Cost of living up. Inflation up. Bills up.
But how can you get your disposable income up so you can have some money spare each month?
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With the cost of living continuing to rise and inflation impacting how far our money can go, budgets are hurting more than ever.
Stretching every penny is something we know well and have lived through.
A few years ago, we got ourselves into £42,000 of consumer debt, and because of that were living on the breadline.
We made a choice that we didn’t just want to survive day to day but wanted to find a way to create a more stable financial future for ourselves and our children.
Stretching disposable income
One of the first things we looked at was how to increase our disposable income.
Disposable income is what’s left over after paying out essential living costs, including rent/mortgage, bills, and food.
We could then use this “leftover” money towards bills, clearing off debt faster, having some left over to have fun with the kids, and even making sure we could start to save a bit.
This is how we increased our disposable income.
(And to add: while this worked for us, it might not work for every family or circumstance. It depends on how far you’ve already cut back and what you’re willing to cut further. Hopefully, you will get some more ideas to help save a little, and I wish things get better for everyone as soon as possible.)
Budget
It all starts with having a record of your realistic budget.
Use paper and pen, a spreadsheet, an online template or an app. It doesn’t matter as it makes sense to you.
Add in every penny of income and benefits, and subtract everything you pay out for.
This will give you a starting place and an overview of your personal finances.
Continue budgeting
Creating a budget is not just a one-off.
We check ours every month and adjust and tweak the figures so we can track what’s happening.
It means we get no nasty shocks part way through the month.
Plus, if anything changes (like our energy company changing our direct debit for the umpteenth time!), we can keep on top of everything.
Audit bank account
When you know what you expect your budget to look like, it’s time to do a bank account audit to make sure everything tallies up.
Using online banking is the easiest and quickest way to do this.
Check direct debits
Check all direct debits that you have set up.
Do they match what you expected?
Is there a random one there? You could have a direct debit that only gets taken once a quarter or year, so you forget about it. These payments are worth adding to sinking fund savings.
Check standing orders
Next, look at any standing orders you’ve set up in the past. Do you still need to be paying out for them?
Could you cancel the service?
Check subscriptions
Most banks now split out recurring subscription fees, so it’s easier for you to track your expenses.
Take a look at the list. Do you see any surprises?
I saw a Reddit thread the other day where someone checked and realised they have 13, yes 13, subscriptions! They cancelled them down to two. I don’t even know how much money they saved doing that, but I wouldn’t say no to that saving!
Scrutinise everyday purchases
It would help if you also looked at what you are spending on your debit card and cash withdrawals.
Food, shopping, random treats – what can you cut back on to save?
This can be difficult to manage as there can be so many categories. Look at the Spending Diaries tips below to help you understand how to break down your cash purchases.
What can you cut?
It’s all very well and good telling someone to cut back, but what you find is essential, or luxury, is very different to me and your next door neighbour.
Just because you need to cut back on spending doesn’t mean you must cut something out altogether.
Instead, you could adapt to find a cheaper alternative or perhaps bulk buy.
Or, you could stop spending on your “luxury” for one month, then get it back the next.
Only you can decide if you want to cut Coca-Cola or switch to a store’s own brand, ditch a weekly takeaway and swap to a fakeaway, or leave the car at home and walk more etc.
Make decisions on what works for you, your family and your budget.
If you are struggling to work out how to cut back, use these tips to help you stop spending money you don’t have.
Keep a spending diary
When it comes to contactless, online, and debit card spending, as well as any cash withdrawals, it can be harder to track where the money goes.
Instead of guessing the amounts, keep a spending diary for a week, a month or longer to determine what you are paying for.
This can really give you a good idea of the random little bit of money that might go on sweets after school on a Friday, a quick coffee, pint, or whatever. A fiver here and there adds up fast over a month!
Switch
Where contracts allow, get your switch on.
There’s not much more to be said on this as it’s a matter of waiting until your contract is 30 days from expiry, then seeing the best price your provider can manage, or go elsewhere.
You will see savings in your bank balance.
However, even in mid-contract, some providers will let you adjust your costs if you also adjust what you’re paying for.
Perhaps you could switch to a service with fewer bells and whistles to save a little. They might ask you to sign up for a new 12 month term from that point, so you need to work out if that’s ok for you.
Haggle
Even when you get a price, haggle.
Do some homework, find out how much you’d spend elsewhere, and then see if your preferred provider will cut you a deal.
If you don’t ask, you don’t get.
Increase income
It gets to a point when you can cut back, but you can’t cut back anymore!
Then, it’s time to start looking at how you can increase what comes in, so you have more disposable income.
There are a few ways to do this:
Get free money
Exactly as it says on the tin, you can literally get money for nothing!
It’s not going to pay the bills forever, and the offers will eventually run out, but there are loads of ideas to get you free money and get you started.
Get a side hustle
A side hustle is a smaller commitment than getting another job, and you would likely have more flexibility.
It enables you to get some extra money on the side, which you can do in your own time.
And you never know – over time, that side hustle could turn into an entire business that takes over all other income!
Another job?
Perhaps it’s time to switch to a new job altogether to get more or get another job on top? (I had four jobs on the go at one point, and while rubbish, I kept telling myself that it’s not forever.)
Take a look at your local job market and spruce up your CV, as you never know what opportunities are out there if you don’t look.
I always think it’s a balance, though. The grass isn’t always greener on the other side; it might just be a different shade. You never know if a new company can offer better overall benefits and flexibility than you currently have – it’s not always just about having more money.
Get a raise
If you are happy to stay where you are (or, as above, would struggle to leave due to working patterns etc), ask your manager or HR team if there is any chance of a raise.
You may feel awkward asking, so perhaps put your request more formally in an email. Show why you’re worth more with details from a recent performance report, feedback from co-workers and clients, and projects you’ve been working on successfully.
Claim all entitlements
There are a whole host of benefits out there. Are you sure you’re not entitled to them?
Millions of people are not claiming what they are due and are missing out on thousands of pounds.
The easiest way to check is by using a tool on the Turn2us site.
Get back what you’re owed
Although more of a one-off, you can hunt down money owed to you from other places.
What other ideas do you do to increase your disposable income?
Naomi knows the burden of living on very little and became debt free by following her own money saving tips and tricks. She is an expert on saving money at the supermarket and side hustles.
