A new report from Deloitte suggests that UK households face a drop in disposable income of around £780 this year.
This is the result of spending cuts, tax rises and price inflation, including higher commodity prices.
£780 is a significant amount of money for any household to see missing from their annual budget.
With careful financial planning, it might be possible to avoid this drop in disposable income. The figures suggested in the Deloitte research are simply average numbers, so this combination of factors will hit households to differing extents.
When faced with a reduction in disposable income, financial planning is usually concerned with increasing the gap between income and expenditure. By maintaining a healthy gap between income and expenditure, it is possible to create excess income which can be used to meet longer-term financial objectives.
Money is often wasted each year through a lack of financial planning.
This can include paying unnecessary taxes or simply not having a documented financial plan in place. Not having a financial plan can result in households spending money without purpose; money which could have been used to repay expensive debts, save for the future or build an investment portfolio.
Of course spending without a purpose is almost as bad as saving or investing without a purpose. By not knowing where you money needs to go, it becomes easier for it to go in the wrong direction.
With Deloitte expecting it to take until 2015 for disposable income levels to get back to their 2009, families need to take proactive steps to ensure they are not an average statistic.
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