Financial Planning DIY debt solution

Summary: Financial Planning - This article underlines the importance of planning ahead and organising our finances accordingly.

Planning ahead

There are some of us whose financial affairs are relatively straightforward. We have a regular income and fairly constant outgoings. It leaves us with a balance for the extras or luxuries, and things tick over without too many problems. And then there are the rest of us! Income is not quite so regular and outgoings don't seem to be under control. And the debts seem to have developed a life of their own!

Erratic income

It may be that our income is far from consistent. It could be that we are paid by results - commission/bonuses, or our hours can vary significantly. Or for those running their own business as a Director or a Sole Trader - income will be determined by trade, seasonal issues or the ability of others to pay us. Somehow these variances need to be drawn into a plan to meet the rather more regular outgoings. We may want to use the credit card or overdraft to meet the low-pay months but we can quickly find our finances going out of control. Some sort of average, where we make practical arrangements to cover the poor months by the good months seems wise.

Erratic outgoings

Budgets are necessary and all well and good, but not all expenses are spread evenly. We hadn't figured on the AA taking out a three figure sum through the annual Direct Debit we have with them. Or car tax or the dental bill - they are not usually monthly payments. Perhaps most of all - the pressures of meeting self-assessment tax repayments can be hugely problematic. We seem constantly to be playing catch up with the taxman and again careful planning is needed to be able to meet the twice-yearly payment.

Contingency Fund

Many people's home expenditure budget is simply inadequate. We forget key outgoings. There is no room for the slightest deviation or unexpected item. Therefore we must wherever possible, factor in a contingency component. The credit card or overdraft can be the buffer for the unexpected but the subsequent repayment may well not be accounted for and lead on to as growing debt problem.

Taking time

Time can be a great investment. Considering the best use of our assets, reflecting on the way we handle the unexpected expenditure, looking into the way we manage debts - all requires planning. The big 4 - income, outgoings, assets and liabilities all need assessment in order to plan ahead and keep control.