. The problem is, my sales fluctuate, particularly at Christmas time (Nov & Dec) when sales increase substantially. So averaging the annual total per month as I am doing now, obviously inflates the monthly figures for the other 10 months Jan to Oct, giving the impression I have more income in those months than I actually do. So what is the best way to allow for this, so that I am budgeting using a more realistic monthly take home pay? Considering both tax and expenses also fluctuate considerably each month depending on sales, I don't know where to start to calculate the take home pay individually or do an SOA / budget for each month!

So far I've looked at overall sales figures for last year (i.e before tax nics, expenses) which are:

Sales JAN to OCT 2019 = £40,785.97, averaging £4078 monthly

Sales NOV to DEC 2019 = £17,920.35, averaging £8960 monthly.

Therefore an average percentage increase of 119% per month for those Christmas months. Could that be used, and if so how?

Otherwise can you give any pointers how I could go about this to achieve the original goal?

OK, that makes sense. At the moment, I think your SOA is overestimating your total outgoings.

One possible way to budget for this is to redo the SOA, move the HMRC debt payment plan into your other debts and remove the business expenses. Then include the lowest self-employment income you have (after tax/NI and accountant deductions). This is to ensure you are able to budget for all of your monthly outgoings during the 'worst-case scenario' month.
If you are able to achieve this, then you can use any additional funds for clearing the debt.

Over time you would look at adjusting the budget each month as your income fluctuates. The most important thing in doing this though, is to make sure you set aside additional funds on the better months to cover you for the lesser months. 

Thanks I'll try that. Why remove the business expenses though? Ie where will that be accounted for? 

Yea as theoretica says, your business expenses (Class 2/4 NI, income tax and student loan deductions, along with accountant fees) would be reflected by having a reduced self assessment income. I.e this figure is your net self assessment income after deducting these expenses. 

The only thing you would have to include is the HMRC payment plan for the arrears you owe, but just treat that as a debt. Might be some logic in concentrating on paying that down as quickly as possible first, as it may be treated different to other debts. Not sure though. 

Putting together a plan of which debts to pay down is the next step though!

OK thanks. Also "think your SOA is overestimating your total outgoings.". Great if true; what are you seeing to suggest that? 

I suspect I have simply misunderstood things, so apologies!
What do each of these business outgoings relate to?

BUSINESS OUTGOINGS MONTHLY
30% Tax savings -757.04
HMRC Payment Plan -732
PAYE employee tax -140.4
Accountant -52
TOTAL BUSINESS OUTGOINGS MONTHLY -£1681.44

Are these expenses different to the income tax and NI you will have deducted from your gross self-employment salary?

Since you give your net self-employment salary, I was wondering if perhaps you have double counted the expenses related to your self-employment?

jmb1

OK thanks. Also "think your SOA is overestimating your total outgoings.". Great if true; what are you seeing to suggest that? 

I suspect I have simply misunderstood things, so apologies!
What do each of these business outgoings relate to?

BUSINESS OUTGOINGS MONTHLY
30% Tax savings -757.04
HMRC Payment Plan -732
PAYE employee tax -140.4
Accountant -52
TOTAL BUSINESS OUTGOINGS MONTHLY -£1681.44

Are these expenses different to the income tax and NI you will have deducted from your gross self-employment salary?

Since you give your net self-employment salary, I was wondering if perhaps you have double counted the expenses related to your self-employment?

Yes cirrect, I too had realised I'd double accounted. I've since removed the 757 tax savings outgoing, as, as you rightly say I had put my net income so its already deducted. 

On_my_way

Look up Dave Ramsey's theory baby steps