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When everyone has a home

Housing advice for Northern Ireland

Budgeting and financial management

The key aspect of budgeting is being honest and realistic, whether you’re listing your income or your outgoings. A financial statement, containing a listing of your income and expenditure, is a starting point for dealing with debt and making a sustainable repayment proposal.

Reduce your spending

Make a list of your regular household and personal expenses.  You should list all your expenses, no matter how small.  Include a regular monthly or weekly amount towards one-off expenses, for things like birthdays, school uniforms or Christmas presents. Once you have your outgoings listed, you 

It is very easy to underestimate what we spend – being realistic and listing your expenses accurately will give you a practical basis for your financial statement and any future repayment proposals.

Maximising income

In the same way you did with your spending, you should also list the money coming into your home.  This could be from your salary, benefits, insurance policies or tax credits. You should go to an advice agency that helps people apply for benefits, like Citizens Advice, to make sure that you're getting all the financial help from the government that you're entitled to.   If you're on certain benefits you can get help to pay the interest part of your mortgage payment.  This is called Support for Mortgage Interest

Your surplus

The surplus is what income you have left after all your outgoings have been taken out. It's also called your disposable income.   If you have a healthy surplus you might be able to agree to pay a certain amount of this on top of your monthly mortgage or rent payment each month.  The extra payment will go towards paying your arrears. 

If you owe money to more than one lender, you will need to decide how much of your surplus you can give to each creditor.  Your priority should be on paying off your mortgage, secured loan, rent and rates debts. 

Coming up with an offer

The details of the offer you make to your lender will depend on how much surplus income you have. Mortgage arrears will normally need to be paid off over the remaining time left on your loan.  If you're 5 years into a 25 year mortgage, your offer will need to make sure you clear your arrears, plus any interest, in the next 20 years.

If, after creating your financial statement, you realise that you do not have any disposable income left to go towards the arrears, you or your adviser should consider writing to the creditors asking them to:

  • suspend interest and charges,
  • suspend recovery of the debt, 
  • accept token payments, or
  • write off the debts.

Give your lender or landlord a copy of your financial statement, along with copies of agreements reached with other priority creditors. It's best to keep all your communication with your lender in writing, so you know exactly what has been agreed. 

You should always pay as much off your arrears as you can safely afford to.  If you haven't spoken to an adviser yet, you should do this before you agree a repayment plan with your lender.  An adviser can help you work out if you can afford to stick to the budget you've set yourself. 

Tools to help

There are lots of free tools that can help you set up a household budget and understand your household income and expenditure.  The Money Advice Service has loads of really useful online tools that can help you manage your finances better.

The budget planner from the Money Advice Service is a really useful tool, that asks for lots of information about your expenses and can show you how much of your income you're spending on bills, travel, children and socialising.   It should take about 20 minutes to complete.  If you don't have time to do a full budget, try the Money Advice Service's quicker version, which is less detailed. 

You can use the Cut Back Calculator to see how much money you can save each month by making small sacrifices.  Cutting down on one 80p chocolate bar a day will give you an extra £25 each month to put towards your mortgage. 

If you've got a smartphone, have a look for free budgeting apps that will help you keep an eye on your finances while you're out and about.