How to calculate your monthly income and expenditure for investing
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.

Investing is a lot like going to the gym, no matter how much you put in, it is better than doing nothing at all.
In an ideal world, we’d all like to invest larger sums, but ultimately what we can invest is typically determined by two things – our income and expenditure.
While we can’t always directly control our income, we can control our expenditure. So, if you do want more money, consider how you can budget your expenses. Of course, there are things you absolutely must pay, and these should be done first, including your rent, bills and groceries. Beyond that is your disposable income, which you can assess to make sure you fairly divide between investment and leisure. Think carefully, are some of your ‘wants’ really that necessary? You’ll be surprised by how much extra over a year you may have to invest when you cut out something such as junk food or a coffee splurge.
Knowing how much you can invest is known as your affordability. To work this out consider your primary source of income, are you self-employed, employed, or something else? This is an important consideration to determine your investing affordability, for example if you are self-employed then you may find that your income fluctuates each month. You’ll have to think more carefully about how much of your money can be invested. In contrast, if you are in a steady full-time job that pays well then you may be able to invest some of your earnings.
Once you’ve thought about your source of income, consider what your monthly income is after tax, and what your monthly outgoings are. Think about how the monthly income may fluctuate, and for your outgoings consider things like bills, leisure costs, holidays, debts and more. Your monthly disposable income is what is left over from your monthly income after tax when your monthly outgoings are taken away. It is from this disposable income you can afford to invest a chosen amount.
Of course, even with a steady income, things can change suddenly. You may be made redundant, or have a sudden major bill to pay. That’s why it also makes sense to have an emergency fund that covers three months’ worth of expenses. By having this buffer, you won’t have to dip into your investment or take on debt if times get tough.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Past performance is not a guide to future performance. Tax rules can change at any time. This blog is not personal financial advice.