Income And Expenditure Explained – Loan Application UK

Calculating your income and expenditure helps ensure your budget is accurate. It’s an excellent way to organise your finances and gain better control of your cash flow.

There are many income and expenditure forms available on the internet.

They’re also called budget planners or budget calculators, and you should choose one that suits you best to understand your financial situation better.

Let’s explore everything about income and expenditure forms.

What Is An Income And Expenditure Form?

An income and expenditure form is a standard or common financial statement you can use to list all your income, debts, and spending every month. An income and expenditure form is similar to a budget in many ways:

  • They both require filling in your income, obligations, and expenses.
  • To gain a true reflection of your financial situation, you must be as honest and accurate as possible.
  • They involve costs and expenses that have more priority than others.

Benefits Of Calculating Your Income And Expenditure

Calculating your income and expenditure is an exact method for analysing and understanding your finances. It will help you answer a few key questions, including:

Do You Spend More Than You Earn?

If you’ve found yourself building up debts or eating into your savings, you’re likely overspending. Spending more than you earn is a significant cause of debt spirals and severe problems for many UK residents.

A debt spiral involves a financially unhealthy lifestyle where you spend more than you earn, borrow to fill the gap, use most of your income to repay debts and keep borrowing to maintain the lifestyle. With all your income going towards debt repayments, you’ll have nothing left!

To regain control, you need an accurate idea of the scale and size of the problem by calculating your income and expenditure. It will help you see exactly where your money goes and identify areas where you could cut back spending.

What Can You Afford To Spend?

Calculating your income and expenditure gives you an accurate and realistic assessment of your monthly disposable income. It shows you where you’re spending to prioritise and alter what you do with your money so you can stick within your means.

Knowing what you can afford is useful when you’re thinking about taking out a loan. A standard financial statement or income and expenditure form is used and recognised by various lending and financial institutions. You can use it to show creditors how much you can realistically afford to pay them.

Most brokers and debt advice providers will initially ask you to complete an income and expenditure form when you’re looking for a loan or help with your debts. It allows them to assess your income and spending to provide the right advice according to your situation and connect you to suitable creditors.

What To Include In An Income And Expenditure Form

A typical income and expenditure form will have the following sections:

Your Income

In this section, you’ll fill in any money you regularly receive, including:

  • Employment or self-employment income
  •  Child or working tax credit
  • Jobseeker’s allowance
  • Universal credit
  • Housing benefit
  • Income support
  • Pension payments
  • Rental income
  • Housekeeping from partners or dependants

Ensure you include all types of income you receive to provide an accurate picture of your situation.

Related quick help guides: 

Your Priority Bills

Household or priority bills are the most necessary expenses, and you must account for them. Failing to pay priority bills like your rent or mortgage comes with severe consequences like repossession or getting kicked out of your home. Priority bills can include:

  • Mortgage, rent or secured loan payments.
  • Utilities like gas, electricity and water.
  • Council tax.
  • Fuel like oil, gas or logs
  • TV licenses.
  • Logbook loans or hire purchases.
  • Child maintenance.
  • Magistrates court fines.
  • County court judgements.

Other Spending

Although they’re also important, they’re not necessarily as crucial as household bills. They include:

  • Car insurance or breakdown covers.
  • Streaming and digital television services.
  • Insurance for buildings and contents.
  • Pension or life insurance.
  • Internet and telephone.
  • Maintenance and repair costs.
  • Public transport.
  • Accident or medical insurance.
  • Professional or union fees.
  • Education fees.

Other Living Costs

Living costs include anything you spend money on every day. You can work these out using an average from recent shopping receipt figures or bank statements. They can include:

  • Individual and family food costs.
  • Clothes and footwear.
  • Toiletries.
  • Opticians and dentists.
  • Hairdressing.
  • Emergencies and sundries.
  • Prescriptions and medicines.
  • Hobbies, sports and entertainment.
  • School essentials and pocket money.
  • Parking costs and petrol.

If you spend too much on non-essential living costs, creditors may require more information to determine whether it’s reasonable.

Non-Priority Debts

In the final section, you’ll list down the debts you currently owe and the payments that go towards them. The amount you give creditors depends on the surplus left after you’ve covered priority payments like household bills, living costs and other expenses.

Items considered as non-priority debts include:

  • Credit and store cards.
  • Unsecured loans.
  • Overdrafts.
  • Catalogue repayments.
  • Payday loans.
  • Arrears from properties you no longer live in.
  • Arrears from service providers you no longer use like gas or electric.

Remember, non-priority debts can become priority debts if creditors pursue and are successfully granted a county court judgement (CCJ) against you by the court.

Expert Tips Before Calculating Your Income And Expenditure

Gather Receipts And Statements

Bring together all your receipts and statements to avoid guessing or estimating. The success of your endeavour will rely on actual income and expenditure costs.

Accuracy, Accuracy, Accuracy

We can’t emphasise this enough. Try to be as accurate as possible and avoid underestimating your expenditure. When you’re not sure, guess larger, not smaller. It will ensure you have funds leftover and you don’t fall short.

Stay vigilant of overlapping some types of spending in different sections to avoid counting them twice. If you include insurance in the other spending section, don’t include it again in living costs.

Don’t Forget About One-Off Spends

Whether it’s a birthday treat or a holiday, one-off spending will affect your expenditure costs. You can account for these by apportioning their annual costs into monthly amounts. If you include one-offs like holidays, don’t forget to subtract regular spending that wouldn’t occur. For example, if you’re abroad for a week, you won’t spend on regular petrol, parking or public transport costs.

Income And Expenditure Final Thoughts

Provided you’re honest, an income and expenditure form will give you an accurate assessment of your budget and show you what you can afford and where you spend more than you earn.

It will help you make the most out of your money, cut out necessary expenses, and stop running up enormous debts or over-commitments. If you already have debt problems, it will show you how much you can spare so you can make realistic offers to creditors.

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.

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