How much do you need to earn to live comfortably?

We show how a salary of £24,000 would be required just to cover essential living expenses, a salary of £39,000 to cover discretionary living expenses and a salary of £48,000 to cover savings.

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Well over 9 million people live in London. But what do they need to earn to survive? In today’s economic situation, this question is particularly pressing. In this article, we use behavioural economics to illustrate the salary a single-person 20-30 living alone in London is likely to need. We show how a salary of £24,000 would be required just to cover essential living expenses, a salary of £39,000 to cover discretionary living expenses and a salary of £48,000 to cover savings. We present a clear methodology for you to follow and adapt for your circumstances, as well as striking implications at the end. The figures have been calculated in September 2022. Essential living costs – £1,688 a month, £20k after tax or a £24k salary We begin by considering the essential living costs before moving into payments that may provide a more enjoyable life. At every stage, we highlight the typical salary that may be required to afford this life.

Rent – £1,000 a month

With the average purchase price of a London flat being more than £400,000 in London, and the median house price to earnings ratio 13.7, they are likely to rent out of necessity. Naturally, they are likely to be select a one-bedroom flat in a location that has relatively good transport links, thereby removing the need for a car. As can be seen from the London rents map, they would be doing very well to find a rent below £1,000 a month. This represents by far the highest expense each month.

Council tax – £100 a month

Despite the small size of their flat, and it’s positioning in a low band, they’re still likely to pay around £100 a month for council tax.

Utilities – £160 a month

Factoring in recent increases in energy and electricity, they are likely to pay at least £100 a month for electricity and gas. They will also need to pay £23 a month for water, £18 a month for broadband, £6 a month for a SIM—only contract and £13 a month for a TV licence.

Transport – £174 a month

Without access to a car, they will need to make the most of public transport to see friends and family. This is likely to require a Travelcard covering at least zones 1,2,3, which will set them back £174 a month.

Food and household essentials – £170 a month

The average cost for a single person to spend on food and drink (excluding alcohol) each week in the UK is around £32 a week. As London is a little pricier, they are likely to need around £40 for a similar lifestyle and therefore spend £160 a month. They will also need household and bathroom essentials such as washing powder and toothpaste, which is likely to set them back a further £10 a month for the essentials.

Hair and personal health – £40 a month

Women typically spend considerably more than men on cosmetics and health products. However, for the essentials, we can suggest that they would be relatively similar, if for example, we factor in that women have less frequent haircuts. With this in mind, we can estimate these costs at roughly £40 every month.

Clothing and shoes – £44 a month

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A young person living in London, they are likely to need to refresh their wardrobe from time to time. They are therefore likely to spend around the UK average on clothes, which would be approximately £44 a month. Let’s now consider what additional expenses would be incurred for what many would consider to be a comfortable lifestyle. In doing so, we’ll keep to the same methodology and do so by making value-based decisions throughout.

Eating out, takeaways, and coffees – £125 a month

To enjoy life, they are likely to eat out roughly three times a month with friends and family or with a takeaway. This would equate to around £60 a month, which would equate to approximately £20 a meal. Furthermore, they may have to add on the cost of lunchtime meals if they go into an office three times a week, estimated to be £40 a month, as well as 1-2 coffees a week at another £25 a month.

Sports and leisure activities – £70 a month

They are likely to join a gym or a sports club to build their fitness, relax and get out of the flat. This is likely to cost at least £30 a month for a standard gym. Furthermore, they may also enjoy an activity at a club (e.g. dance, football) or with a friend (e.g. playing tennis) roughly once a week. This would add approximately £40 a month to their monthly spend.

Consumer products – £200 a month

These include a wide variety of products, including computers, mobile phones, furniture, household products, books, sports equipment, gaming products and consumer electronics. The categories are covered in great detail by the ONS. For simplicity here, we can suggest that they are likely to spend in the region of £200 a month on average, with major purchases being spaced out over time.

Holidays – £200 a month

In the UK, the average person takes approximately 4 holidays a year, of which 2 holidays are likely to be abroad. As this person is living alone, they are likely to want to get out of their one-bedroom flat and follow this guide. In doing so, they will want to keep money tight, yet still enjoy themselves. This would imply a budget of around £100 each day, with everything considered (flights, accommodation, and food). This would equate to approximately £2,400 for four week breaks or approximately £200 a month.

Experiences and nightlife – £80 a month

They will want to make the most of what London has to offer. This would include going to clubs, concerts, exhibitions and sporting events. These costs will naturally fluctuate. However, they are likely to average out to roughly £50 a month. Furthermore, if they decide to take an Uber back home just once a month, it is likely to cost them around £30 a month at night from the centre to the suburbs where they are likely to live.

Cosmetics and luxury personal items – £50 a month

Essential living expenses may cover the basic items, but in reality, they are likely to spend considerably more on luxury non-essential items. These may include vitamins, supplements, and cosmetics. Costs for these will vary considerably, but we can estimate them to be in the region of £50 a month.

Subscription services – £30 a month

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They are likely to subscribe to multiple subscription services. Based on popularity, these are likely to include Netflix, Spotify and Amazon Prime, which would set them back approximately £30 a month.

Alcoholic/evening drinks – £80 a month

Drinking is one of London’s most expensive pastimes, with London pubs charging more than £5 a pint and some charging as much as £8 a pint. The average cocktail also comes in at around £10. As a result, they may try not to have more than three drinks every time they meet with friends. This may be four times a month, if twice is for an experience, and another two times may be at the pub with a friend or after work. In this case, they are likely to spend at least £80 a month. At this point, we’ve not kept anything back. This is not really how a person would live, as they would need to save for the future for many reasons. As a general rule, they may decide to save 20% of their salary. And if that is the case, we can add 20% on to the living expenses and discretionary living expenses that we covered earlier. This would therefore require a further £6,000 a year or £500 a month held back.

Striking implications

We’ve shown how a single person between 20-30 living alone in London is likely to require a salary of at least £48k to live a comfortable life. This is particularly prescient as it is considerably higher than the UK average of £39k and considerably more than the typical salary for someone in this age range. Furthermore, by our estimations, this certainly doesn’t afford a luxurious lifestyle. Renting a modest one-bedroom flat is hardly ‘luxury’ and neither is not having a car. Instead, it shows just how challenging it can be to live a luxurious lifestyle in the capital. But perhaps the biggest implication is that the individual we referred to would almost certainly struggle to ever get on the property ladder. To buy an average one-bedroom flat, they would require in the region of £60,000 as a deposit, which would take them approximately 10 years to save. Furthermore, mortgage lenders typically only lend up to 5x a person’s salary. And this would make owning a property beyond their reach. It’s difficult to find any property in London for £240k without additional help of some kind. We hope you enjoyed this blog. If you’d like to speak to us, then don’t hesitate to get in touch. We look forward to hearing from you.

Until next time.

posito.co.uk - How much you need to earn to survive in London - Posito

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