Money Wellness
Woman sitting at a desk working out a budget

What to do if you’ve got a negative budget

If the money you’ve got coming in doesn’t cover your essential living expenses, this is known as a negative budget. It can be very worrying to find yourself in this position. But there are steps you can take to try and get yourself back on track.

1. Work out which bills to pay first

When you can’t cover all of your bills, it may be tempting to pay the lenders that shout loudest. But some bills are more important than others and need to be paid first. These are known as priority bills.

Priority bills

These include:

  • mortgage or rent
  • gas and electricity
  • overpaid benefits
  • secured loans
  • child support and maintenance
  • hire purchase for essential items e.g. a car you need for work
  • council tax
  • court fines
  • TV licence

Priority bills are the ones that could have the most serious consequences if you don’t pay them. The possible consequences of not paying priority bills include:

  • losing your home (repossession or eviction)
  • being visited by enforcement agents (bailiffs)
  • being forced onto energy prepayment meters
  • having your gas or electricity cut off
  • losing essential hire purchase items

Non-priority bills

Don’t pay these if it means you’ll fall behind with priority bills or have to borrow more.

Non-priority bills include:

  • credit cards
  • store cards
  • overdrafts
  • hire purchase for non-essential items
  • unsecured loans
  • water bills
  • loans from friends and family

2. Catch up with priority bills

If you’ve fallen behind with any priority bills, get in touch with those lenders to try and agree an arrangement to pay back what you owe. You could offer non-priority lenders a token payment of £1. Then use the rest of your leftover income to put towards your priority bills.

If you’ve had debt advice, you may have a standard financial statement (SFS). This is a document showing your income, living expenses and debts. The final page lists all the priority bills you’re behind with, as well as all your non-priority bills.

This is a useful document to have when sorting out payment arrangements with your priority lenders. They may ask to see a copy. Most will accept a photo or screenshot by email.

3. Could you increase your income?

If you have a deficit budget, it’s worth checking you’re getting all the money you’re entitled to:

Are you eligible for any government support?

Billions of pounds in benefits go unclaimed every year. Try our easy-to-use benefits calculator to check you’re getting everything you’re entitled to. You may be able to get help even if you’re working.

Are others paying their fair share?

If you share bills, are others paying their fair share? Find you what to do if you’re struggling to get enough financial support from the other parent of your child.

Are you being paid enough?

Check your payslip to make sure you’re being paid the right amount and you’re getting at least the minimum wage.

Get advice if you’re being paid less than the minimum wage or you think your employer is taking money they shouldn’t from your pay.

Could you get a grant?

If you’re struggling to make ends meet, you may be able to apply for a grant from a charitable organisation. Grants are available for things like:

  • gas and electricity bills
  • household appliances
  • emergencies

A lot of energy providers also offer grants to customers who are in financial difficulty. Find out more.

You may also be able to get help from your local council through the household support fund. This is aimed at anyone who’s vulnerable or struggling to pay for the essentials like energy and food. Check with your local council to find out what’s available.

4. Can you make cutbacks?

Go through your budget to see if there are any areas where you could cut back.

Cancel any services you don’t use or need e.g. TV streaming subscriptions or gym memberships. You could also check whether switching service providers could save you money on things like your mobile phone or broadband.

If you have any items on finance that you could live without, you could look into the possibility of handing them back and stopping your payments.

5. If you couldn't get a debt solution with a negative budget

Having a negative budget won't always stop you from being able to get a debt solution. It depends on your individual situation. But, in some cases, it will. This may be because you own assets that you could sell to go towards your debts.

If you were previously unable to get a debt solution because you had a negative budget, following the steps above may have helped. If you can now cover your priority bills but can’t afford all of your non-priority bills, it's worth getting debt advice again.

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