Making Your Debt Review Work – 2 More Steps to a Successful Debt Review
Reviewed December 2023
Making Your Debt Review Work
Once you have signed up with a Debt Counsellor and have found out who your attorneys will be and who will be handling your money each month it is time to look at making a success of your debt review at home. How so?
When a consumer signs up with a Debt Counsellor one of the first things your Debt Counsellor will ask is for your monthly household spending habits. This is not your payments toward your debts but rather the money you spend each month on things like food, transport, phones and insurance. For many consumers, their total monthly spend is a bit of a mystery. Many are not sure. Few make allowance for the smaller or unplanned expenses that come along. This is one of the reasons why the Debt Counsellor will ask. They need to figure out if you are spending too much on one thing and not enough on another.
For example, you may be paying a large amount for digital TV subscriptions but have no insurance on your car (which is actually required for vehicle finance). Consumers also often are so busy trying to pay their debt that they never have the chance to set funds aside for annual expenses like car and TV licenses or school clothes and books in Jan.
When starting debt review consumers go through the challenging switch from a credit lifestyle where unplanned expenses are simply added to the credit card to having to save up in advance for things (including the unexpected).
After looking over the consumer’s monthly spending habits (even looking through your bank statements etc) the Debt Counsellor will talk you through suggested changes that you need to make. They will remind you to save for particular things and what you need to cut back on. They will then set you a monthly budget figure and show you how they suggest you spend your money each month. They will also then work on the funds left over from your salary and how those can be allocated to your creditors in a fair way.
If you fail to save towards those figures (like school books) you will not have funds to cover those costs when they come and you don’t want to ever miss a payment or steal some funds from your monthly debt repayment amount. Consumers should also be aware that over time things cost more due to inflation. This means that if you are not able to earn more to cover these increases then you need to spend less on things and cut back even more than before to keep within your budget.
Another wise step is to track your spending habits very closely for a month or two. Keep each till slip and write down every cent you spend as a family. Add all the figures up and actually track where the money is going.
Some families use the envelope method in setting out funds for their various expenses each month. Putting cash into labelled envelopes allows for a quick visual budgeting exercise. You spend out of the envelope for the thing it is labelled. When the envelope runs dry you stop buying that thing (eg. airtime for your phone). If you need to spend more you have to steal from another envelope and it helps you track what you are spending and where you are spending more than you thought. Just keep that cash safe!
Stick To Your Monthly Budget.
Check out the final important step below