Having a personal budget that sets out your income and expenditure in detail will help you stay in control of your finances. If you are having problems it will also help to show creditors where those problems lie.

To start, you need to keep a record of everything you spend money on. This will give you an accurate account of your monthly outgoings. Divide your annual income by 12 to get a monthly figure.

Don’t forget to include spending that doesn’t happen regularly, like holidays, car repairs, vets bills, etc. Estimate what the annual cost of these could be and divide that figure by 12. Add that to your monthly expenditure.

Now you can create a monthly budget.
Draw up a list of your monthly income, making sure to include all earnings, benefits, tax credits etc.

Then draw up a list of your expenditure, dividing it into three categories: commitments, including mortgage or rent, all utilities, council tax, insurances, TV licence, car MOT/insurance/road tax; everyday spending, including food, petrol etc and occasional spending, including presents, holidays, car and house repairs and maintenance, furniture, dentist, vet etc.

If the difference between your income and your spending is a positive amount, you have money available to pay to unsecured creditors. But if your spend more than your income your budget is in deficit and you will have to change your spending habits to ensure you can pay unsecured creditors.

If you need to reduce your spending you will need to look carefully at every item of expenditure in your budget and ask yourself a) is the item necessary? and, if it is, can you spend less on it?