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Identifying your debts

Now you've drafted your personal budget, you need to go through the list of payments to check if you're behind on the payments with any of them.

Make a list of all the people and companies you owe money to. These are your creditors.

Case study: The most likely items for Julie and Rajesh to check in their bills are:

• mortgage
• Council Tax
• water rates
• insurance payments
• fuel bills
• phone bills
• TV license
• hire purchase
• credit card
• maintenance.

The shortfall between their income and expenditure has meant that for the last three months, Julie and Rajesh have not been able to pay their mortgage. They now have arrears of £616.00 to repay on top of their original payments. It would have been better if they had started dealing with the problem sooner.

Which of your payments are most likely to cause you problems? The ones to watch out for are usually regular weekly, monthly or quarterly amounts, that you receive a bill or demand for and pay for by cash or cheque. Some of them may be paid directly from a bank account by Direct Debit or Standing Order. You should check your bank statements so you know when to expect these.

If the balance on your budget is less than zero, you need to think how you can increase your income or reduce your expenditure. The section on Maximising your income can help you make a start with this.

If the balance on your weekly budget is more than zero, then that's how much money you have available each week to repay your creditors. It may not seem like very much, especially when divided between several creditors, but it could well be enough - most creditors would rather you paid them a small, regular amount than promise to make a large payment you can't afford.