To purchase Surviving Debt (available in print or as an ebook) visit the NCLC bookstore.
Why Keep Track. When facing financial problems, keep track of your income, expenses, and debt on a monthly basis. This has a lot of value. It gives you a realistic view of where you stand and how much you can allocate to debt payments. When you know that, you can decide which debt payments you can afford to make and which you cannot. Then refer to Chapter 1 to see which debts to pay first.
This book explains how to spread out debt payments for specific debts. But it does no good to lower your monthly payment on a debt if you cannot afford to make even that lower monthly payment. The creditor is likely to give up working with you if you cannot keep up your end of a deal that lowers your payments. Keeping track of your income, expenses, and debt obligations gives you a realistic idea of how much you can promise a creditor that you will pay each month.
Sometimes, in working with a creditor to set up a plan to lower your payments, you will need to show the creditor your income, other debts, and other information. You can have this already in hand if you keep track of your financial condition in an organized fashion. A list of your debts and income is also needed if you file for bankruptcy. Reviewing your expenses each month can also help you identify areas where you can reduce costs. Chapter 8 discusses ways to do this.
How to Keep Track. Keep a list of your actual income, expenses, and debt payments for the past month, and do the same for at least a number of months. There is no one required way to do this.
This chapter includes a filled-in form as a sample list. This form can also be seen at www.nclc.org/keepingtrack, which includes a version of the form in MS Word format that you can adapt in any way you wish and then print out. The form is only a sample; keep track in whatever way works best for you and makes sense for you.
Keep the lists for each month in a safe place. Using a notebook for this purpose is another way to do this. You can keep track on a computer or your smart phone if that is something you are used to doing. After you have made a monthly list for several months, start comparing months and see what is typical and how you are doing.
Corporations increasingly push to send you credit card, bank, and loan statements electronically instead of on paper. Some people prefer electronic statements. Companies may also try to slip you into electronic-only statements without your realizing it. If you receive electronic-only statements, you should have the ability to read them electronically and in fact do read them regularly. Otherwise, request paper statements.
Keeping Track of Income. Your income listing should include all present sources of income that month for each family member. List the amount separately for each source of income and then total them all up.
For employment income, use take-home pay and not gross pay. If you do not work on salary, list your earnings in the last month and also list under your expenses any self-employment and federal and state taxes you should pay on that income. If your income is higher or lower than usual that month, make a note of that.
Include in income additional cash you receive on a regular basis, including Social Security, unemployment compensation, food stamps, other public benefits, child support, alimony, pensions, and the like. Do not include as income money you draw down from your bank or savings account or cash from loans you took out that month. Do not list money friends or relatives lent you if you have to pay it back. If you are unlikely to pay it back, you could label it as a gift and treat it as income. Also do not treat as income any one-time, very large cash payment such as an inheritance, sale of property, or an insurance payment.
When you prepare your income list, evaluate whether you are maximizing your income. A number of ideas to increase your income are discussed in Chapter 9.
The Expense Listing. Your expenses should list separately each category of your monthly expenses, such as food, housing, utilities, clothing, transportation, and medical expenses. Some ideas for categories are listed below and on the sample form, but use whatever categories work for you. For example, it might be easiest for you to break down expenses by the type of store you go to, rather than the exact nature of the goods purchased there, such as “purchases at Walmart.”
Listed below are some ideas for categories. Some of these categories are used in the filled-in sample form, which can also be seen (and adapted) at www.nclc.org/keepingtrack. But you should use whatever categories work for you.
- ● Rent or manufactured home lot rent or mortgage payments (first and second mortgages);
- ● Property taxes and homeowner’s insurance if not included in your mortgage payments (make a note that these are billed only a few times a year);
- ● Condo or homeowner association fees and assessments;
- ● Home maintenance and repairs and landscaping;
- ● Furniture, appliances, electronics, or other goods;
- ● Gas and electric utilities, heating oil, propane, or wood;
- ● Water, sewer, and trash;
- ● Land line telephone and/or cell phone, TV, and internet;
- ● Groceries and related items;
- ● Eating out, including lunches not brought to work;
- ● Products and services related to personal appearance and hygiene;
- ● Clothing and footwear, laundry and cleaning;
- ● Medical insurance premiums, medical expenses not covered by insurance, and prescriptions;
- ● Dental expenses;
- ● Auto loan or lease payments, car insurance, gas, and maintenance;
- ● Buses, other public transportation, Uber, taxis, Lyft, etc.;
- ● Student loan payments;
- ● Religious and charitable contributions and organization dues;
- ● School-related expenses;
- ● Entertainment, newspapers, videos, video games, books, etc.;
- ● Alcohol, cigarettes, etc.;
- ● Hobbies, sports equipment, health clubs, and the like;
- ● Pet expenses;
- ● Alimony or child support;
- ● Other insurance (beside auto or homeowners);
- ● Taxes on self-employed income (where withholding not taken out from income);
- ● Tax preparation;
- ● Credit card minimum or other small payments.