Step 2: Create a financial statement

Why complete a financial statement? Back to top

A financial statement is an essential tool when dealing with debt problems. It presents a clear picture of individual or family income, identifies expenditure and clearly shows disposable income available. 

Once you have completed a financial statement, you can demonstrate your current financial position to creditors or courts and develop a strategy for dealing with your debts. It’s important to make sure your financial statement is realistic. It should always reflect what actually happens in practice, leaving you with enough money to pay your main expenses. A realistic budget is an essential tool for solving debt problems. 

The financial statement may become a vital document and is an extremely useful tool when dealing with creditors, as it forms the basis for any proposed repayment schedule. 

Download a sample Back to top

Download a sample financial statement [PDF, 743kb]| that you can adjust and use to show your income and expenditure. 

Guidelines to filling out your financial statement Back to top

Completing a financial statement will start you off on the road to dealing with your debts. Here are some important points to remember:

1. When you work out your budget, it’s important to use either monthly or weekly figures. Don’t mix the two or the sums won’t work out. Table 1 shows you how to do the calculations.
2. Add up all of your sources of income.
3. Add up all of your basic expenses.

After following those steps, you will be able to calculate your disposable income. This is what you have left over once your basic living costs are paid.

Table 1. Calculating weekly or monthly payments

 

If your bill is …	And you want to change it to…	… do this
Weekly	Monthly	Weekly amount x 52 ÷ 12
Quarterly (four times a year / every three months)	Monthly	Quarterly amount x 4 ÷ 12
Annual (every year)	Monthly	Annual amount ÷ 12
Monthly	Weekly	Monthly amount x 12 ÷ 52
Quarterly (four times a year / every three months)	Weekly	Quarterly amount x 4 ÷ 52
Annual (every year)	Weekly	Annual amount ÷ 52

The following points will help you fill out the details in your financial statement.

Income includes:

• Wage/salary Add the income from your net pay once all deductions have been made. Only include overtime if you can guarantee this as regular income.
• Benefits and tax credits If you’re on a low income, you may need to have your entitlement to benefits checked by an experienced adviser.
• Disability benefits If you have cancer, you may qualify for disability benefits. Please note that Disability Living Allowance and Attendance Allowance are intended to cover health needs, so your financial statement needs to represent this if you are receiving either benefit. This means that these benefits need to be recorded as income, but that you should also show how you’re using this money as expenditure for care needs, perhaps under ‘other costs’ or ‘healthcare costs’. 
• Other financial help This includes contributions from other household members, eg non-dependants, lodgers or boarders.

Expenditure includes:

• Mortgage/rent Check your entitlement to help with these payments through your insurer, your payment protection insurance or benefits.
• Council tax Check your entitlement to Council Tax Benefit if you’re on a low income or whether you may be entitled to any council tax discounts (eg if you live alone or are a student).
• Gas/electricity If you pay this quarterly, you’ll need to add your last four bills together and divide the total by 52. If your heating bills are very high, it may be useful to contact your energy supplier to see if they have any tariffs that could reduce your payments. They may also provide energy efficiency advice. In April 2011, the government introduced the Warm Home Discount Scheme. This scheme will require companies by law to discount the energy bills of vulnerable customers. Speak to your individual energy provider for more information. 
• Housekeeping This should include all food items, toiletries, cleaning materials, newspapers and so on. You can also include some entertainment expenses. The following are rough weekly figures that people might spend on housekeeping. These are in line with the Financial Services Authority suggestions of: single person £46–£60; couple £82–£98; each child £20–£35; non-dependant £25–£35. You can add an extra figure for any special dietary needs, but you need to state a reason for these on the financial statement.
• TV licence Check the annual cost for this and divide by 52 for a weekly amount or by 12 for a monthly amount.
• Telephone Include your regular landline and mobile bills. These can be classed as essential when you’re unable to go out due to your illness or if you’re in hospital, as it helps you keep in touch with family or work.
• Water rates Water companies aren’t allowed to disconnect your water supply. Some water companies have trust funds that may be able to help pay your water bill. 
• Travelling expenses Include travel to and from hospital as well as travel to and from work/shopping. If you have a car, include maintenance costs, such as MOT, tax, insurance and petrol.
• Hire purchase If the hire purchase item is needed for your work or due to disability,an explanation of this will need to be included in your expenditure.
• School meals It may be worth checking your benefit entitlement to see if you qualify for free school meals.
• Clothing As a general guide, you should allow £3-£5 for clothing per person on a weekly basis. If you’ve lost or gained weight, or if your body shape has changed, you could increase this amount, but explain the reason for the increased figure.
• Children’s expenses This could include after-school clubs or school trips. It is a good idea to add an additional note about this on your financial statement if these expenses are particularly high.
• Healthcare costs This should include charges for items connected with your illness, such as bedding, special equipment and help in the home.
• Other As shown on the financial statement, this should include funds put aside for emergencies or things like birthdays, public holidays/religious celebrations and household repairs.

When you have created a financial statement you can follow the next steps:

• Step 3: Identify your priority debts
• Step 4: Negotiate with your creditors.