Are your finances out of control?

If your finances are out of control, the first thing to do is stop - and take stock of your situation. Once you`ve figured out exactly where you stand, you`ll be in a much better position to figure out what you should do next.

So, sit down and write down the relevant financial information. You need to know exactly what you owe, what you earn, and what this means for your finances on a monthly basis. The answer to the question "What can I do?" depends largely on your disposable income: the amount of money you have left once you`ve spent the money you absolutely have to spend.

For most people, calculating their Total income is quite easy: it`s just the total of their salary, benefits and any other payments they may receive.

Calculating Total expenditure can be quite tricky. You`ll need to write down everything you spend on your essential living expenses: mortgage/rent, utility bills, food, petrol, etc. Don`t include anything you spend on your non-priority debts (unsecured loans, credit card, store cards, overdrafts, etc.), or anything you spend on luxury items (basically, anything you don`t need).

Once you have your two figures, you can calculate your Disposable income:
Total income minus Total expenditure equals Disposable income.

Disposable income: is it enough?

Your Disposable income is the money that you are able to spend on servicing your non-priority debts and saving (as well as buying anything you don`t really need).

The most important thing is servicing your non-priority debts - making at least the minimum monthly payments. If you can afford this, you can improve your financial situation by putting any remaining money where it will do most good, whether that means `overpaying` your debts (reducing both your overall debt and the amount you`re spending on interest) or saving for a rainy day (which could help you avoid getting into debt if you run into an unexpected expense at some point in the future).

Debt help

If you can`t afford the minimum monthly payments to your non-priority debts, you should see this as proof that your finances are out of control, and that you need to seek expert debt help as soon as possible. A professional debt adviser may be able to suggest ways of increasing your income or reducing your expenditure, or they may be able to suggest a debt solution that could help you regain control of your finances.