A guide to managing your money and dealing with debt. Prepared on behalf of The Money Advice and Budgeting Service (MABS)

Transcription

1 A guide to managing your money and dealing with debt Prepared on behalf of The Money Advice and Budgeting Service (MABS)

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3 Money problems can result from many things a change in circumstances perhaps that has resulted in a drop in income or increased expenditure, or simply not having enough to go around. This booklet will help you take control and stay in control of your money. There are more people than you might think experiencing problems with money. Our experience is that financial difficulties can affect everyone from high-income earners to people on a low income, so if you are worried about money you are not alone. This booklet contains a tried and tested Three-Step Approach to money problems based on budgeting, dealing with debts and making payments. If you would like more information on a particular problem, you can get a range of information leaflets on specific debts such as housing, utilities or personal loans, from any MABS office. There are seven golden rules in dealing with a money problem. If you follow these you won t go far wrong. 1. Don t ignore it it won t go away and the longer you leave it, the worse it gets. 2. Don t borrow money to pay off your debts without thinking carefully and seeking independent advice. Though borrowing can seem like a solution, you may be storing up greater difficulties for later on, for example you may end up losing your home. 3. Ask everyone you owe money to if you can have more time to pay Contact each person either by phone, letter or in person and ask for breathing space to assess your full situation and work out what you can actually afford to pay. You will find a sample letter to help you at the back of this booklet. 4. Check your rights and entitlements staff at the Irish Financial Services Regulatory Authority (IFSRA) LoCall can tell you how credit companies must operate by law. You may find for example that your repayments are insured against sickness, redundancy and so on. 5. Be open and honest with the people you owe money to about your circumstances. Show them a copy of your household budget so each can see what you can 1

4 realistically afford given your other commitments. You will find a sample personal budget sheet and letters to help you at the back of this booklet. 6. Always attend court hearings and take a copy of your personal budget with you and explain your situation. The court s role is to decide whether you owe the money and how much you can realistically afford to pay. 7. Keep copies of any letters and forms you send or receive these may be useful in convincing a creditor or court that you are being reasonable. Three-step approach to money management and dealing with debts It can often be difficult to know where to start, particularly where you owe money to a number of institutions. You may find it helpful to approach your money problems one step at a time. The following steps aim to let you first take control of your money and then stay in control: Step one budgeting Step two dealing with debts Step three making and monitoring the payments Step one budgeting There s nothing mysterious about a budget. It s simply a plan of the money you expect to receive and how you expect to spend it. Here are some suggestions for drawing up a budget. Decide who you will include. Do you want to make out a budget for the whole household or just for yourself? Remember if you share your home with a partner or other adults, you all use fuel and you all need to eat. It may be that each of you has loans and bills in different or joint names. The budget plan has most chance of success if it takes account of all household income, expenses and commitments. Ignore any arrears, loans and credit debts for the moment. The initial aim in budgeting is to try and sort out your regular weekly or monthly essential spending first. So, list any arrears on your rent or mortgage, any outstanding bills and any personal loans or credit debts on a separate sheet and ignore all these for the moment. We will look at how to deal with these in stage two once you have worked out a manageable budget. 2

5 Decide whether you will budget weekly, fortnightly or monthly. We would suggest the easiest approach is to budget weekly if you are paid weekly, or fortnightly or monthly if you are paid in this way. By converting all the figures to the same basis (weekly, fortnightly or monthly), you can see how much you have coming in and going out and whether or not there is any money left over. This is the key to taking control. Always try to do this conversion as accurately as possible dividing by four, as many of us do, to convert a monthly bill to a weekly amount gives a very inaccurate figure. The most accurate way to convert amounts from monthly to weekly is to multiply by 12 and divide by 52. Write down your income and spending. Take a piece of paper and a pencil (you might want to change the figures later) and on one side write down the money coming in each week or month, and on the other your weekly or monthly spending and commitments. Include your mortgage or rent payments, your weekly shopping, and how much fuel you actually use each week or month. Be realistic and honest with yourself. At the back of this booklet is a budget sheet listing a number of common items of spending if you feel it would help. You can also get a spreadsheet from our website, Add up your income and what you spend see whether there is a surplus (an amount left over) or a deficit (not enough to go around). The first time you see everything written down can be a bit of a shock. If you have found it hard to make ends meet, the figures may show you why. Whether you have money left over or not enough to go around, you should now have a fairly accurate picture of what is happening to the money coming into and going out of the household, as long as you have been honest with your self. Making ends meet If you do not have enough to make ends meet there are two main options open to you: maximising your income or reducing your spending. 3

6 Can I maximise my income? Even if you have a surplus, raising extra income can help you to manage your money more easily. Perhaps taking on a part-time job or letting a room in your house is a possibility. Below are some other options for you to consider. Social welfare entitlements Your local Citizens Information Centre (CIC) can help you check that you are claiming all your entitlements whether you are working or not (see the local telephone directory for details of the nearest Centre). You can also get citizens information over the Internet from the following Comhairle websites: or from the Department s own website, Health board payments These are administered by Community Welfare Officers generally based in your local Health Centre or Clinic. Some of these payments need you to meet certain conditions again your local CIC can tell you what these are. Tax Your local tax office will advise you about the credits you are entitled to given your circumstances. You can also get information on the Comhairle websites and the Revenue website, Insurance Check to see whether any of your loan repayments (your mortgage, for example) are covered by payment protection insurance. Employment There are various legal provisions on wages, dismissal, equality and redundancy that may mean you are owed money by your employer or previous employer. You can find out more through your local CIC, the Comhairle websites, or on the Government s own website, Back to Work Training schemes Again you can get information on the various schemes through your local CIC and the Comhairle or Department of Social and Family Affairs websites. 4

7 Welfare funds Certain larger employers may have schemes in place to assist employees (or past employees) who are experiencing financial difficulties. There may also be local community or voluntary groups who may be able to assist. Can I reduce my expenditure? Try and identify areas where you could maybe cut back on spending. With your budget in front of you see if the following plan might help. First put a mark against commitments that can t be changed (your rent for example where payments are fixed). Then look at payments or bills that might be varied. Controlling the energy that you use (heat and light) can reduce the cost of your bills. You may be able to re-negotiate lower mortgage or insurance payments or cut back on using the the telephone. Now consider how you might budget for essential weekly spending, groceries, housekeeping, clothing and so on. You might find keeping a daily spending diary useful for a while (a week or two) to get an idea of where your money is going and where you might be able to economise. Next, look at your spending on other items, such as entertainment and so on. Although again you may decide to make cutbacks here, try and leave room for a social life for you and your family while being realistic about your budget. Finally, look at including an amount in your budget for dealing with unexpected expenses that may crop up and towards savings for education costs and so on. Hopefully after you have made perhaps difficult choices and decisions you will have at least a balanced budget that will cover your basic living costs. Any surplus is the money for paying arrears and credit commitments. Income Living costs = Surplus money for arrears and creditors. If your living costs (without taking into account arrears and credit debts) are still more than your income, you may need to seek advice on what to do. A full list of MABS offices is included at the end of this booklet. 5

8 Step two dealing with arrears, loans and credit debts Check you owe money legally Before putting forward proposals out of your surplus, it is always worth checking any documents you might have, as sometimes you may find that a company has acted improperly. For instance, legal documents or those for a loan may not have been properly drawn up, the account balance may be wrong, the institution may have wrongly applied charges. The Office of the Director of Consumer Affairs (in the case of credit agreements) or any MABS office can tell you your rights if you want to check into this. See which of your debts are most important Now turn to the list of arrears, loan repayments and credit debts that we suggested you make earlier. The golden rule here is to prioritise your debts. Some debts are more important than others as the law gives different creditors different ways of getting their money back. Before making any proposals from your surplus, split your debts into two categories: priority debts and secondary debts. Priority debts These are debts where if you fail to pay, your house may be repossessed, you may be evicted, your fuel or telephone may be disconnected, or you may have to pay a fine or go to prison. Use your surplus to make proposals to these creditors first on a weekly or monthly basis as appropriate given your budget. What to offer Housing and utility creditors will normally be prepared to accept an amount on top of your normal payment or use it to clear arrears over time. In other cases (tax and TV licence, for example) you may need to clear the arrears within a fixed time, so you will need to work out your weekly or monthly proposals on this basis. Try and ensure if at all possible that the offers to priority creditors do not use up all of your surplus and that you still have money left over to offer towards any outstanding credit commitments. 6

9 How to make the offer Contact your priority creditors as soon as possible to explain your situation you may find the sample letters at the back of this booklet helpful. Sending each a copy of your budget is often an effective way of persuading them to accept reduced payments that you can afford over a longer period. If you require more information about dealing with a particular priority debt, mortgage, rent, fuel, or court order, we have a specific leaflet on each one, which you can get from any MABS office or the internet at Secondary debts These are debts where money has been loaned to you without you having to provide any security. Personal loans, credit cards and credit union loans are all examples of secondary debts. Though you can be taken to court if you have failed to keep up the payments, as long as you don t ignore the problems and you respond to court documents with details of your financial circumstances, you will generally only have to pay what you can afford in line with your budget. What to offer Offer each secondary creditor a share of any remaining surplus based on what they are owed. The ones you owe more to should receive more than the smaller ones. How to make the offer Again, sending each a copy of your budget is generally an effective way of persuading them to accept reduced payments in line with your ability to pay. Ask them to suspend any interest charges to be suspended to help you reduce your balance quicker. You will find a sample letter to help you at the back of this booklet. If you have no surplus, send the companies a copy of your budget to show them this and ask for a moratorium (breathing space) to see if things improve in three to six months time. CHECK If they take you to court, tell the court the same thing nobody can get blood out of a stone. If you require more information about dealing with a particular secondary debt, credit cards, car loans or credit arrears for example, we have a specific leaflet on each one, which you can get from any MABS office or from our website, 7

10 Step three making and monitoring the payments Once you have drawn up a budget and decided how much to pay to cover living costs, arrears and credit commitments, the key to staying in control is to find the most convenient (and cheapest) way to pay as many debts as possible when you receive your income. There may be costs involved in setting up the various accounts referred to below, so it may pay to shop around and see what services you can get locally (such as credit unions, post offices, banks) to find the cheapest option that works best for you. As you will see, some options (paying bills through the post office for example) are free. There are a variety of ways you can choose to manage your money, but whatever facilities you choose should ideally consist of three elements. A working account facility Try to have all your income including any cash you receive paid into this account. This is the account you will draw on for your groceries and other daily household needs. Banks, post offices, building societies and some credit unions offer this type of account, in some cases along with a laser or cash-point card. If you have a credit card, try to pay your monthly credit card bills from this account. A bills account facility If possible, ask your working account provider whether you can set up a separate bills account into which you can transfer have a weekly or monthly amount transferred on when you get paid to cover future bills and credit commitments. You should then be able to set up automatic transfers from this account to cover your various bills. Banks and building societies often offer such accounts (check the costs involved). Alternatively, you could opt to pay for your bills on a pay-as-you-use basis. Both the ESB and Bord Gáis offer a variety of schemes. Another option is to pay regular amounts towards a range of bills through the post office s (free) billpay service. Some credit unions and employers also operate their own budget schemes. 8

11 If you get a social welfare payment, the Department of Social and Family Affairs operates a Household Budget Scheme along with An Post. Under this scheme, you can opt to have up to 25% of certain social welfare payments deducted at source to cover local authority rent, ESB, gas and telephone bills. Many MABS operate a special budget account scheme in partnership with participating credit unions. The scheme allows you to pay weekly amounts in line with your budget to a range of creditors through the credit union. More details are available from any MABS office. A savings account facility Again ask your working account provider if you can set up a separate savings account into which you can transfer a weekly or monthly amount at the time you are paid. Alternatively you could choose to pay the money into a credit union or post office account. The credit union offers both competitive interest rates on savings as they grow and opens the door to credit if needed in future. This account will ensure there will always be something to fall back on in case of an emergency. Keeping an eye on these accounts If you just have one account, it can be difficult to know what money has or hasn t come out, so there is an advantage to separating your working, bills and savings accounts. In this way, you know that what you have in your working account is money for living costs, as money for bills and saving will be in separate accounts. Seek further advice If you require further guidance on money management or dealing with debt, please contact your local MABS for an appointment to speak to a Money Adviser in confidence. Some other useful addresses are listed below. 9

12 Useful contacts AIM Family Services, 6 D Olier Street, Dublin 2 ( ) - legal information, mediation and counselling service for couples experiencing marital and family problems Citizens Information Centres (nationwide) - local free confidential information on a range of rights, entitlements and services. Centres are listed in the Golden Pages and on the Comhairle website Citizens Information Call Centre (Lo-call ) - independent information on citizens rights, entitlements and services - funded by Comhairle Comhairle, Hume House, Ballsbridge, Dublin 4 ( ) - the statutory body responsible for providing information, advice and advocacy on social services Commission for Communications Regulation, Block DEF, Abbey Court, Irish Life Centre, Lower Abbey St, Dublin 1 (LoCall ) - the independent body responsible for licensing and regulating the telecommunications and postal industry Commission for Energy Regulation, Plaza House, Belgard Road, Tallaght, Dublin 24 (Tel: ) - the independent body responsible for overseeing the gas and electricity industry Energy Action Ltd, Unit 14, Newmarket, Dublin 8 ( ) - energy efficiency information and services for older people in the Dublin area only Family Mediation Service - Dublin: 1st Floor 5, St Stephens Green House, Earlsfort Terrace, Dublin 2 ( ) - Cork: 3rd Floor, Hibernian House, 80a South Mall, Cork ( ) 10

13 - Galway: 1st Floor, Ross House, Merchants Road, Galway ( ) - Limerick: 1st Floor, Mill House, Henry Street, Limerick ( ) (There are also a number of parttime centres details available from any of the above) - a professional, free and independent mediation service for couples who have decided to separate Free Legal Advice Centres, 13 Lower Dorset Street, Dublin 1 ( ) - runs a network of (free) part-time advice clinics throughout the country and a telephone information and referral line Irish Bankers Federation, Nassau House, Nassau Street, Dublin 2 ( ) - the representative body for banks and building societies promotes a code of ethics for dealing with customers, including those with mortgage arrears Irish Energy Centre, Glasnevin, Dublin 9 (Domestic Energy Enquiry Service, ) - information on energy awareness and conservation Irish Insurance Federation Information Service, 39 Molesworth St, Dublin 2 ( ) - free information and advice on matters related to insurance Irish League of Credit Unions, Mount St, Dublin 2 ( ) - the representative organisation for all affiliated credit unions in Ireland Insurance Ombudsman of Ireland, 32 Upper Merrion St, Dublin 2 ( ) - independent arbitration of disputes between policy holders and (member) insurance companies Irish National Organisation for the Unemployed (INOU), Araby House, 8 North Richmond Street, Dublin 1 ( ) - information on entitlements for the unemployed 11

14 Office of the Director of Consumer Affairs, 4-5 Harcourt St, Dublin 2 ( ) - information on consumer rights and legislation Society of St. Vincent de Paul, 8 New Cabra Road, Dublin 7 ( ) - help and support for people in need Threshold (Housing Advice Agency) - 19 St Mary s Abbey, Dublin 7 ( ), - 8 Fr. Matthew Quay, Cork, ( ), - Augustine House, St Augustine Street, Galway ( ) - advice and information on matters relating to housing Irish Financial Regulatory Services Authority, PO Box 9138, College Green, Dublin 2 ( ) - information on consumer credit 12

15 LETTER ASKING FOR TIME Address Date Dear Sir/Madam Account Number: I am writing to you with regard to the above account. The purpose of my letter is to inform you that I am currently experiencing financial difficulties and am in the process of trying to resolve these difficulties. I am therefore in the process of assessing my full financial situation and working out how much I can afford to pay to each of my creditors, taking into account all my living expenses and commitments. While I am undertaking this process, it would be of immense help to me if you would put a hold on any action being taken to recover this debt, also if you would suspend any interest or other charges currently being added to this account. May I take this opportunity to thank you in advance for your co-operation. Yours faithfully Name Signed 13

16 LETTER MAKING AN OFFER Address Date Dear Sir/Madam Account Number: Further to recent correspondence, I am writing to advise you that I have now completed a full assessment of my current financial situation taking into account all my living expenses and commitments. As a result I am now putting forward an offer of per week/month as being realistic in my current circumstances. Should circumstances improve to the extent where I can afford to increase this offer, I will contact you immediately. In the meantime, I hope that this proposal will be acceptable to you. I would be grateful if you would suspend any interest and other charges being added to the account to help me resolve my difficulties within the shortest possible period. I look forward to hearing from you. Yours faithfully Name Signed 14

17 Carlow Carlow Cavan Cavan Clare Ennis Shannon Cork Charleville Cork City Dunmanway Mallow Donegal Derrybeg Donegal Letterkenny Dublin Ballyfermot Ballymun Blanchardstown Clondalkin Cherry Orchard Coolock Crumlin Dun Laoghaire Dundrum/ Rathfarnum Exchange House Travellers MABS Finglas Killinarden Meath Street North Strand Pearse Street Rialto Swords Tallaght Galway Galway City Tuam Kerry Tralee Kildare Kilkock Newbridge Kilkenny Kilkenny Laois Portlaoise Leitrim Ballinamore Limerick Limerick Limerick (PAUL) Longford Longford Louth Dundalk Drogheda Meath Navan Town Mayo Ballina Castlebar Monaghan Catleblayney Offaly Tullamore Roscommon Roscommon Sligo Sligo Town Tipperary Carrick on Suir Clonmel Nenagh Thurles Tipperary Town Waterford Waterford City Dungarvan Westmeath Athlone Mullingar Wexford Wexford Wicklow Arklow Bray

18 Personal Budget Spreadsheet Weekly Expenditure Rent/Mortgage ESB Coal Gas/Oil Groceries Milk/Bread Toiletries/Cleaners etc. Phone(s) Clothes(s) Baby Goods School/Contributions School Books Donations/Raffles etc. Medical Expenses Chemist Papers Lotto Entertainment Cigarettes Hardware/Maintenance Household Goods TV Rental TV Licence Cablelink Videos Car Petrol/Diesel Car Insurance Car Tax Car Maintenance Car Repayments Transport Costs House Insurance Misc. Expenses (1) Other Insurance Misc. Expenses (2) Total Expenditure Weekly Income Wages/Social Welfare Children s Allowance Part-time work (average) Other income Total Income Balance Available Loans/Arrears Loan/Arrears 1 Loan/Arrears 5 Loan/Arrears 2 Loan/Arrears 6 Loan/Arrears 3 Loan/Arrears 7 Loan/Arrears 4 Loan/Arrears 8 Total Loan/Arrears

19 For free, confidential advice and assistance contact your nearest: MABS Money Advice and Budgeting Service Disclaimer Every effort has been made to ensure that the information contained in this leaflet is accurate, but the Department of Social and Family Affairs accepts no legal responsibility for any errors or omissions contained in it. If you have a specific legal query relating to matters raised in this leaflet you should get detailed legal advice. The Money Advice and Budgeting Service (MABS) This leaflet is prepared on behalf of the Money Advice and Budgeting Service (MABS), a free, confidential and independent service for people with debt and money management problems.