Average UK family has less money to spend on luxuries than four years ago

Slow growth in wages means that UK families don't have much extra cash to spend on luxuries such as cinema trips and holidays.

The average UK family had 'disposable income' of £155 a week in February. That's a 2% increase over the last year, but is £2 a week lower than the equivalent figure in 2009.%VIRTUAL-SkimlinksPromo%
If you're wondering what 'disposable income' is, it's the amount of income a household has once it's paid taxes and bought all the essential items such as food, clothing, transport and housing.

So you might use this disposable income for 'fun' stuff such as going to the pub, or you could choose to save it for your future, or a combination of the two. Here's a summary of how much disposable income households have had over the last four years. The figures come from Asda's Income Tracker survey.

Weekly disposable income for average UK household


Income tracker

February 2009


August 2009


February 2010


August 2010


February 2011


August 2011


February 2012


August 2012


February 2013


Source: Asda Income Tracker

I think the above table makes pretty depressing reading. Yes, on the plus side, families have slightly more money to play with than a year ago, but they were significantly better off three years ago – around the time of the last election.

So what has caused the modest improvement over the last year?

Well, the most positive change has been the rise in the number of people in work, up by 590,000 to 29.7 million people. It's also good to see that food price inflation has slowed down a little, falling from 4.2% in January to 3.7% in February.

But there are also several factors that held income back. Firstly, regular earnings (excluding bonuses) rose by only 1.2% over the year to January, well behind inflation. And secondly, there have been big price rises for electricity, up 6.4%, and gas, up 7.2%.

The future
I fear that disposable income isn't going to rise by much in the years ahead. Most employers won't want to give big pay rises in the current climate and I also worry that further weather shocks will push up food prices.

So if you want to have more money to spend on 'fun stuff', you're probably going to have to manage your money better. If you spend your money more efficiently, you'll get more bang from your buck and you'll have more disposable income to play with.

Spend less on essentials
The best way to boost your disposable income is to spend less on essentials. That doesn't mean you have to freeze in your home or eat nothing but rice. But there's a good chance you could save money if you shopped around more.

Don't just accept the renewal quote on your car insurance every year. Make sure you compare all the leading deals on the market. Do the same with your home insurance and any other insurance policies you may have.

You should also follow a similar approach with your gas and electricity. With energy prices soaring, it's essential that you pay the lowest price possible. Read more in How to pay 2011 energy prices!

Budgeting is also really important. If you don't set yourself a monthly or weekly budget, start one now! And even if you already have a budget, you may be able to improve it.

For starters, are you including all your spending in your budget, right down to the smallest items? If you include how much you intend to spend on, say, diet cokes, you may find that you can cut back on the amount you spend here – that could benefit your health as well as your bank balance.

Lovemoney's MoneyTrack tool could also help you budget more effectively. This tool enables you to see all your spending on your current account and your credit cards – all on one page. Your spending is split into different categories such as 'Eating out' or 'Gadgets,' so you can see where your money is going.

Even better, you can also set a budget and then monitor whether you're keeping within that budget every day.

Hopefully by budgeting better and spending less on essentials, you'll have more disposable income for the next year. And, who knows, if you get really lucky, you might get a decent pay rise too...

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Average UK family has less money to spend on luxuries than four years ago

This takes time, but once you know the cost of a phone call, putting the dryer on, or a bag of potatoes, it enables you to judge far better how much you can afford to consume.

Once you know the base price, you are in a position to keep your eyes open for a better offer. If you see a discount you can judge for yourself whether it actually constitutes a bargain. For bigger things like utilities it enables you to do a proper price comparison and see if you can cut your bills.

Don't just assume that the premium range is better, try the every-day brand, or even the basic version and see if you spot the difference. Likewise, consider trading down your supermarket from one of the big players to local markets or discounters like Aldi.

If you plan what you buy to match what you actually cook and eat then not only will you be able to budget far more effectively, but you'll also waste much less and find your money goes further without you having to try.

If you can't think of a way to get your meat for less, consider a vegetarian day once a week. If you can't find petrol any cheaper, then work on making your driving as efficient as possible. The more you can think of clever alternatives the less you will have to make painful cuts to make ends meet.

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