If you find yourself worrying about the future and don’t know where to start planning for your future financially, we can offer some guidance. It’s important to plan ahead when it comes to finances, and we want to encourage as many people as possible to start now.

1.    How to calculate your income and expenditure

Some people overcomplicate how to calculate your income and expenditure. The most simple and accurate way is to have a way to organise all of your receipts, invoices and bills This can be great for expenditure that isn’t digital, so it’s all in one place and easily accessible.

It’s always a good idea when calculating your expenditure to do it in categories, eg rent, council tax, telephone/mobile, food shopping, petrol/travel, etc.

At the end of every month, you can then calculate how much you’ve spent and compare it to how much money has come in. This will help you to determine how much you can afford to spend each month. This then leads to knowing how much you can save towards your future each month.

2.   Understanding your disposable income

In the UK, the average salary is around £30,000-£35,000, which means you take home about £27,000 a year. Research shows that the average disposable income per household in the UK is around £30,000 by the end of the financial year, which has increased by around 2% since before Covid-19. However, amid the current cost of living crisis, many are finding their disposable income doesn’t go as far.

A big player in the disposable income game is unnecessary expenses. They can take a big chunk of your monthly income, and you may not even know it. That Amazon Prime subscription you have that rolls over each month – do you use it enough to be paying £8 for next day delivery? If not, cancel it! Although £8 every month doesn’t seem like much, this adds up to nearly £100 a year.

Although you might treat yourself once in a while, your daily meal deals could turn into £220,000 to support your financial future. So, it’s always good to start with what expenses you currently have that are able to be cut out.

It’s known that the generation of ‘baby boomers’ have the highest disposable income, so it’s important to understand your disposable income as prices increase, to learn how you can support your own financial future.

3.    Knowing how your income may change

Your disposable income can become affected by many things. One of the biggest is if you should become unexpectedly sick. If you’re sick for a week of work (once statutory sick pay begins) you can miss out on a big chunk of your income, which then means you need to plan accordingly. For example, if you earn £35,000 a year you take home around £2,295 a month – £570 a week. Statutory sick pay only pays £99.35 per week, so this would be a huge loss in your income. Many people won’t plan for this, as they’re fit and healthy, but should the unexpected happen, it’s much better to be prepared, so you’re able to support your monthly expenses.

When thinking of retirement, it’s important to start calculating how much disposable income you’ll have after all of your expenses, so you can relax and enjoy your retirement.

You’ll need to consider whether a state pension can support you when you’re planning your financial future. The new full state pension is £185.15 per week or £740.60 a month. This amount is considerably low for someone to live off, especially if you’re used to having a lot of disposable income. Therefore, it’s so important to start planning as early as possible for your retirement and life after work. It may seem a lifetime away, but it’s better to be over prepared than not prepared at all.

For more information on balancing your income and expenditure, book an appointment with us.

Disclaimer: Whateley Wealth Management is not responsible for any external site content.

Disclaimer: The purpose of this blog is to provide generic information and should not be interpreted as a personal recommendation or advice.

 

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