Debt management and budgeting – the cost of kids

20 June 2008

As anyone on a debt management plan will know, budgeting can be an eye-opening experience. Actually writing down where the money goes can be an unwelcome – but essential – ‘reality check’.

Keeping track – an essential part of debt management
For example, research from the Co-operative Bank Savings indicates that the average British family spends around £5,000 per year entertaining the kids! If that sounds far-fetched, it just shows the importance of keeping track of your finances, and why it’s such a vital part of any debt management plan: the big expenses are easy to spot, but it’s the little expenses that really add up.

Debt management – what do creditors think?
For someone in debt (even if they spend a lot less than £5,000), there’s a lot of potential for saving money and paying off their debts faster. But it’s not that easy. Adults may be able to cut out their non-essential spending if they know it’s for a good reason, but what about kids?

In most cases, there’s just no way a family could cut out expenses like these altogether – but any budget should allow for some non-essential spending, especially when kids are involved, and creditors know this.

Whether you’re on a professional debt management plan or negotiating with creditors yourself, they’ll appreciate that cutting out swimming, books, sports and other leisure activities would obviously be bad for a child’s development, so they’re almost certain to understand if you allow for some ‘discretionary spending’ like this when you’re working out your budget.

It’s your debt management plan
Of course, if you’re on a debt management plan, it’s your plan. It’s in your interest to pay your creditors as much as you can afford, as soon as realistically possible. Cutting your discretionary spending by 50% (or even by 20%) could free up a lot of money, drastically reducing the amount of time you’ll be in debt.

If, for example, you took a cheaper holiday this year – or no holiday at all – what impact would that have on your finances? It might not be easy, but it might be worth it. As always, it’s a question of balance: balancing the need to relax with the need to manage your debts.

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