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Money management when you are on Universal Credit

money management on universal credit

Universal Credit has made a lot of bad headlines, but like it or not, it’s here to stay. It will be phased in until 2023, replacing lots of other means tested benefits. Around 3m people are expected to be on it by the time the roll-out is complete.

The way your Universal Credit is calculated is complex. If you’re over 25 years old, the standard allowance per month is £317.82 for a single person (£251.77 if you’re younger), or £498.89 for a couple (£395,20 for under-25s).

On top of that, additional allowances specific to the circumstances of all household members dictate what you’ll ultimately receive, including whether you have children, have a disability or need help paying housing costs. The maximum allowance works out at just over £1,100 if you’re single, and just over £1,600 for a couple – there’s a London weighting added too if you live in the capital.

How much do you receive?

The amount you’ll receive is reduced depending on your income and savings.


  • If you’re employed, your Universal Credit is reduced by 63p for every £1 you earn over a fixed monthly income.
  • If you receive help with your housing costs, this reduction begins after you’ve earned £287 in a month; if you don’t receive help with housing costs, you can earn up to £503 before any deduction.


  • You can hold savings (cash, investments, stocks & shares, property) up to £6,000 without any deductions.
  • If you have between £6,000 and £16,000 in savings, for every £250 over the £6,000 limit you have, £4.35 is deducted from your payments. So if you had £7,000 in savings or investments, you’d have 4 x £4.35 = £17.40 deducted.
  • If you have more than £16,000 in savings, you will no longer receive any Universal Credit.

Financial Planning on Universal Credit

If your goal is to get off Universal Credit in the future – if it’s helping you through a difficult period – then use this time to come out of the other side in the best position possible; you might study or train to learn new skills for a future career, for example.

And with a few steps, you can use this period to take control of your finances, now and in the future.

Step 1: Set your goals

All good planning begins with your desired outcome: what do you want to achieve in life?

That’s a huge question of course! But it’s all too easy to just go through life without moving towards your goals. Life is finite. I spend around one-third of my book The Money Plan on setting outcomes and changing your mindset, it’s that important. Break down your ultimate goals into smaller steps, not just one big leap.

It’s incredibly hard to think positively when you’re going through tough times, but some simple actions that cost nothing can have a big impact, including:

  • Motion: get outside and move! Walk, run, whatever it takes. Get away from screens and get some fresh air
  • Breathing & meditation: there are some great apps such as Calm to Head Space, which can help you relax your mind and body
  • Ask yourself good questions: we’re constantly asking ourselves internal questions, so make them positive. What can you do today to make tomorrow better?
  • Food & drink: eat a balanced diet and drink a lot of water, science has shown that it makes a real difference

I have a compelling vision worksheet in my members area to help you set goals

Step 2: Get financially organised

Set aside some time to assess four areas:

1. Know what’s coming in: are you claiming the maximum benefit you’re eligible for?

2. Know what’s going out: list all your expenditures in a document

3. What you own: it might not be anything, or you may have some savings

4. What you owe: list your debts, and are you paying the lowest interest possible on them?

After that, a few simple actions will go a long way to empower you.

  • For every expenditure on your list, ask yourself three questions: do I need this? Do I want this? Can I get the same thing for less? You’ve got to reduce your outgoings as much as possible, even if it means making sacrifices. Remember your outcome; sacrifices are temporary.
  • Automate all regular payments via Direct Debit or standing order, which takes emotion out of everyday financial decision-making. That includes pocket money if you have kids – systemise the payments, link them to your children’s age, and link it to household chores of some kind. That way you’re also teaching them life skills.
  • Set a sensible weekly budget to cover all your variable expenses, and add this to your list of Direct Debits, paid into a separate account. This is your WAM – walkabout money – and helps you to stick to your limits.
  • Potentially the hardest action is to make sure your monthly income is greater than your outgoings, preferably by 12.5%. That might sound crazy if you’re living hand-to-mouth. Look around your home and see if there are any items you can sell online, or can you get a part-time job that doesn’t reduce your UC payment? There’s no getting around the fact that what comes in must be greater than what’s going out.

Download financial organisation and debt management tools

Step 3: Put your financial foundations in place

  • Set yourself a goal to save £1,000, however long it takes. Once you get there, put it into premium bonds so it’s out of arm’s reach. That’s your emergency cash, your safety net should any unexpected costs suddenly arise.
  • Arrange a Lasting Power of Attorney. You can get exemptions on the cost of an LPA if you earn less than £12,000 annually, all you need to do is get the forms and complete them.
  • Get a will. This is essential if you have kids, and a good idea for everybody.Once you reach this stage, you should congratulate yourself and take a lot of pride. Don’t underestimate what you’ve done: those three steps represent enormous development and huge steps towards changing your life – and they can all be done during what may be a difficult period.


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