Disposable income divide – areas with the most and least cash at the end of the month

How much cash we have left at the end of each month after we’ve paid the bills can make all the difference to how financially secure we feel. New research has pointed to a big divide in these disposable incomes across the UK – with some surprising differences around the country.

Households in the wealthy enclave of Elmbridge in Surrey have the most money left over after paying all their bills for the month, an average of £455, according to wealth firm Hargreaves Lansdown.

They also have enough savings to cover 7.7 months’ worth of essential spending, and just 4% of them are in arrears, sending Elmbridge to the top of the financial resilience index.

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Meanwhile, the City of Kingston upon Hull is the borough with the lowest financial resilience in the country, where households have an average of £76 left at the end of the month.

They also fare poorly in all sorts of areas from emergency savings (with only enough savings to cover 1.6 months’ worth of essential spending on average) to relatively high levels of arrears – with 17% falling behind on debt repayments or bills.

The fact Hull is also home to lower incomes is no surprise, because low incomes are so strongly correlated to lower financial resilience, Hargreaves’ research found.

We look at how much you should have in savings by age in a separate article.

And while people often associate the capital with higher incomes, in reality, there are vast gulfs between higher and lower earners in London. It’s true some boroughs are dominated by higher earners with better overall resilience – including Richmond upon Thames which is placed 38th for overall resilience.

However, far more commonly, different wealth groups exist side-by-side within London boroughs, and those on lower incomes significantly outnumber those on higher incomes.

It’s why the bottom four for financial resilience is rounded out by the London areas of Newham, Barking and Dagenham, and Hackney, where, at just £44, households have the lowest amount of surplus income at the end of the month.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “There’s a vast gulf between the capitals of resilience and the tougher areas, where money is far more stretched. Yet they are often just a few miles down the road from one another.

“While the top scoring local authority area of Elmbridge is a couple of hundred miles from Kingston upon Hull at the bottom of the list, the home counties dominate the most resilient areas and London makes up a major chunk of those at the bottom of the pile.”

Role of housing in financial resilience

Incomes play a key part in terms of financial resilience – areas with higher incomes perhaps unsurprisingly correspond to having more disposable cash left at the end of the month. But incomes are only part of the picture.

Unaffordable housing is also an issue, because it means fewer people are able to buy a home and build their resilience this way. The top 10 local authorities score an average of 71% for home ownership compared to 43% among the bottom 10, according to the Hargreaves research.

“Home ownership matters particularly as we approach retirement. It’s one reason why local authorities in the home counties do well for retirement resilience because so many of them have more equity and higher incomes,” said Coles.

Meanwhile, London and other cities, where more people rent, and more own a smaller chunk of their home, have lower scores. This owes something to higher house prices in London, and also to the fact that the population is younger on average, and has not been able to get onto the property ladder.

Ways to get financially stronger

Even wealthy households can have financial resilience gaps. The right first steps to closing your gaps will depend on where you are now, so the first step is to take stock.

“It’s worth emphasising that you don’t need perfection in one area before moving onto the next. Most people will split the available cash between their goals, so they can fill any protection gaps, pay down expensive debts, and build for the future at the same time,” said Coles.

1) Pay off debts

Paying down debt – especially expensive credit card debt – should always be the priority if you feel you’re struggling under their weight.

2) Get comprehensive insurance

Likewise, if you have people who rely on you, and not enough insurance cover to protect them, this should be high up on the list.

3) Budget

Coles said: “If you’re spending every penny every month, it can feel impossible to move on, so you need to start with your budget. If money is exceptionally tight and there’s nothing you can cut, this is going to be a difficult process.”

Every spending decision will have to come under scrutiny. In some cases, there will be incredibly difficult choices to make about how and where you can afford to live. It’s worth talking to a debt charity like Stepchange, because their experts can take you through it all.

4) Boost long and short term savings

All households should be working towards three to six months’ worth of essential spending in an easy access account while working age and one to three years’ worth in retirement.

But don’t wait until your emergency fund is completely full before looking to the future. By their nature, emergency funds will ebb and flow, and you don’t want to stop plans for the long term every time it needs to be topped up. It means you should be building it alongside pension payments and investments.