How much does it cost to live in London?

Many graduates who are considering moving to London after university, worry about how much money they’re going to be able to realistically survive on in London. Of course, annoyingly there is no set answer to this question, as everyone has different circumstances. Some people will insist on living by themselves, which is always going to be considerably more expensive than sharing. Others will rent a room in a shared house, where bills can be split 4 or 5 different ways. Couples in a one-bed flat will be able to split everything down the middle. However, couples who choose to share a room whilst living with other people in a shared house, probably have the most affordable solution available to them – although unfortunately you’ll find that some people living in a shared house are unwilling to live with couples.

We’ve put together some estimates of normal costs in London. The numbers used in this article should be used as a rough guide only, do not use them as definite set-in-stone figures. You should tailor everything to your own situation.

Average Graduate Salary in London

According to Salary Track’s data from November 2009, the average annual salary for graduates in London is £25,000. This is approximately £2,000 more than the average graduate salary in the rest of the UK. Assuming that you’re paying off a student loan (you will pay back 9% of everything you earn over £15,000, so in this example you’ll be paying £900 per year if you earn £25,000), you’ll take home £18,273.65 after tax and your loan deduction. You can use this really handy calculator to work out your tax based on a different wage.

So of this £18,273.65, how much of that will be going to bills?

Rental Costs

Again, speaking in very general terms if you budget £500 per month for rent, you can live in many areas of London very comfortably, if you’re willing to share accommodation with a partner or live in a shared house. You can often find shared accommodation quite a bit cheaper than this, but we’re using £500 as an estimate here. If you’re expecting to live by yourself, then  you’ll need to budget at least £600 per month and you’ll inevitably be stuck in a tiny studio flat. For an idea of prices of current properties that are available in London, check out Easyroommate.

Bills in London

Next up are bills. Whilst mobile phones, landline phones, broadband and TV packages could be considered by some to be optional, there are some bill payments that everyone needs to cough up for. Council tax and various utility bills all fall into this category. Wandsworth and Westminster Council boroughs offer the cheapest council tax in London. Westminster Council covers areas of Central London that aren’t particularly affordable to live in, in terms of rent. So if you’re looking to save money on council tax and still pay an appropriate amount of rent, then you might be better suited to Wandsworth council borough, covering areas such as Clapham, Balham, Streatham, Earlsfield etc. For further information, please check out our recent article on current council tax rates in London.  As for your utility costs, always shop around and look for the cheapest energy provider. Npower and EDF energy always offer really competitive quotes, so they’re a good place to start with. In general, try and budget around £2,000-2,500 for council tax and utilities and then adjust this depending on which council borough you live in and how many people you’ll be living with to help split the bills.

Travel Costs

Next up are travel costs. Again, this is going to depend on where you live and where you work. It’s also going to depend on whether you’re willing or able to purchase an annual season ticket, which will save you the most amount of money on your annual travel.

Let’s say that you work in Central London in zone 1, but you live in zone 3. If you purchase an annual travel card, this will cost  £1208 per year. If you purchase a monthly travel card instead, this is £116 per month (or £1392 per year). These costs would decrease to £1032 per year or £99.10 per month (or £1189.20 per year) if you live in zone 2.

Supermarket Shopping

So, now you need to think about supermarket shopping. You can read loads of tips on how to eat affordably on our Affordable London page, but if you try and concentrate on always eating breakfast at home and taking your lunch to work with you, then you should be perfectly able to survive on groceries that amount to £40 per week, which works out at £2080 per year.

Now we’ve got through the basic bills, let’s see how much of the average £25,000 salary there is left.

After tax and student loans deductions, there is £18,273.65 left.

After deductions for rent, there is £12,273.65 left.

After deductions for council tax and utilities, there is £9773.65 left.

After deductions for travel, there is £8565.65 left.

After supermarket shopping bills, there is £6485.65 left.

So this is how much you’d have left for going out, making pension contributions if you wish to and possibly putting something aside for savings.

It’s a really reasonable amount of money to be left with for whatever purpose you choose. If you expect to be able to go out every night in London, then you’re going to end up quickly getting yourself into debt. However, if you manage to be fairly well behaved during the week and then spend the weekend sinking some beers with your mates, or going for a restaurant meal once in a while, you’ll be able to live very comfortably on this wage and many people do manage to make the most of living in London on quite a bit less than this wage. For more tips on saving money in London, please read our Affordable London page.