What Do We Spend Our Disposable Income On?

According to ONS data, average household disposable income in the UK increased by £700 between the financial year ending 2019 and FYE 2020. In the period before the COVID-19 lockdown was implemented, the typical British household had around £30,800 in disposable income after taxes and benefits. How did we spend this cash during months at home in 2020?

How Our Spending Habits Changed in 2020

Over half of Brits (54%) have said that the COVID-19 pandemic has caused “minor, moderate or major” decreases in their spending. Most of those cutting back are in the 25-to-34-year age group (62%). Younger adults in the 18-to-24-year group were most likely to have made “major” cutbacks in spending (16%).

While the nation has been spending less overall, specific categories have seen a surge in purchases.

Lockdown Spending Surges: Takeaways, Entertainment & Home Improvement

During the lockdown period, Brits spent a total of £40.6 billion on dispensable items to make their time at home more enjoyable. This spending works out to an average of £771.34 per person. Takeaways and clothing topped the list, while goodies for home and garden improvement were also popular.

Around one third (33%) of UK spenders said that their purchases made lockdown more enjoyable.

The 10 most frequently-made purchases in the UK during lockdown were as follows:

  1. Takeaway food and drinks
  2. Summer clothing
  3. Outdoor plants and flowers
  4. Baking ingredients
  5. Spirits
  6. Loungewear
  7. Paint and painting tools
  8. Make-up
  9. Nightwear
  10. Entertainment subscriptions

Did you know? One fifth (20%) of Brits reported spending more on streaming services, being unable to attend concerts, movies or social gatherings in person.

How Men and Women are Spending their Income

Spending patterns among women and men were similar, although women were more likely to say they’d spent more on certain items:

  • Groceries (58% women vs 45% men)
  • Hobby supplies (29% women vs 19% men)
  • Books (26% women vs 17% men)

Meanwhile, it’s interesting to note that British men have been spending nearly double on their appearance compared to women. This includes money spent on fashion, fitness, and health and beauty products.

Overall, women in the UK spent an average of £571.58 per person, while men spent an average of £1,014.08.

Hey, Big Spenders and Savers

Gen X: When it comes to the most financially influential generations in the UK, young Generation X-ers, or those between 41 and 45, generally earn, spend and contribute more to the British economy than any other age group. At the beginning of the year, they were also predicted to be the highest earners and spenders in 2020, estimated to spend around £803.91 per week. Interestingly, this group are also amongst the biggest savers.

Millennials: As one of the nation’s largest spending groups, millennials often dominate the conversation when it comes to topics around shopping and saving. Despite a general strengthening of the millennial pound as this group moves up the career ladder, millennials are also famously known as the generation least likely to be able to own their own homes, with many calling the group ‘generation rent’.

This is also the generation that has been scrutinised for its frivolous spending habits over the years, so much so that an Australian luxury property developer, Tim Gurner, once implied that more millennials could get onto the property ladder if they simply stopped buying avocados.

However, research has shown this criticism unfair, with most millennials spending the largest chunk of their money on rent or house deposits and savings, with things like clothes, technology and entertainment falling further down the list.

The Property Squeeze

Housing was predicted to account for the largest proportion of spending by 2020, accounting for almost 20% of total spend across all generations. This is primarily due to consistent growth in private rental prices, mortgages and high energy bills. It is also one of the main drivers behind alternative home-buying schemes like Shared Ownership becoming popular among those looking to step onto the property ladder without the burden of saving a substantial deposit.

In 2020, the average price of a first-time buyer home in inner London was £517,920 – meaning that a 20% deposit would work out at an eye-watering £103,584. For those looking to buy their first home on the open market, spending less on subscriptions, clothes and food could go a long way in helping their savings balance increase. However, even if millennials could save 20% of their wage each month, it would still take an average of eight years and four months for one person to save enough for a house deposit.

“In stark contrast, saving to buy a Shared Ownership home can prove to be much more achievable for first-time buyers. For example, if a couple can put aside £400 a month, then they could save for a deposit in a third of the time needed for a deposit on the open market.” – Nick Lieb, Head of Operations at Share to Buy

Try this tool: Shared Ownership Mortgage Calculator

How to Save Money: Basic Ways to Boost Your Savings

  • Start to budget: 2020 was a financially difficult year for many, but if you want to start budgeting, try keeping a list of debt and savings targets in your wallet to stay on track with a planned budget for the month. This is a good way to see how much you really spend on entertainment, travel and more.
  • Stick to a list: One of the simplest money-saving tips is to decide what to prioritise by creating a list before you go shopping. The trick is to stick to it to avoid impulse purchases like chocolate or clothes.
  • Prioritise spending: From health and beauty to takeaways and tech, prioritise spending habits from highest to lowest across each major category, and see where you can cut down. Try to spend money across just one of the categories each month.
  • Create a waiting list: Help to reduce impulse spending and increase disposable income savings by creating a two-week waiting list for bigger purchases to see if they really are worth the spend.
  • Use technology: Finance apps like Money Dashboard and Tandem can help you stay one step ahead of your finances by tracking how much you save and spend.
  • Recheck all your subscriptions: Stop wasting your disposable income through unused gym memberships, magazines, TV channels and more. Do an audit of every group or service you belong to and cut everything you no longer engage with by using a helpful app like Emma.
  • Set short-term goals: Alter your spending habits by creating specific goals you can work towards, like cutting your entertainment budget from £300 a month to £200. If you’re looking to step onto the property ladder, use this mortgage comparison tool to discover what kind of mortgage you could afford to begin setting your goal. Whether you fall into the average disposable income in the UK or not, any amount of savings is a good start!

Discover more about how Shared Ownership is helping first-time buyers put their disposable income to good use by getting onto the property ladder with a reduced deposit.