A recent report by economists from the Ernst & Young ITEM Club has predicted that the government’s changes to the personal tax system, combined with falling inflation, will leave the average earner in the UK with £482 more to spend by the end of the year, and with £624 more in their pockets in 2013.
In light of this news, we at Labs wanted to hear what you would do with an extra £500 a year - and why.
We also invited you to tell us how much of a difference (if any) this amount of money would make to your current situation.
Of those who took part in the debate, a larger proportion of you told us that this would make a very or fairly big difference in your life.
- Participants, especially pensioners and students, said that an extra £500 a year would substantially change their current situation, including providing a cushion in the event of unanticipated expenses, as well as a little peace of mind.
- Those of you who said this amount of disposable income wouldn’t have much of impact on your current situation, either told us that your incomes were high enough that £500 spread out over a year would be fairly inconsequential, or that the cost of living was rising so quickly that £500 would be eaten up in no time at all.
- Whether you said an extra £500 a year was a big deal or a mere drop in the bucket, participants on both sides of the discussion said they would spend the extra money on similar things.
- Most of you told us you would use an extra £500 a year to pay down debts, followed by stashing it in savings, or putting it towards a holiday, as the third most popular response.
What would you do with an extra £500 a year?
What difference, if any, would it make to you? Tell us below.
We asked: Would an extra £500 make a difference to your current situation?
‘An extra £500 a year would really help me out’
“The cost of living is too high, and my weekly shop bill is horrendous. I worry I don't have enough to get by” Rand, Eastleigh
“£500 is a lot of money; some more affluent people may not agree, but to me it could almost be life changing – no joke!” Anon
“Every penny earned working on a yearly wage under £20,000 is priceless. An extra £500 would help millions under this income bracket. It would certainly help me reduce my debts rather than splurge it on extravagance” Jubin, Glasgow
“Having just started back to work after being unemployed for several months, I am still recovering from the debt incurred whilst on JSA” Anon
“I am a university student and don't have much spare money at the moment. Knowing that I have an extra £500 would help me to feel more secure in case I needed money for anything” Briony, Beverley
“I am a pensioner living on a limited income, and £500 would help protect me from any big bills” Anon
“My disposable income isn't very big. £500 to me is roughly how much I have left each month after rent and bills are paid” Neil H, London
“My husband is 70 and I am 65. We both work part time to make ends meet, and we try not to dip into our savings too much. Having that extra £500 would give us peace of mind and make a very big difference to my life especially” Blaylock A, Dumfries
‘£500 would not go very far for me’
“Every time I (a pensioner) get a small increase, the cost of living has risen exponentially to match or surpass it” Ross, Guildford
“I wouldn't notice it. It represents less than 2% of what I earn. I would probably go to the pub 2% more often, buy stuff worth 2% more at the supermarket, and spend 2% on presents at Christmas. It's hardly a life changing amount, even for someone earning half what I do” Jim, Castleton
“£500 would be nice, but it won't make enough different to my life. The main things I want to do cost more: pay off student loan, get full car insurance, go to a conference that costs more than £500, put a deposit on a house, find a job. These things cost more than £500 and they would make a bigger difference to my life” Anon
“It doesn't even buy you a half decent holiday, and in real terms is less than a week’s pay for an ‘average earner'. It might have made more sense if it was £5,000 we were talking about” Anon
“If you take in account that prices continue to rise like rent/gas/electric/water, and not forgetting food, the money we get back from changes to the tax system will soon be gobbled up” Philip C, Tesside
“I spend hundreds a week on crap; I'm not going to notice another tenner a week” Anon
“It is only £40 a month extra – not much really” Anon
“It is not a massive amount of money, and it would probably go some way to a weekend away” John S, Kesgrave
We asked: What would you do with an extra £500 a year?
Pay off debts:
“I don't like owing money, and I don't need to spend on anything frivolous” Rand, Eastleigh
“With the economic downturn and low wages, people have been living off their credit cards – I’m one of them. The interest rates charged by credit card companies are extortionate. Clearing as much debts as possible would be the wise decision” Jubin, Glasgow
“I am trickling off money in debt interest every month. Paying off debts is the most reliable way to increase my disposable income in the medium term” Neil H, London
“I feel it would be prudent to put the additional money to good use, rather than to squander it. Things I might put it towards as savings are: holiday; unexpected expenses; deposit on a house; retirement” Jamie L, Warwickshire
“I have a present fund which I should build up every month to cover birthdays and Christmas, but it ends up paying off debts instead. I would be determined to put the extra into savings so it wouldn't go towards debt” Anon
“I am saving for my future and the future of my daughter, a little nest egg to look forward to and this extra money would help” Anon
Put it towards a holiday:
“I think if I just put it towards normal [expenses] it would just disappear and I wouldn't appreciate it. I would like to go on a city break, possibly to either Amsterdam, Barcelona or Dublin” Jacqui, Essex
“I would go camping with the kids; Isle of Wight or Norfolk – great family British traditional holiday” Sully, Birmingham
“We need more breaks, but spending money on them seems an extravagance” Anon