A change in income or outgoings can happen to anyone, at any time. These can change for the better, giving you more to spend, save or invest.

You may also experience this negatively, giving you less money to cover your outgoings and meet your money goals.

In this lesson, we’ll look at some of the things that can impact your income and outgoings. We’ll prepare you to be initiative-taking and reactive in dealing with these changes.

We’ll also equip you with help and support resources you can use if sudden changes do come up.

Key Learnings

  • How to prepare for sudden changes to your income
  • Things to consider when your income drops
  • Where to find help and support

Read time: 

19 mins

Chapter 1 

Income, outgoings, what do they mean?

Read time: 

4 mins

Income

Your income is anything that is a regular payment you receive. This could be from work or your investments. You may receive it daily, weekly, monthly, quarterly, or annually.

Income can take many forms depending on your personal situation. Knowing what you’ve got to come in can really help you make decisions with your money. Let’s look at some of the main sources of income.

 

  • Wages – The amount of money you are paid by your employer for the job you are doing.
  • Pension – A regular income paid by the government and/or your employer if you no longer work. This is usually due to you reaching retirement age or due to health.
  • Benefits – Payments made by the government to certain people on low incomes or to meet specific needs.
  • Investments – Assets or items bought in the hope they’ll increase in value or make an income.
  • Child maintenance – Payments from the government that helps pay the costs of bringing up a child.
  • Inheritance – An asset left to you by a loved one when they pass away. An inheritance may be in different forms, for example, cash or a house.

 

Outgoings

Your outgoings are money you spend regularly, for example, to pay your bills. These can change at any time, for example, the cost of buying food may increase or your mortgage goes up due to a rate change.

Let’s have a look at some of the common outgoings.

 

  • Mortgage – Is a loan used to buy a house.
  • Rent – Is a payment to a landlord for the use of a property.
  • Food – Is a substance eaten by people to sustain life and growth.
  • Council Tax – Is a fee you pay to your local council. This goes towards funding the local services you receive, for example, rubbish collection.
  • Utilities – Are services to keep your home running, for example, water, gas, and electricity.
  • Insurance – Is a financial product sold by companies to protect against loss, damage, or theft. For example, car insurance.
  • Internet (maybe Internet, cable, and streaming services) is services provided to you by a company to allow you to access the worldwide web.
  • A mobile phone – Is a portable telephone you can use in many locations.
  • Childcare costs – Are the costs of paying for someone to look after your child while you are at work.
  • Transport – The costs of getting to work or travelling, for example, train fare.
  • Debt payments – Are payments you pay to repay money you have borrowed, for example, monthly credit card payments.
  • Recreation – Are the costs of your leisure activities, for example, going to the cinema.

 

What can cause changes to income and outgoings?

Causes of change

There are many things, which can cause your income and outgoings to change. Sometimes these will cause prices to fall and sometimes they’ll rise.

Here are some examples.

  • Economic – when prices change due to the costs of production, raw materials, or wages, this is called inflation. You’ll see the rate of inflation expressed as a percentage in the news. This can cause prices to go up when the rate of inflation rises. Which may mean that the cost of your outgoings will go up. It can cause prices to drop when the rate of inflation falls. Which may mean that the cost of your monthly outgoings falls.
  • Environmental – For example when there are storms in the UK causing homes lots of damage, you may find that home insurance premiums go up because there have been lots of claims.
  • Legal – when there is a change of law, this may impact you. For example, when the government increased the minimum wage. This means the minimum hourly rate for workers rose from £10.18 to £10.42. Your income may have risen because of this change of law.

Chapter 2

Changes to income

Read time: 

11 mins

Positive changes to income

Receipt of an unexpected income can bring joy and relief. While it may be tempting for you to spend all your new income, consider your options. There will be many things for you to think about. Take your time and weigh up your options.

 

Examples of positive changes to your income

  • Wages – You may get a pay rise, a new job or bonus
  • Pension – You may qualify to receive your State Pension or private pension
  • Benefits – You may be entitled to receive a benefit you weren’t expecting, for example, a carers allowance. This is where you look after an older adult relative
  • Investments – The value of your investments grow, providing you with an increased monthly income
  • Inheritance – You receive a cash sum following the death of a relative

 

Get financial advice

A financial adviser can help you decide what to do. They’ll consider many things before making a recommendation. There may be fees to pay, but they must inform you of any. You can find your nearest adviser through MoneyHelper.  

 

Investing

If you are thinking about investing in assets, stocks and shares, a financial adviser can help you with this too. You can find your nearest adviser through MoneyHelper.

 

Save some money

Another thing to think about is saving some money. Please see our lesson on Budgeting essentials for more details.

 

Invest in yourself

Think about your own wellbeing. You may want to consider taking further qualifications or education, for your career or a hobby. You may want to take a well-earned holiday and relax!

 

Negative changes to income

If you find yourself in a position where your income unexpectedly drops, then don’t panic. Help and support are out there for you. There are steps you can take yourself before seeking help.

 

Some common causes of income loss:

  • Job loss
  • Illness and accidents – Which prevent you from working
  • Death
  • Mortgage rates increase – Means that you are paying more money each month for your home
  • Rent increase – Which means your monthly payment to the landlord goes up
  • Reduced working hours – Means you get paid less money each month

 

What you can do

Activity - Make a list of all your debts

Think about all the debts you owe and make a list of them. It is important for you to know what you owe. Write down who they are, how much you owe and your monthly payment.

Activity – check all debt payments

Check whether any of your debts are eligible for a capital holiday repayment. This means that you may be entitled not to make any payments for an agreed period. Usually this applies to debts, which have a monthly repayment. This information can be found in your terms and conditions. You’ll still have to make these payments later.

Activity - Claim on any protection policies

Check to find out if you have any protection policies in place. 

If you do, read the terms and conditions to see if you can make a claim. There will be details on how to make a claim in the policy document. You may have a claim form with the policy.

If you don’t have any known policies, it is always worth a phone call to your lender to check.

Activity - Prioritise your debts

Review your debts and prioritise them. This will help you decide where you need to focus your money.

 

Split your debts into two lists.

Priority debts are things like your mortgage, rent and household bills. You might lose your home or roof over your head if these are unpaid. 

Non-priority debts are things like credit card bills, unsecured loans, bank overdrafts and catalogue debts. The outcome of non-payment of these isn’t quite so harsh.

Activity - Revise your budget

Now work out your revised household budget. If you already have a budget, then revise it or you can create one. This will give you an idea of what you’ve got to come in and go out.

Allow for payment of your household bills, living expenses and priority debts.

Pay off debts

If you have an emergency fund, savings or redundancy pay, think about paying off your debts. The interest rate on your debts is likely to be greater than your savings rate. Usually, it’s best to start with your priority debts.

Any money left over can be a new emergency fund.

Who can help you

Debt help

From your list of debts, speak to each of the companies, which you borrowed the money from. Explain your situation and they’ll be able to explain the options open to you.

It is always better to speak to your lenders first and tell them what has happened. Unless you speak to them, they won’t know until they see something wrong with your payments.

Don’t leave it too late to get help.

 

Banks

Most high-street banks will have lots of ways to contact them if you’re concerned about your debts. They have specialist departments to offer help and guidance. You can contact your bank online through their website. If you have a mobile banking app, you may be able to use this to speak to someone from the bank. Some banks may have an email address you can use to communicate with them.

Your bank's website will also have links to charities and services, which might be useful to you, or someone you know, who need help with money or mental health.

 

Charities

Charities offer free advice to help you. Some can help you set in place agreements with your creditors. They can help stop or reduce fees and charges and make affordable payments towards your debt.

 

Here are some charities who may be able to help you with debts.

 

Emergency food and money help

If you are facing an emergency and you need money and food urgently.

 

Local councils

Each local council has a welfare support scheme. This is to help you if you are on a low income. Some of the help can be a small cash loan or grant, food vouchers or free used furniture. Each council’s scheme is different and has its own rules. Find your nearest council.

 

Food banks

Give food and essential home items. Find out where your nearest food bank is.

 

Government

You can check whether you can claim benefits using one of the free calculators.

 

Charities

Can help you get grants and access to support services, for example Citizens Advice Bureau.

 

Credit unions

Are a community loans and savings organisation who can offer low interest rate loans to their members. Find your nearest Credit Union.

 

Help with your mental health

Being in a money emergency or loss of income situation can also affect your mental health. If you need help, you are not alone.

There is support available through your local doctor. They’ll talk to you, make a diagnosis, and offer you support. If needed, they may also refer you to a specialist.

Some charities, for example, The Samaritans can help you with your mental health. Don’t be afraid to contact them if you need help.

The National Health Service have an urgent helpline you can contact if you need help.

 

Being pro-active

A money crisis can happen at any time. Sometimes, it can be out of your control, for example, if you lose your job.

You’ll find it a good exercise to review what you have in place to cover you and your family.

Let’s look at some things, which may help you to avoid a money crisis.

 

Creating a budget

A good place to start is to know how much money you’ve got to come in and go out. A budget can help you with this. See our budgeting essentials lesson to get started.

Remember to keep your budget up to date and don’t forget to save it!

 

Saving for an emergency

An emergency fund is an amount of money set aside for unexpected costs. The size of your emergency fund will be different for everyone. Regardless of the amount, it will help towards covering any unexpected costs.

34% of adults had either no savings (or less than £1,000) in a savings account

Source Bank of England UK savings statistics 2024 from money.co.uk

Protection policies

Protection policies are types of insurance, which give cover for you and your family. They cover you in the event of death, illness, or loss of job.

 

Types of protection 

  • Life cover will pay a lump sum in the event of your death
  • Critical illness cover can give you an income should you be too ill to work
  • Income protection pays a portion of your regular salary, for example, 70% each month
  • Mortgage protection will cover your mortgage payments if you can't work because of an accident or sickness
  • Payment protection will cover some or all your loan or card repayment.

Chapter 3

Changes to outgoings

Read time: 

4 mins

The positive changes to outgoings 

Sometimes you might find your outgoings reduce which means you have more money to spend. This is great news and can happen for various reasons, for example, petrol prices fall. While it may be tempting for you to spend all the extra money you now have, consider your options. There will be many things for you to think about. Take your time and weigh up your options.

 

Examples of positive changes to outgoings

  • The cost of food falls or you find cheaper ways to buy food
  • Your mortgage interest rate reduces
  • You’ve repaid a loan or other debt
  • Petrol prices reduce
  • You can cancel a membership or subscription
  • You can cancel a Direct Debit or standing order for something you no longer need
  • Your car or home insurance premiums reduce

 

Things to consider:

  • Create a new budget - see budgeting essentials for more details
  • Saving or investing some money
  • Pay off any other debts
  • You may want to invest in your own well-being, for example, having a holiday

 

Negative changes to outgoings

From time-to-time prices of things can go up, for example, the cost of food goes up. This usually means you may have less to spend.

 

Examples of negative changes to outgoings

  • The cost of food increases in the shops
  • Your mortgage interest rate increases
  • Petrol prices go up
  • Your car or home insurance premiums will increase when you renew
  • Rent cost increases

 

The help and support you need can change. You may want to review Chapter 2 again to see the things to consider.

Learn with Halifax is committed to providing information in a way that is accessible and useful for our users. This information, however, is not in any way intended to amount to authority or advice on which reliance should be placed. You should seek professional advice as appropriate and required. Any sites, products or services named in this module are just examples of what's available. Halifax a division of Bank of Scotland plc does not endorse the services they provide. The information in this module was last updated on 8th  February 2024.