Award-winning financial planner WARREN SHUTE tells you everything you need to know managing your money on Universal Credit as the roll-out continues.

UNIVERSAL Credit has made a lot of bad headlines, and 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).

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Financial planner Warren Shute

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.

There are a lot of misconceptions about Universal Credit. 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.

So there are incentives for people receiving Universal Credit to get themselves off it, if they are able.


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 to pursue a new passion, 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 can be 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; motion creates emotions

· Breathing & meditation: there are some great apps such as Calm and Head Space, which can help you relax your mind and body using meditation and mindfulness

· Ask yourself good questions: the longest conversation you’ll ever have is with yourself! And we’re constantly asking ourselves questions, so make them good questions like, ‘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

Step 2: Get financially organised

The brutal reality of welfare reform is the negative impact of the introduction of the monthly payment. Giving this to people who have little or no financial or budgetary experience is as we have seen a recipe for disaster. Many people I speak to tell me they are struggling with this and that they had fallen into further debt as a result. It’s not their problem so much as an endemic problem with the fact that we are not educated about money in school.

Here are some easy tips for you to follow:

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 expenditure in a document and ask yourself ‘how can I reduce these?’

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

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 and have these paid out of a separate bills account. That includes pocket money if you have kids – systemise the payments, link the payment to your children’s age, and 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 from your bills account weekly, into a separate spending account. This is your WAM – walkabout money – and will be used to cover all weekly variable expenses; it will help you get financially organised.

· 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 but use this as a savings target. Also, 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.

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. To avoid getting into more DEBT we all need a safety net

· Get your FREE Lasting Power of Attorney’s (LPA). 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, complete them and send them off. If you can’t make decisions for yourself, say you have an accident or you’re sick, you can legally appoint an attorney such as your partner or your parents, to make decisions for you. There are two types of LPA; Health & Welfare which deals with your medical and social care needs with the NHS and Social Services, and Property & Affairs which deals with all your financial matters.

· Get a will. This is essential if you have kids, and a good idea for everybody. When we die, we leave a whole bunch of work for the people we love and left behind to sort out, and having a will makes their job so much easier. If you have minor children and both parents die, social services will care for the children, not your parents or family, until the courts decide who should be appointed legal guardian, your children do not need this at such an emotional time and having a will in place can avoid it.

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.

Managing money can be tough, not everyone has learnt the skills needed, we are all good at certain things in life and some people just struggle with money. If your parents have poor money habits, there’s a chance these habits could be passed on to you, but it doesn’t need to be that way.

When you change the inflows of money and you don't have a plan in place, the deck of cards can easily come falling down. We can't expect people to know about how to handle money if they are never taught.

The root cause of the problem is a lack of financial education, and in many cases, we’re expecting vulnerable people to make some fairly complex decisions, like managing and planning a budget for a month. In todays’ society bills need paying regularly, and most of the time, they need to be paid automatically; this is an additional layer of complexity.

Warren Shute is a multi-award-winning financial planner and author of the bestselling personal finance book, The Money Plan