Graduates who relocate to London for work post-university, are often concerned about the living expenses associated with London. Unfortunately there is no definitive answer to the question 'how much money will I need to earn in order to live comfortably in London?'. As you can imagine, every graduate who moves to London has a different set of circumstances and criteria as to how they'd like to live their life in London. However, we'll use this article to break down some average costs for you.
By using Salary Track's November 2009 report, the average gross salary for graduates working in London was £ 25,000 per annual. This is £ 2000 more per year than the average graduate salary in the reminder of the country. A person earning £ 25,000 would take home £ 18,273.65 (depending on their tax code) after tax and student loan deductions. The Student Loan Company take 9% of everything you earn over £ 15,000 from your earnings, so in this case, you would pay £ 900 per year back to the SLC.
Rental costs in London are extremely variable, but there are some key factors that are a fairly good indicator of how much you'll have to pay per month in rent. If you wish to live by yourself, then this is probably going to be the most expensive option available to you. If you're a couple sharing a 1 bed flat, then this would put you at an advantage to the solo tenant, as you'll be able to split the cost of the bills and rent straight down the middle. Next if you're willing to live in a shared house, then you could save loads of money, as there could potentially be 4 or 5 of you to split the bills with. Finally, the icing on the cake for cheap rent, would be if you're a couple sharing a bedroom in a house with other people living there. If you budget around £ 500 per month (or £ 6000 per year) for your rent, then generally this should buy you some reasonably comfortable accommodation in a decent area. However, this changes if you're planning to live by yourself, in which case you'll need to set at least £ 650 and even then you're likely to live in an extremely pokey space.
The bills that you're required to pay in London are not any different to ones that you'll have to fork out for in the rest of the UK. They include council tax, utilities such as electricity, gas and water and optional bills such as for a mobile phone, landline telephone, television license, satellite packages, broadband etc. When it comes to council tax though, it's worth knowing that there are 33 different council boroughs covering Greater London and they each have quite different council tax rates. Wandsworth and Westminster Council charge the cheapest tax rates in London. Whilst Westminster Council covers some pretty expensive areas of Central London, Wandsworth Council includes desirable, yet affordable areas of South London, such as Clapham, Balham, Streatham and Earlsfield. So if you're looking to move to an area with affordable council tax you should definitely consider South London. In general though, try and budget an average of £ 2000-2500 per year for council tax and utility bills and you should find yourself well covered.
Travel costs in London large depend on what transport zone you live in and what transport zone you work in. Let's take an average example of someone who lives in transport zone 3 and who works in Central London which is transport zone 1. If you purchase an annual season ticket forones 1-3, this will cost you £ 1208 per year. If you're unwilling or unable to purchase an annual season ticket, then you might be more interested in a monthly season ticket costing £ 116 per month (or £ 1392) for the same zones. If you want to travel from zone 2 to zone 1, it will cost you less than this example, but if you want to travel into London from further out than zone 3, then it will cost you more.
Supermarket shopping in London is a little more expensive than the rest of the country, but if you budget £ 40 per week (or £ 2080 per year) then you should be able to easily eat breakfast and dinner at home and make yourself a packed lunch to take to work. However tempting it might be to buy a sandwich every day, this does eat through your spending money quite quickly.
So based on all these figures, the average graduate earning £ 25,000 per year who is paying off their student loan, paying £ 500 per month on rent, £ 2500 per year on council tax and bills, £ 1208 per year on travel costs because they live in zone 3 and work in zone 1 and spending £ 40 a week at the supermarket, should have £ 6485.65 per year or £ 540.47 per month left to spend on entertainment and savings. This is really quite a comfortable amount of money to live on if you're sensitive with it. Do not expect to be able to go to London's top restaurants 7 nights a week or you'll be flat broke within days, but it's a reasonable amount of money to spend having a good time with your friends on the weekend. Millions of Londoners earn a lot less than this in London and still manage to maintain a good quality of life.