The “credit crunch” is now officially starting to bite on a personal level with people losing their homes and facing bankruptcy. The good news is that there are steps one can take to avoid this and below are - London accountants Carter Backer Winter (CBW) recommendations. 

By quantifying the problem (with a review of liabilities, expenditure, assets and income), it will become clear what degree of change will be needed in order to survive.

Dealing with the crisis primarily involves managing one’s cash flow. This takes a two pronged approach: reducing expenditure and increasing income. 

REDUCING EXPENDITURE

An analysis of expenditure will highlight where the most money is being spent and where it’s easiest to make cuts. These are the areas to address first but a full list of     considerations should include:

• Reduce loan repayment size by:

  * Consolidating debt (but be sure to read the fine print!)

  * Investigating the impact of an “interest only”, “repayment  holiday” or “equity release” option

  * Re-mortgaging to a better deal (see CBW’s mortgage advisor)

• Reduce the cost of essential bills

  * Shop for deals on utilities    including package deals

  * Pay by direct debit in set amounts to spread costs

  * Review insurance policies to avoid wasteful duplications

  * Investigate if a pay-as-you-go   mobile plan is cheaper

  * Reduce mileage and car pool to save on petrol costs

• Shop smarter every day

  * Avoid the temptation by   avoiding the shops

  * When tempted to make a non essential purchase consider what’s more important, that item or the family home

  * Set a weekly budget and stick to it. Using cash only will make it difficult to “forget” what has already been spent 

  * Find cheaper sources for the essentials—search the internet and visit your local markets

• Suspend all luxury purchases

  * Reduce nights/days out

  * Forego the big annual holiday

INCREASING INCOME

• Renegotiate contracts

• Explore all options for claiming government benefits or tax    credits

• Increase working hours with overtime or seek an additional part time job

• Ask older children to contribute to the household bills

• Sell! Sell! Sell! ...consider eBay

• Rent out any spare space such as bedrooms and garages

TALK TO THE PROFESSIONALS

Before you sink under the weight   of debt, speak to an accountant who may refer you to a specialist insolvency advisor if appropriate.  

Need further advice? Got a question? Then visit London accountants Carter Backer Winter (CBW) website