If you’ve had your eyes on money related news recently, then you may have spotted a story highlighting that the top 1% of the world’s wealthiest people now have control of a massive 50% of the world’s wealth. While this statistic shows just how much wealth those at the top now possess, it also makes us wonder how little spare cash others must have.
To further illustrate this growing wealth divide, we could also look at another statistic which shows that to be among the wealthiest 50% of people in the world, you only need to have around £2,065 to your name. While this doesn’t sound like a lot of money to place you in the top 50% of the worldwide wealth spectrum, it is still more than many families in the UK would say that they have at their disposal, should they quickly need it.
To build up savings and wealth, you need to have enough disposable income available each month. So, what is disposable income exactly? Let’s consider this in a little more detail.
What Is Disposable Income, Really?
When talking about disposable income, many people actually get a little confused, thinking that it refers to the amount of money you have left over at the end of each month after all of your essential bills and savings have been taken care of. Actually though, this isn’t the case, as this scenario is referred to as ‘discretionary income’. Instead, the term ‘disposable income’ refers to the amount of money you have left over from your pay packet once any income tax and national insurance has been deducted. This money can then be used for all aspects of day to day living, this is your ‘disposable income’.
Now that we know what disposable income is, we can begin to discover how much disposable income average Brits actually have available, and also how they spend it. Once we get a clear picture of this, we’ll also be able to see just how much money the average Brit has left as ‘discretionary income’, once all of the ‘essential’ living expenses have been deducted.
What Do We Spend Each Week?
According to recent research, the average weekly household expenditure in 2013 was £517.30. The image below shows just how this money gets spent:
If the above figures are to be believed, it would imply that after we remove expenses such as buying food (£59.00), putting a roof over our heads (£74.00) and then having clothes to wear each day (£23.00), then this should leave the average Brit with £361.30 worth of ‘optional’ expenditure to take care of each and every week. I would imagine, however, that whether you view expenses like being able to get around (transport), getting an education and staying alive (health) as being ‘optional expenses’ would be highly debatable to most. So the term ‘optional’ is used quite loosely here.
What About Extra Expenses?
From the figures in the last subheading, we can see that the average weekly household expenditure works out to a mouthwatering £26,899.60 each year – which is about £400 more than the £26,500 the average Brit currently gets paid in salary each year. So, what are we supposed to do about all of the other expenses that may come out of the blue in our lives? For example, how are we supposed to deal with the cost of things such as the following, if we are already overspending?
So, what is the true picture when it comes to disposable income in the UK? Well, if we consider that UK unemployment is currently sitting at around 5.6%, this means that an estimated 1.8 million people are currently looking for work. Around 800,000 of these will be claiming Job Seekers Allowance, meaning they will receive £73.10 per week at the maximum rate. Then, when we consider that the current UK living wage of £7.85 per hour – or £9.15 an hour in London – seems like a distant dream for millions of those working in the UK, well it doesn’t take a genius to see just why so many people in the UK are struggling to make ends meet.
As we can see then, with the average UK household expenditure outstripping the average salary by £400, unless you are living in a dual income household it stands to reason that you may be struggling to get by. We do also need to remember, though, that these average expenditure figures may not be entirely representative in a world where there is a growing wealth divide.
Read more at Aspire Money.
