How Much Debt Can We Handle 2

Knowledge Blog, Budgeting, Credit Rebuilding

Part 2

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

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		Health 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		Haircare
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		Haircare
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 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.