If you are struggling to pay your debts you may decide to negotiate reductions in your monthly repayments. We consider what living expenses your creditors will agree as reasonable thus allowing them to accept your reduced payment offer.

If you are struggling with debt one option open to you is to simply approach the banks and other people you owe money to and ask them to accept smaller monthly payments. This approach is known as a Debt Management Plan (DMP). It is an extremely common way of managing a debt problem and banks do accept agreements to reduce payments from people every day based on this solution.

However one of the key pieces of information you will need to provide to your creditors will be your monthly living expenses budget. We will look at what types and levels of living expenses make up an acceptable living expenses budget it you want your creditors to agree reduced debt prepayments.

Living expenses must be reasonable

To be confident that the banks will accept your reduced payment offer you will have to show that you are offering to repay much as you possibly can and can afford no more.

To do this you have to show that you are living on a reasonable living expenses budget. You will have to list all the expenses in your budget and make this available for everyone you want to negotiate with to see.

The first thing to do when listing your expenses is think about all of the things you pay for each month which stay the same, your fixed costs. These include mortgage or rent payments, council tax, and utility bills especially if you pay these on a monthly basis.

These expenses should simply be listed as they are. The fact is that you are unable to change these expenses without a significant change in your life such as moving home which is simply not realistic in the short term.

Next, you need to list all of your living expenses which can change in the short term. These are things that you do have control over the amount you spend each month such as food, petrol, clothing and entertainment.

Most banks and other creditors have a standard set of guidelines for these types of expenses which they feel are reasonable for someone with a debt problem to keep within. A full list of these guidelines is given in the BeatMyDebt.com living expenditure guide.

If you want your creditors to accept your offer of reduced payments, it is very important that you keep within these guidelines. If you do not, they may feel that you are not doing enough to keep your costs to a minimum and will reject your reduced payment offer.

What if you spend more than the guidelines?

If you feel the amount you spend each month is more than the accepted guidelines, you can include a higher figure in your expenditure budget.

For example, you may have special dietary requirements which mean that you need to spend more each month on food. Alternatively you may live a long way from work meaning your fuel or other transport costs are particularly high.

If the reason for your higher expenditure is that you have business expenses which you then reclaim from your employer, you should not include these in your living expenses budget.

These expenses are specific to your job and will be offset by the expense claim you put into your employer at the end of the month.

Meet your creditors halfway

If you are struggling to pay your debts and you need to reduce the payments you make to your creditors, you will need to show them that you are doing everything you can to pay them as much as possible.

You can do this by sticking to a sensible living expenditure budget which already meets the guidelines agreed by most banks and other lenders.

Of course, if you feel you need to spend more, then as long as is a reasonable justification and explanation for the  living expenditures you require, the people you owe money should accept these and be prepared to meet you half way and accept lower payments from you.

At the end of the day, sticking within an agreed expenditure budget is not easy. However, if you are struggling with debt, it is in your best interest as it will allow you to make as much money as possible available to pay your creditors thus paying back your debt in the fastest time.