How to Create a Monthly Budget When You're in Debt
To create a monthly budget when you are in debt, list your net income, then your essential living expenses, then your debt repayments. Subtract expenses and debt from income to see what is left. If there is nothing left or the figure is negative, you may be over-indebted and a financial assessment can help. A budget gives you control and shows where to cut back.
Key Points
- List net income, essentials and debt repayments in order.
- Subtract to see what is left each month.
- A negative balance signals possible over-indebtedness.
- A budget is the foundation of any recovery plan.
Step 1: Record your net income
Write down all sources of net income — your take-home pay after deductions, plus any other regular income. Use the amount you actually receive, not your gross salary. If your income varies, use a conservative average.
Knowing your real income is the starting point for every budget.
Step 2: List essential living expenses
List your essential expenses: rent or bond, electricity, water, groceries, transport, school fees, medical costs and insurance. Be honest and realistic — underestimating essentials makes the budget fail.
Separate essentials from non-essentials so you can see where there is flexibility.
Step 3: List your debt repayments
List every debt: the creditor, the monthly instalment, the interest rate and the outstanding balance. Include personal loans, credit cards, store cards, vehicle finance and your home loan.
This shows your total monthly debt obligation, which you can compare to your income.
Step 4: Do the calculation
Subtract your essential expenses and debt repayments from your net income. If the result is positive, you have a surplus you can direct toward debt or savings. If the result is zero or negative, you may be over-indebted.
If you are over-indebted, a financial assessment with a registered debt counsellor can determine whether debt review is appropriate.
Frequently Asked Questions
Worried That Your Debt Has Become Unaffordable?
Debt Guidance can assess your income, essential expenses and debt commitments to determine whether debt review may be appropriate.
Reviewed by Carolina Guevara Harris
Registered Debt Counsellor · NCRDC3152
Last updated: 17 September 2025
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