Income protection insurance can provide a potentially vital financial safety net for families, yet it remains widely misunderstood or overlooked by many.

With rising living costs and economic uncertainty, safeguarding your income against unforeseen circumstances is more important than ever.

Let’s look at what income protection insurance is, why you might need it, when you might not, plus the key considerations when shopping for a policy.

Income protection explained

Income protection insurance is a policy designed to provide a regular income if you’re unable to work due to illness, injury, or disability.

Unlike other forms of ‘protection’ insurance, such as life insurance or critical illness cover, income protection focuses on replacing a portion of your earnings over an extended period, helping you maintain your lifestyle and meet financial commitments.

The way it works is straightforward. You pay a monthly premium to an insurer, and in return, the policy pays out a tax-free monthly sum – typically 50-70% of your pre-tax income – if you’re unable to work for a specified period.

Policies often have a waiting (or deferral) period, which can range from a few weeks to several months, during which you must be unable to work before payments begin. This waiting period can be tailored to your circumstances, with shorter periods generally leading to higher premiums.

Payments continue until you’re able to return to work, the policy term ends, or you reach retirement age, depending on the policy’s terms.

Some policies also offer additional benefits, such as rehabilitation support to help you return to work or cover for specific conditions like back injuries or mental health issues.

Income protection is particularly valuable for those whose financial stability depends on their ability to earn, offering peace of mind that bills, mortgages and daily expenses can still be covered during difficult times.

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Why you might need income protection

The primary reason to consider income protection is the risk of serious illness or injury that prevents you from earning an income.

In the UK, millions of people face long-term health challenges that disrupt their ability to work. Over 2.8 million people were economically inactive due to long-term sickness in 2024, according to the Office for National Statistics (ONS), a figure that highlights the vulnerability of relying solely on personal savings or statutory benefits.

Serious illnesses, such as cancer, heart disease, or mental health conditions, can strike unexpectedly, often requiring extended recovery periods.

Similarly, accidents – whether a car crash or a workplace injury – can lead to temporary or permanent disability, cutting off your income stream.

Statutory Sick Pay (SSP) in the UK provides only £118.75 per week (as of 2025) for up to 28 weeks, which is unlikely to cover most people’s living expenses, especially if you have a mortgage, rent, or dependents.

 Savings can quickly dwindle and benefits such as Universal Credit may not bridge the gap adequately. Income protection can provide a more substantial, reliable income, allowing you to focus on recovery without the added stress of financial hardship.

Self-employed individuals are particularly at risk, as they lack access to employer-provided sick pay. Freelancers, contractors, and small business owners often face immediate financial strain if they’re unable to work.

Even salaried employees may find their employer’s sick pay scheme, typically a few months at full or half pay, insufficient for prolonged absences.

Beyond health-related risks, income protection can also be a lifeline for those with significant financial commitments, such as young families or individuals with large mortgages. Losing your income could jeopardise family stability, making income protection an essential consideration for parents.

Reasons why you wouldn’t need it

While income protection is valuable for many, it’s not necessary for everyone. Certain circumstances may reduce or eliminate the need for a personal policy.

If you’re employed and benefit from a robust workplace protection scheme, you may already have adequate cover. Some employers offer generous sick pay packages, covering full or partial salary for extended periods, or provide group income protection schemes as part of their benefits package.

These policies, often cheaper due to collective bargaining, may make a personal policy redundant. However, it’s crucial to review the terms. Some schemes only cover specific conditions or have shorter payout periods.

Individuals with substantial savings or alternative income sources may also forgo income protection. For example, if you have enough in savings to cover living expenses for several years, or if you have passive income from investments, rental properties, or a pension, you may not need the additional security of a policy.

Similarly, those with a partner or family member who can fully support household finances during a period of illness might feel less urgency to purchase cover.

People nearing retirement or with no dependents may also find income protection less relevant. If you’re close to receiving a pension or have paid off major debts like a mortgage, the financial impact of losing your income may be minimal. Additionally, some policies don’t cover individuals over a certain age, typically 65, which aligns with retirement for many.

Finally, if you work in a low-risk profession and have excellent health, you might perceive the risk of needing income protection as low. However, this assumption itself carries risks, as unexpected illnesses or accidents can affect anyone, regardless of lifestyle or occupation.

Things to look out for when buying a policy

Choosing the right income protection policy requires careful consideration to ensure it meets your needs and offers value for money.

Here are key factors to keep in mind:

Shop around: Premiums and policy terms vary widely between insurers. Use comparison websites or work with a broker to explore options from multiple providers. Look at the percentage of income covered, the deferral period, and any additional benefits, such as rehabilitation support or premium waivers during unemployment.

Consider speaking to an adviser: An independent financial adviser can help you navigate the complexities of income protection options, ensuring the policy aligns with your financial situation and goals.

Understand exclusions and eligibility: Insurers may exclude pre-existing medical conditions, mental health issues, or high-risk occupations (e.g., construction or professional sports). Disclose your full medical history and job details to avoid having claims denied later. Some conditions, like chronic illnesses, may preclude you from getting cover or increase premiums.

Check policy flexibility: Ensure the policy allows adjustments, such as changing the deferral period or coverage amount, as your circumstances evolve. Also, check whether premiums are guaranteed (fixed) or reviewable (subject to change), as this can affect the long-term affordability of the policy.

Cost vs. coverage: While cheaper policies may seem appealing, they often come with shorter payout periods or stricter terms. Balance affordability with comprehensive cover and explore policies with back-to-work support to reduce long-term costs.

In conclusion, income protection insurance is a crucial consideration for many in the UK, particularly those with dependents, significant debts, or no alternative financial safety net.

By understanding how it works, assessing your need, and carefully selecting a policy, you can protect your financial future against the unpredictability of illness or injury.

Always consult with professionals if you’re in any doubt and compare options to find a policy that offers both security and peace of mind.

Photo credits: Pexels

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The Pensions and Lifetime Savings Association (PLSA) has released its latest Retirement Living Standards update, revealing a notable decrease in the cost of a minimum retirement lifestyle, while moderate and comfortable standards have seen increases.

The changes are driven by lower energy prices and shifting public expectations on retirement income levels.

For a two-person household, the cost of a minimum retirement lifestyle has dropped to £21,600 annually, down £800 from previous levels, while a one-person household now requiring £13,400, a £1,000 reduction.

The decline is largely attributed to a significant fall in energy costs, with weekly domestic fuel budgets for a two-person household at the minimum level decreasing by £12.44 and by £8.82 for one-person households.

These savings reflect broader economic shifts, including lower energy prices, which have eased financial pressures for retirees at this level.

Zoe Alexander, director of policy and advocacy at the PLSA, said: “For many, retirement is about maintaining the life they already have not living more extravagantly or cutting back to the bare essentials. The Standards are designed to help people picture that future and plan in a way that works for them.

“Everyone’s situation is different, and contributions should be manageable. But if your circumstances improve, even small increases can make a big difference to your future.

“This year’s findings show that costs can go down as well as up. But planning matters more than ever. Whether you’re on your own or sharing your future with someone else, these Standards are here to help savers picture and plan their retirement – with real figures, real choices and real flexibility.”

The Retirement Living Standards, calculated by Loughborough University’s Centre for Research in Social Policy, are based on in-depth discussions with UK residents to define three retirement lifestyles: Minimum, Moderate and Comfortable.

While the minimum standard saw reductions, the moderate and comfortable standards have risen slightly due to inflation across various expenditure categories, though lower energy costs – down £16.74 and £15.38 per week for two- and one-person households, respectively – helped offset these increases.

Professor Matt Padley, co-director of the Centre for Research in Social Policy at Loughborough University, said: “Our research on what the public agree is needed in retirement at these three different levels continues to track changes in expectations, shaped by the broader economic, social and political context.

“The consequences of the cost-of-living challenges over the past few years are still being felt, and we’ve seen some subtle changes in public consensus about minimum living standards in retirement, resulting in a small fall in the expenditure needed to reach this standard. 

“In these uncertain times, planning in concrete ways for the future is ever more important, and the RLS help people to think in more concrete ways about what they want their retirement to look like, and how much they will need to live at this level.”

Public discussions also highlighted evolving expectations for the Minimum standard, with small adjustments in spending on clothing, hairdressing, technology, taxi use, and charitable giving. However, rail travel budgets increased, rising from £100 to £180 per person annually, reflecting higher fares and greater reliance on trains for longer journeys.

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This year’s update introduces new terminology, replacing “single” and “couple” with “one-person” and “two-person” households to better reflect modern retirement living arrangements.

A PLSA survey found that 75% of people live with family members, 22% live alone, and 3% share with non-family members. Looking ahead, 77% of non-retired individuals expect to live with someone in retirement, with only 12% preferring to live alone, signaling openness to shared living to reduce costs.

The RLS serve as a guide, not a rigid target, encouraging retirees to tailor plans to their lifestyles.

Alexander urges savers to consider pension contributions beyond the 8% automatic enrolment default, suggesting 12% or more for a better chance at their desired retirement.

Photo credits: Pexels

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Pensions Minister Torsten Bell has announced the Government’s plans to legislate for so-called ‘collective defined contribution’ (CDC) pension schemes.

The Government will legislate to create collective pension schemes in the Autumn as it looks to improve pension outcomes for workers.

This will see pension funds from multiple employers pooled together into much larger pots. The Government says by increasing the size of the pension funds it spreads the risk and improves outcomes for members.

Minister for pensions, Torsten Bell, comments: “Success in the world of pensions isn’t just about getting people saving, it’s ensuring their savings work as hard as possible for them.

“Too often at present we are leaving individuals to face significant risks, about how their individual investments perform and how long their retirements last.

“Pooling some of those risks will drive higher incomes for pensioners and greater investments in productive assets across the economy.”

More from Edmund Greaves

CDC pensions explained

Currently when an employee joins a company, they are auto enrolled into the company scheme. But the variety of choices, sizes and performance of these pensions are mixed.

Instead, the Government intends to launch so-called ‘collective defined contribution’ or ‘CDC’ schemes. Such schemes are much larger. This makes them more powerful and also more accountable with larger numbers of members reliant on positive outcomes.

Currently the only CDC scheme in the UK is run for Royal Mail employees. It has over 100,000 members and offers them a combination of cash lump sum and income for life in retirement.

The Government will set out new legislation in the Autumn to widen the reform to more employers and schemes.

It plans to offer members of such schemes products on retirement such as annuities as an option for a secure lifetime income instead of managing funds and savings independently once retired.

What collective defined contribution means for pensions

While there is no current indication of whether your pension will be affected by the collective defined contribution pension reforms, there are changes coming in this Parliament.

Workers will potentially see their pension funds moved into larger schemes, which could give them less control over their investments.

The trade-off here is more assurance that their savings are being invested fruitfully for the future – but this is by no means guaranteed.

CDC schemes will have more power to invest in long-term assets such as illiquid investments (such as infrastructure) and more UK-based investments. This is a part of the Government’s wider priority to see more savings invested locally in the UK to boost the economy.

Other types of pensions such as legacy final salary (defined benefit) and private pensions such as self-invested pension pots (SIPPS) will be unaffected by the reform.

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From parents helping kids to pay the mortgage, to the launch of a universal basic income trial in the UK and why the Chancellor is telling consumer watchdogs to crack down on price hikes, here are our favourite personal finance stories this week.

One in four parents helping kids with the mortgage

Nearly one in four parents are helping out their children with mortgage payments, Madeleine Ross writes in The Telegraph.

The so-called Bank of Mum and Dad, with assets over £250,000, are supporting mortgage costs, while 79% help with other everyday costs for their kids, according to research from advice firm Saltus Wealth.

Mike Stimpson of Saltus Wealth commented: “Traditionally, parents have helped out their children with deposits on houses, and other investments that grow with them, but now, we’re increasingly seeing clients forced to bring those investments forward to help their children with everyday costs such as mortgages and household bills.”

With mortgage costs soaring as the base rate rises, Ross spoke to a single mum Kate, who has received help from her parents, although so far hasn’t had to ask for help with her loan payments. Another young homeowner, Sophie, says she and her husband are struggling to pay mortgage and childcare costs as their mortgage payments increase.

UK universal basic income trial launches

A trial of ‘universal basic income’ or UBI has launched in the UK, Simon Wilson writes for MoneyWeek. Thinktank Autonomy is running the trial in which participants will be given £1,600 every month with no strings attached for two years.

Just 30 people will be part of the trial, with one group in Jarrow, Tyneside, while the other is based in East Finchley, north London. The trial will cost £1.5 million over the two-year period, but this pales into insignificance compared to the £1 trillion annual cost were it to be applied to the entire UK.

Commenting on the trial, director of Autonomy Will Stronge says: “Our society is going to require some form of basic income in the coming years, given the tumult of climate change, tech disruption and industrial transition that lies ahead. This is why building the evidence base and public engagement now is so important.”

Wilson adds dozens of countries have trialled UBI but most have found that the income didn’t encourage most participants into work but improved other factors such as wellbeing, confidence and life satisfaction.

Chancellor urges regulators to crack down on price hikes

With inflation continuing to hurt households and push up interest rates, Chancellor Jeremy Hunt has asked major consumer regulators to crack down on excessive profiteering, James Tapsfield writes in the Daily Mail.

Hunt has also warned supermarkets to pass on falling costs to customers as international prices fall for consumer staples such as food.

Tapsfield writes that Hunt is looking to the Competition and Markets Authority (CMA) to investigate food costs as concerns mount that companies are hiking costs for consumers just to take advantage of the situation.

Utility companies have rebutted Hunt’s warning however, saying prices are now beginning to fall for customers, despite high headline rates of inflation from the Office for National Statistics (ONS) persisting.

Photo Credits: Pexels

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From cryptocurrency being treated as a form of gambling to higher income tax rates and green mortgages – here are our favourite must know money stories this week to help you get your head around your personal finances.

Treat crypto investing as gambling, MPs say

MPs from the influential Treasury Select Committee have urged the UK Government to treat retail investment in cryptocurrencies as a form of gambling, report Chris Vallance and Tom Gerken for BBC News.

The committee’s report noted that about one in 10 people in the UK held crypto assets, and most said they are a “fun investment.” Gambling helpline charity GamCare said that in the last two years, it was approached by over 300 people struggling with investing in cryptocurrency.

While the Treasury agreed crypto value could dramatically change – closely resembling gambling – it did not support using gambling regulation.

The Treasury believes crypto offers opportunities, but said it was “robustly regulating the market, addressing the most pressing risks first in a way that promotes innovation.”

After identifying the potential risks and rewards of cryptocurrency, the committee recommended a balanced approach, while suggesting that the government should avoid any spending of public resources without a clear benefit.

One in five taxpayers to pay higher income tax

One in five taxpayers will be paying a higher-rate income tax by 2027, reports Ruth Emery for Money Week.

The Institute for Fiscal Studies (IFS) said the six-year freeze on thresholds and “fiscal drag” will push teachers, nurses, and electricians to the 40% tax bracket. 2.1 million more will be higher rate tax payers in five years, according to the Office for Budget Responsibility (OBR).

The report found in 2022–23, 11% (6.1 million) were paying the 40% tax rate, compared to the 3.5% of UK adults (1.6 million) in 1991-92.

Emery also outlines several tips to avoid the fiscal drag – using an ISA and pensions for tax relief, reducing your inheritance tax bill, taking advantage of the marriage allowance, or salary sacrifice if your salary has just tipped into a higher tax band.

The truth about ‘green’ mortgages

The UK Government is looking to hit net zero targets by 2050, and you might soon be forced to look into how ‘green’ your home is, writes Esther Shaw for The Telegraph.

According to the Office of National Statistics (ONS), the average UK property has an EPC (Energy Performance Certificate) rating of ‘D,’ and while it is not yet a law, all homes are expected to have an EPC rating of at least ‘C’ by 2050.

Some mortgage lenders are offering ‘green’ mortgages – to purchase energy efficient properties at slightly discounted rates – however, these aren’t quite appealing.

Nick Mendes of John Charcol, a mortgage broker, said: “While banks may be keen to talk about how they are doing their bit as eco-friendly lenders, rates tell a different story. Borrowers should not assume that opting for green will mean they get the best rate. Most market-leading deals will be on non-green products.”

However, some lenders offer alternative green perks including cashbacks, preferential rates, interest-free loans, or rate reductions.

Mr Mendes said: “You need to look at the other benefits of having an energy-efficient home. Not only will this mean lower utility bills, but it could also help when you come to sell, as a higher EPC rating could add value to your property.”

While EPC ratings are generalised and only measure a property’s energy costs, rather than its energy efficiency, for now at least it is the only way of gauging a property’s energy usage.

Photo Credits: Unsplash

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Along with energy bills and mortgages, for many people council tax is their largest single item of monthly expenditure.

Councils do of course need this money to help pay for services, from police to refuse collection, parks and libraries to schools. Nonetheless, in the current cost-of-living crisis it’s an expense that growing numbers of people are struggling to afford. 

As if that wasn’t enough, from April millions will see their council tax bills rise by 5%, the maximum allowed by the government. Along with all the other price rises, it’s no surprise many are wondering how on earth they will make ends meet in the months (and years) ahead.

Fortunately, however, there are various ways you may be able to reduce your council tax bill, in some cases to nothing. There are three main methods: household-based, income-based and property-based. I’ll look at each of these in turn.

Household-based

First and foremost, if you’re a single-person household, you will qualify for a 25% discount on your council tax. 

As a matter of interest, this is the only reduction I qualify for myself. My local council applied it automatically after I notified them of my partner’s death a few years ago.

You will also qualify for the 25% discount if the only people you live with are under 18 or aren’t liable for council tax for some other reason (e.g. they are full-time students). 

To claim the discount, go to https://www.gov.uk/apply-for-council-tax-discount and enter your postcode. You should then be forwarded to the web page for the council in question, where you can apply.

There are other household-based discounts as well. For example, people with a ‘severe mental impairment’ (SMI) may be eligible for a discount of up to 100%. This could include Alzheimer’s, Parkinson’s, MND, severe learning difficulties or someone who has had a disabling stroke.

To qualify, the person will need to be both medically certified as having an SMI and be in receipt of at least one of certain state benefits (e.g. Attendance Allowance).

People with a live-in carer may qualify for up to 50% discount, as live-in carers are exempt from paying council tax. To qualify the carer will need to look after a person with a disability – who is not their partner, spouse or under 18 – for at least 35 hours a week.

Caring for your mother, father, brother, sister, niece, nephew, friend, uncle or aunt does count. The carer must live with the person concerned, and again that person must receive one of a range of benefits.

Finally, people receiving pension credit may qualify for a discount of up to 100%. I talked about pension credit a while ago in this article for Mouthy Money. I highly recommend that anyone of pensionable age who may be eligible applies for it.

Even if you are only awarded a few pounds a week you may qualify for a council tax reduction, and you should also be eligible for further government ‘cost of living’ payments in the months ahead. Receiving pension credit also makes you eligible for other benefits, including free TV licences for over-75s.

You can check if you might be able to get pension credit using this online calculator.

Income-based

If you’re on a low income and/or claim benefits such as universal credit, you may also qualify for a council tax reduction. This applies both to people who own their home and those who rent. It doesn’t matter whether you’re employed or not. 

Every council runs its own scheme and eligibility requirements vary, as do the discounts on offer. Councils typically take into account your household income, number of children and adults, benefits, residency status, and so on. They will also take into consideration your pensions and savings, and housing costs such as rent or a mortgage.

To apply for an income-based reduction in your council tax, again go to https://www.gov.uk/apply-for-council-tax-discount and enter your postcode. You should then be forwarded to the web page for your local council, where you can apply.

Property-based

You may also be able to get a reduction in your council tax bill due to the property itself.

For example, if your home has been adapted for a person with a disability, you may be eligible to drop a council tax band.

As you may know, every property in the UK is allocated a council tax band based on its value, from Band A (lowest) to Band H (highest). The actual amount you pay in each band will depend on the council concerned, so the benefit of dropping a band will vary from council to council. It will generally be worth somewhere between £100 and £400 a year (more for larger properties).

The types of adaptation might include an extra bathroom or kitchen for the person who is disabled to use, or a room adapted specifically to their needs, e.g. with extra space for a wheelchair or a stairlift to get up to the bedroom.

Finally, if you think your property has been allocated to the wrong council tax band, you can apply for it to be reassessed. This is quite a complex matter and I can’t go into detail about it here. But if your house is in a higher tax band than similar neighbouring houses, you may have a case. 

The popular Moneysavingexpert website has an excellent step-by-step guide to checking whether it’s worth asking for a reassessment and, if so, how to apply.

Do just bear in mind that reassessment means exactly what it says, and it’s possible your council tax band could be raised rather than lowered. So it really is vital to ensure you have a good case before proceeding.

As always, if you have any comments or questions about this article, please do post them below.

Nick Daws writes for Pounds and Sense, a UK personal finance blog aimed especially (though not exclusively) at over-fifties.

Photo Credits: Unsplash

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The new year is traditionally a time to make fresh plans and resolutions. And that should certainly apply to your finances as well.

BIlls are rising rapidly at the moment, including gas and electricity, food, petrol, and so forth. For many – perhaps most – of us, our incomes aren’t increasing fast enough to keep pace. Of course, that can be pretty scary.

There ARE things we can do to keep our financial affairs under control, though, so in my article today I’m recommending a three-pronged strategy.

1. Maximize Your Income
2. Minimize Your Expenditure
3. Apply Smart Budgeting

I’ll look at each of these in turn…

Maximize your income

In other words, ensure you have as much money coming in as possible. Even if you’re living on a fixed pension, there are still things you may be able to do to boost your income and improve your financial position.

My first tip is to check you’re getting all the welfare benefits you’re entitled to. I recommend trying the Turn2Us online benefits calculator. This asks a series of questions about your finances and personal circumstances. It then works out which benefits (if any) you may be eligible for.

Another top tip is to check your tax code. As you may know, this code incorporates your tax-free allowance. It tells your employer (or pension provider) how much tax they should be deducting every month. If your code is wrong, you could be paying more tax than you need.

You should be able to find your tax code on any payslip or pension statement you receive. This article on the popular Money Saving Expert website will tell you exactly what the code means. If you think your code may be wrong, contact HMRC and ask them to look into it.

You could also consider applying for a part-time job. This might range from a Saturday job at a local supermarket or DIY store to gardening, delivery driving, leafleting, and so on. 

Part-time work is generally low stress. As well as giving your income a boost, it also has the benefit of keeping you mentally alert and meeting new people and potentially new friends. Part-time jobs are often advertised locally or you could search on websites like Indeed.

Finally, you could start a ‘side hustle’ to give you an additional income stream. Again there are lots of options here, from doing online surveys to entering TV quiz shows!. You can see many more ideas in the Earning category on Mouthy Money.

Minimize Your Expenditure

The second strand of my strategy involves reducing your spending. Again, there are lots of ways you may be able to do this.

One method I want to mention here is using price comparison websites. Two of the best known are Go Compare and Compare the Market.

These sites let you compare prices for a range of services. They include home insurance, car insurance, travel insurance, holiday insurance, mobile phone services, broadband internet, pet insurance, and more.

At one time they used to let you compare energy suppliers as well, but with prices so high and so few deals around at the moment, they typically can’t help much with that right now.

Nonetheless, if you’re looking to save money on services like these, price comparison sites are well worth a look. I would offer just two pieces of advice here. First, use more than one service.

All sites cover a different range of suppliers and sometimes they negotiate special deals for their members. So you can and probably will get quite different results from different sites. 

The other thing is to check out cashback services as well. These are services like Topcashback and Quidco. The way these sites work is that you start by signing up as a member, which is generally free.

Then when you need to buy something you start at the cashback site and find a supplier listed there who provides whatever product or service you need. Click through that link and make a purchase, and if everything goes as it should, cashback will appear in your account in due course.

• When I checked recently, I found Top Cashback was paying £25 cashback to anyone who clicked through to Compare the Market and took out a policy through them. So in this case, by going to Topcashback first, you would get a £25 cash rebate in addition to saving money with the price comparison site itself. It’s often worth combining price comparison sites with cashback sites to get the best possible deal.

Again, in this article I only have room to skim the surface of money-saving methods. I highly recommend checking out the Saving category on Mouthy Money for many more ideas and strategies.

Apply smart budgeting

This is the final strand of my strategy. Having maximized income and minimized expenditure, smart budgeting means prioritizing what you spend and – as our American friends say – getting the most bang for your buck.

One thing I strongly recommend is that you perform a spending audit. By that I mean taking an in-depth look at what you are spending over, say, a three-month period. 

Look especially for any subscriptions or other regular payments and see if they are things you could do without. And yes, I’m afraid that does include charitable donations! 

When I helped elderly friends do this recently, I found they had six standing orders to local and national charities which they had accumulated over the years. None was huge, but taken together they came to almost £50 a month, which was money they could ill afford.

So I had to advise them to cancel them. They said they’d feel terrible doing that, so I told them to decide which one was the most important to them and keep that but cancel all the others. That was a compromise they could live with. In the end they kept a small monthly payment to a local animal charity and cancelled the rest.

There may be other things you don’t need as well, like insurance policies that are no longer relevant or memberships you no longer get any benefit from. Again, my friends paid a membership fee for a local botanical garden by standing order but they hadn’t been for over a year.

I had to say to them, if you’re only going once or twice a year, it’ll be more economical to pay an admission fee when you go. Going through all your outgoings may well highlight opportunities for reducing your expenditure like this.

It’s also important to look at things like mobile phone and broadband bills. Unfortunately, if you don’t take a proactive role, these tend to go up and up. Although in theory suppliers aren’t supposed to penalise long-standing customers, it definitely does happen.

Earlier this month I noticed my Virgin Media broadband bill had gone up to almost £50 a month. So I phoned and said I was thinking of switching. Miraculously, they found me a new deal on £28 a month for the next 18 months, almost half what they had been charging.

It shouldn’t be necessary to do this but sadly if you’re a loyal customer and never complain, it’s highly likely you’re going to be – to put it reasonably politely – shafted.

Finally, I want to say a word about savings. Obviously in these cash-strapped times saving is hard. But if you don’t have any money stashed away, it can make you very vulnerable if the unexpected happens. 

A general guideline is that everyone should aim to have at least three months of their normal outgoings available in easily accessible form. An easy access account is likely to be the way to go here, and you should be able to earn a bit of interest on it as well. 

Interest rates for savers, as I’m sure you know, are pretty poor at the moment, but the Money Saving Expert website – mentioned earlier – will show you who is paying the most. At the time of writing the best interest rate available on a no-strings-attached easy-access savings account was 2.86% with Zopa. But that may have changed by now, so it’s worth looking to see who MSE are currently recommending.

For many more smart budgeting tips and ideas, check out the Spending category on Mouthy Money.

Closing thoughts

Summing up, my recommended strategy for boosting your finances in 2023 is three fold. First, maximize your income. Second, minimize your expenditure. And third, use smart budgeting to ensure that you deploy your financial resources as efficiently as possible.

I’ll close with one last piece of advice, and it’s arguably the most important of all. As it (allegedly) says on the front of The Hitch-Hikers Guide to the Galaxy, DON’T PANIC.

These are undoubtedly challenging times, and the media love nothing more than a good scare story to make everyone terrified. But panicking seldom achieves anything and is often counter-productive. When times are hard, it’s more important than ever to keep a cool head and deal calmly with the situation. 

Whatever our circumstances, as I hope I’ve shown above, there are lots of things we can all do to help keep our finances on an even keel.. 

Keep visiting Mouthy Money for much more valuable advice about boosting your finances through 2023 and beyond!

Nick Daws writes for Pounds and Sense, a UK personal finance blog aimed especially (though not exclusively) at over-fifties.

Photo by Microsoft 365 on Unsplash

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Most people in the UK will know of Sir RIchard Branson (born 1950). He is probably Britain’s most famous and successful serial entrepreneur.

Branson’s early business career involved selling records (the CDs of their day) by mail order. In 1972 he opened a chain of record stores, Virgin Records, later known as Virgin Megastores. Today his Virgin Group comprises more than 400 companies in areas from music to air travel, sports centres to space exploration. 

Branson himself is a billionaire several times over. In 2007 he was included by Time magazine in their Top 100 Most Influential People in the World list.

Of course, I’m not suggesting that every Mouthy Money reader should try to emulate Branson’s success (though dream big, by all means!). However, I do think we could all benefit by taking a leaf out of his book and being a bit more entrepreneurial, especially in these challenging times.

Multiple income streams

Like Branson and his Virgin Group, I’m a big believer in having several strings to your money-making bow, each one generating another income stream for you.

That doesn’t necessarily mean starting new businesses (though it could) but simply ensuring you have more than one source of money coming in. There are many advantages to this.

For one thing, the extra cash can give you greater resilience in the event of your main income source drying up. It can also help you build reserves to cope with unforeseen circumstances. You can put it towards major purchases in future. It can also finance a few extra treats to improve the quality of life for you and your family – from gifts and meals out to having the heating on for an hour longer in the evening…

Of course, even Branson doesn’t strike gold every time. Some of his businesses have gone under due to changing times and fashions. Others never really took off in the first place (Virgin Cola being the classic example). But because he always has plenty of other projects on the go, his empire just keeps growing and growing. That never-say-die approach is something we can all benefit from copying!

Here then are some ways you may be able to generate extra income streams for yourself…

Part-time work

I guess this is pretty self-explanatory. It could range from getting a Saturday job at your local supermarket or DIY store to gardening, delivery driving, leafleting, and so on. 

People with specialist skills may also be able to get paid part-time work in their field. For example, I know several retired nurses who went back to work part-time giving Covid jabs. 

Part-time work is generally low stress. As well as giving your income a boost, it also has the benefit of keeping you mentally alert and meeting new people and potentially new friends. If you’re over 50 (like me) there’s a website called Rest Less which specializes in part-time work suitable for older people. 

Side hustles

Side hustles is a broad term that covers small-scale money-making sidelines of all kinds. I am a big fan of side hustles and have a number myself, including freelance writing and blogging. 

There are lots of other potential side hustles, of course. One I’ve done from time to time is being a TV or movie extra. This can be great if you have a little time available in the day. You won’t make a fortune but you’ll be paid and get to see how films and TV shows are made. There are a few agencies that employ freelance extras (here’s a link to one). I wrote more about working as an extra in this article on Mouthy Money.

Another possibility is going on TV quiz and game shows. You can make a lot of tax-free money if you win a big prize on a show like The Chase or Who Wants to Be a Millionaire. Of course, you may not win anything at all, but it’s still an interesting and enjoyable day out and generally your expenses will be covered. I also wrote about this opportunity in Mouthy Money..

There are lots of other side hustles as well. I can’t go through them all in detail here, but they include tutoring, consultancy work, dog walking, handyman/DIY work, house  sitting, making and selling craft items, and so on.

Rent a room

This is a tried-and-tested way to generate extra income. If you have a spare room (or rooms) in your house that you don’t mind letting out, the government will allow you to earn up to £7,500 a year tax-free under the Rent a Room scheme. 

Tax exemption if you don’t earn more than £7,500 this way is automatic – you don’t even have to fill in a tax return. The room must be furnished and in your own home.

If you don’t want a full-time lodger, Rent a Room tax relief can also be used for income from short-term lets, as with Airbnb.

Online auction selling 

Next I want to mention online auction sites, of which the best known is eBay. 

A lot of people use eBay as a shopping site, but it can be a great way of making extra money as well. We all have stuff lying around the house we don’t need any more, so why not sell it on eBay and get a few pounds for it? Obviously selling is a bit more complicated than buying, but eBay has been running for a long time and they have learned to make selling on the site as easy as possible, even for people who are brand new to it. 

There is no tax liability if you’re simply selling your old stuff on eBay. If you decide to start buying in stuff to sell at a profit then there could be, but it’s worth bearing in mind that everyone has a £1,000 Trading Allowance. If you make less than this in a year from things like eBay trading you don’t have to pay tax on it or even declare it, whatever other income you might have.

• Though you may like to note that from January 2024 online marketplaces such as eBay have been required to notify HMRC if a user earns more than £4,000 in any one year from selling. There will still be no tax liability if you are just selling old possessions and not making a profit on them. But if you want to avoid any potential hassles there may be a case for keeping sales on any single platform below the £4,000 a year reporting threshold.

Online surveys

Finally, I want to mention survey sites. These are a great way to earn a bit of extra cash for little effort, though you certainly won’t make a fortune. Again, I wrote about this a while ago on Mouthy Money. 

As I said then, my favourite survey site is Prolific Academic.This site is used by academic researchers world-wide to recruit participants for online studies and surveys, and they are varied and often surprisingly interesting. 

The studies on Prolific require anything from a minute to an hour to complete, with payments based on how long (on average) they take. I’ve earned over £700 to date from Prolific Academic and highly recommend them.

I do hope this article has inspired you to follow in the footsteps of Sir Richard Branson and adopt a more entrepreneurial approach by creating multiple income streams for yourself. 

Of course, Mouthy Money regularly publishes articles by me and my fellow contributors setting out methods for making extra money. Take a look at MM’s Earning category for many more ideas and inspirations!

As always, if you have any comments about this article, please do leave them below.

Nick Daws writes for Pounds and Sense, a UK personal finance blog aimed especially (though not exclusively) at over-fifties.

Photo by Austin Distel on Unsplash

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If you’re not a property owner or have no interest in getting on the property ladder, this article may not be for you.

However, if you want to become a homeowner one day, you’ll want to familiarise yourself with the content of today’s article.

Your debt-to-income ratio (DTI) is an important term to understand when considering purchasing a home. Your DTI can make it easier or harder for you to qualify for a mortgage, so knowing your DTI can help you better understand how easy, or difficult it’ll be for you to get on the property ladder.

Put simply, your DTI compares how much of your monthly income goes towards debt, including housing costs, personal loans and credit card payments, versus your monthly gross income. It gives lenders an idea of how much money you have to put toward your mortgage and the amount of debt you can handle.

For example, if your mortgage is £1,400 a month, you have a car loan for £200 and your credit card debt and other loans equal £400, your total monthly debt payment is £2,000 (£1,400 + £200 + £400 = £2,000). If your gross monthly income is £6,000, then your debt-to-income ratio is 33% (£2,000 is 33% of £6,000).

What is considered a good debt-to-income ratio?

The lower your DTI, the better. A DTI below 36% is preferable and will help you secure a better rate on your new mortgage because you’ll be perceived as a low-risk borrower able to manage their debts well.

However, as long as your DTI is below 43%, you should still be able to secure a mortgage, providing there are no other weaknesses in your application, such as a bad credit rating or too many credit applications in recent months.

If your DTI is above 50%, lenders may be concerned about your ability to manage multiple repayments and will therefore approach your application cautiously.

How to lower your debt-to-income ratio

If you’ve calculated your DTI and it’s close to or above the 36% optimal DTI, don’t be alarmed; there are things you can do to reduce that percentage.

It won’t happen overnight, but it is absolutely possible with consistent effort over time. Here are a few things you can do to lower your DTI:

1. Increase the amount you pay monthly toward your debt. In the short-term, you may see your DTI increase, however in the long-term it will go down. Also, these extra payments will help lower your overall debt faster and save you money on interest payments.
2. Keep track of your DTI monthly; this helps you see your progress, and watching your DTI fall month-on-month can help you stay motivated to keep paying down your debts.
3. Avoid any unnecessary new debt. If you’re trying to reduce your DTI, taking on new debt will not help. If you were planning on making big purchases on credit, pause until you’ve secured your new mortgage.
4. Alternatively, you could extend the duration of your loans.‍ Doing this will reduce your monthly loan payments on the debt. However, it’s important to note that doing this may mean paying a higher interest rate to compensate.
5. Addressing your debt is one way to improve your DTI; the other thing to consider is increasing your income. You can do this by securing a higher-paying role or starting a side hustle.

Photo by Johnson Johnson on Unsplash

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Households will have felt a slight easing of price rises in the past month as inflation falls following the drop in fuel prices.

The latest update from the Office for National Statistics (ONS) showed a fall in inflation in August for the first time in a year.

The Consumer Price Index (CPI) rate of inflation slowed to 9.9% annually, down from 10.1%, mainly thanks to a drop in fuel prices.

The CPI figures showed the fall in prices of motor fuels was the largest downward contribution to the figures, while most of the upward contribution was due to rising food and non-alcoholic beverages, along with housing and household services.

While the unexpected drop might provide some relief to households, inflation levels are still very high relative to recent years, and remain a significant problem for households in 2022.

What is happening to prices as inflation falls?

Households are experiencing the fastest increase in food prices since 2008. Food price inflation is as high as 13.1% currently, with significant increases in the price of milk, cheese and eggs in particular. Clothing and footwear prices rose despite end of summer sales too, up 7.6%.

Alongside fuel, consumer spending has notably fallen in transport, tourism and recreational activities, taking into account the effects of rail strikes. 

Analysts expect inflation to persist as energy bills continue to rise. However, while bills were expected to exceed £4,000 pounds annually by January, Government intervention has now promised to cap average bills at £2,500.

Personal inflation

Households are finding ways to navigate the crisis – from cutting food and transportation spending to making energy efficiency savings at home.

But not all households experience inflation in the same way, as each one has different things it spends money on. For example, not all households have cars, a big cost for many.

The ONS has an inflation calculator which shows consumers their relative cost-of-living changes in the past year.

It uses the Consumers Prices Index including owner occupier’s housing costs (CPIH) which it says is the most comprehensive measure of inflation.

The tool estimates the rise in the consumer’s monthly spend, shows previous year comparisons and breaks down which items contribute to the consumer’s cost-of-living more.

You can input their household spend on a range of categories such as groceries, housing, transport and leisure.

Try using the tool yourself and see what your personal rate of inflation is:

Photo by Markus Spiske on Unsplash

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