Part 2

December 5, 2013

By Margaret H. Johnson

We began Part 1 with the above question, how much debt can we handle? $25,000? $50,000? $100,000?

 

Before we could answer this question, we needed to know some details about the person’s financial situation, such as net monthly income and monthly expenses.

We then discovered that trying to figure out our monthly expenses wasn’t so easy. What are our necessary monthly expenses? We searched and found two neutral approaches to family household expenses. Neither really helped us in figuring out what most people need in terms of necessary expenses.

A friend gave me the following financial disclosure statement for the family courts that provides a better grasp of what today’s working (and separating) families need to live on.

 [If the expense is an annual one, divide the annual amount by 12 and place the result of that division in the Monthly column.]

 

Monthly

   

Monthly

Compulsory deductions

 

Health

CPP contributions

   

MSP premiums

 

E.I. premiums

   

Extended health premiums

 

Income taxes

   

Dental plan premiums

 

Employee pension contributions

   

Heath care (net of coverage)

 

Other (specify)

   

Drugs (net of coverage)

 

Sub-total

   

Dental care (net of coverage)

 

Housing

 

Other (specify)

 

Rent or mortgage

   

Sub-total

 

Property taxes

   

Personal

Property insurance

   

Clothing

 

Water, sewer, garbage

   

Hair care

 

Strata fees

   

Toiletries, cosmetics

 

House repairs and maintenance

   

Education (specify)

 

Other (specify)

   

Life insurance

 

Sub-total

   

Dry cleaning/laundry

 

Utilities

 

Entertainment/recreation

 

Heat and electricity

   

Gifts

 

Telephone

   

Other (specify), e.g. alcohol, tobacco

 

Cable TV

   

Sub-total

 

Other (specify), e.g. internet connection

   

Children

Sub-total

   

Child care

 

Household expenses

 

Clothing

 

Food

   

Hair care

 

Household supplies

   

School fees and supplies

 

Meals outside the home

   

Entertainment/recreation

 

Furnishings and equipment

   

Activities and lessons

 

Other (specify)

   

Gifts

 

Sub-total

   

Insurance

 

Transportation

 

Other (specify)

 

Public transit, taxis

   

Sub-total

 

Gas and oil

   

Savings

Car insurance and licence

   

RRSP

 

Parking

   

RESP

 

Repairs and maintenance

   

Other (specify)

 

Lease payments

   

Sub-total

 

Other (specify)

   

Support payments to others

 

Sub-total

   

Specify

 

Other

 

Sub-total

 

Charitable donations

   

Debt payments

 

Vacation

   

Specify

 

Pet care

   

Sub-total

 

Newspapers, publications

   

TOTAL MONTHLY EXPENSES

 

Other (specify)

   

TOTAL ANNUAL EXPENSES

 

Sub-total

   

[multiply TOTAL MONTHLY EXPENSES by 12

 

This is a much more comprehensive a list that includes Child Support, vacations, RRSP’s and debt payments.

Now, take a deep breath before reading any further. In many respects the above financial summary overwhelms. The first question that pops into my mind is this. Who has enough money to meet all of these categories? The second question is this. What do you do if you do not have enough money, (enough income) to meet all of these expenditures?

After taking a hard look at our income and all of our obligations, both family expenses and creditor payments, we may have to make a few adjustments.

The approach I take, as do most credit counsellors and insolvency practitioners, is to narrow the family expenses down to the absolute necessaries. The more basic budget looks something like this.

My approach allows people to see what they can basically afford for the raw basics.

Then we can ask, “How much can you afford for an RRSP? How much money is left over after the very basics of life are met? What do you do if you don’t have any surplus at all?”

 

If you find yourself struggling to make even the minimum payments on your debt you need professional help! Don’t wait! Call Solutions Credit Counselling at 1(877) 588-9491 or fill out our Debt Consolidation Questionnaire and get your Free Credit Counselling Advice today.