Disposable income in Australia

There's no doubt some parts of Australia are more expensive than others. Sydney is famously one of the most expensive cities in the world for property, but it's also home to some of the highest wages in the country. The best way to increase your disposable income and boost your savings is to cut your expenses and increase your earnings – but this is easier said than done.

Finder crunched the data on living expenses and wages to find out which state has the highest level of disposable income per person. We analysed after-tax earnings alongside expenditure on living expenses including rent, food and bills.

For the purpose of comparison, we assumed expenses for a single person under the age of 35.

Which states have the most disposable income?

The results show those from the ACT have the most disposable income per capita, with an average of $2,899 left over after paying for living expenses like rent, food and bills. This is considerably higher than the rest of the country, due to higher wages than other states.

Western Australia ($2,832) and Victoria ($2,794) come in second and third places for the highest amount of disposable income per person per month.

Meanwhile those from the Northern Territory have the least amount of leftover cash, an average of $1,635 per person per month.

How do earnings and living expenses differ by state?

The chart below shows how wages compare with the cost of living in each state. A larger gap between earnings and expenses means more disposable income is left over.

What is the best state to retire in?

Optimising your retirement outcomes means maximising your retirement income while minimising how much you spend on necessities.

With the highest wages in the country, those from the ACT receive the highest annual income in retirement on average at $43,772. Western Australia ($43,156) comes in second place, with New South Wales in third place ($42,157). On average Tasmanians earn the lowest annual income in retirement at $39,484.

However, when you take into consideration the cost of living in each state, the story changes a bit. We looked at the average weekly living expenses for a single person aged 65 and over to see where retirees are left with the most disposable income.

The chart below shows retirees in the Northern Territory have the most disposable income, with an average of $2,062 extra cash per month. Western Australia ($1,979) and Queensland ($1,703) follow closely behind.

Despite having the highest wages in the country, retirees from the ACT have the least amount of disposable income due to relatively higher living costs for retirees than the other states ($1,252).

How to maximise your disposable income

Tighten up your budget. Having more disposable income can give you the financial freedom to go out with friends or travel, but this doesn't mean being reckless with your money. Consistent expenses like Uber trips, food delivery and online shopping can be the silent killers of savings, and don't necessarily make you any better off. The easiest way to maximise your disposable income is simply to cut down on any excess spending – and save your money for something special like a holiday or a home.

Be stingy where it counts. Bills, food and rent or mortgage payments are likely your biggest expenses, so this is a great place to start in cutting down your living costs. If you have a home loan, can you refinance to a lower rate? Or if you have a credit card, can you switch to a balance transfer card? Get into the habit of regularly comparing providers for all your major bills and expenses, and don't hesitate to make the switch if you can get a better deal elsewhere.

Get investing. Interest rates on savings accounts are still near-zero, making it hard to earn interest on money sitting in the bank. Instead, investing in the share market gives you an opportunity to earn higher returns on your money. In addition to the potential to boost your net wealth over time, certain shares and funds also pay dividends to investors. Before jumping in, be sure to understand the risks and rewards, and compare share trading platforms so you're not overspending on brokerage fees.