The graduate’s guide to budgeting in London 💰

Renting in London

It should come as no surprise that renting in London will likely account for most of your expenses, particularly if you choose to live in Zones 1-3.

Given the cost of renting in London, it should account for a large chunk of your graduate salary; so remember this when you’re working out how to properly budget your monthly salary.

Sharing a property with flatmates can help to make your rent cheaper, so if you don’t have a friend or a family member to live with it’s worthwhile using sites like Spareroom.

Living in less well-known areas of London can also help to reduce your overall living costs.

While you might have set your heart on living in particular area of London, consider shopping around to find the best deals – there are plenty of things to do in West London, things to do in North London, things to do in East London, and things to do in South London – don’t feel that one place is the be-all and end-all!

When deciding where to live in London, remember that the deposit will be a huge hit to your finances – as it’s one of the biggest factors in the cost of living in London.

Typically one to six weeks of rent, plus agency fees (usually between £100-£200), a security deposit needs to be paid upfront, and therefore it’s worth thinking about saving for before you move to London.

National insurance & income tax

After not paying it at university, many graduates forget to consider that they’ll have to pay National Insurance and Income Tax on a graduate salary – and therefore forget to factor these large expenses into their budget.

Both National Insurance and income tax will be included in the cost of living in London.

They will vary depending on your wage, and can be calculated using a tax calculator, like Money Saving Expert’s.

When you are working out how to properly budget your monthly salary, think about everything – including taxes and bills that will soon add up!

Repaying student debts

Contrary to popular belief, your repayments won’t make a huge dent in your salary straight after graduation.

In fact, you don’t have to start repaying until you are earning more than £25,000 per year.

They are something you’ll need to factor into the cost of living in London, though.

To work out the total amount you’ll repay, and to make sure you’re properly budgeting in London, you can use GOV.UK’s Student Finance Calculator.

Travel Costs In London

Commuting to work is another huge expense to factor in. It is important to take into account the cost of getting around London, with London travel costs being significantly high whatever method you take – but if you know where to go in London, is something that will vary hugely depending on how far you need to travel.

If you are going to be commuting by bus, this will only cost you around £60+ per month, whereas tube travel is significantly more expensive, with peak journeys costing between £2.40 and £5.10+ per journey depending on which zones you’re in.

Transport For London will help you stay up-to-date with any delays, planned closures or other status updates on your journey to work.

Other Expenses

Having deducted all the above expenses, you’ll have a set amount of money to spend on everything else – including your groceries, toiletries, and your social life.

When working out how to properly budget your monthly salary, split this into essentials (food, cleaning products, toiletries and mobile phone bills) and non-essentials (alcohol, trips or outings, clothing, entertainment and so on).

Many banking apps like Monzo and Revolut now provide monthly and weekly breakdowns of spending, split into these same categories – helping to make budgeting much quicker and easier to keep track of!

This is where you can save the most money by making small lifestyle decisions such as buying own brand food and bringing your lunches to work.

Try using cheaper supermarkets like Aldi and Lidl and make sure you head straight to the reduced aisle first to see what discounted food is reaching its sell-by date, and bag yourself some bargain offers!

Be selective with the things you do (you might occasionally need to sacrifice a trip to the local pub on a Monday, so that you’ll have enough to go to that concert on Friday).

Knowing where to go in London for cheap will also be valuable when you’re trying to work out how to budget your money and save.

Saving some of your salary

Wherever possible, it’s always a good idea to set some money aside for a rainy day.

The amount you will be able to save is very much dependent on your salary and expenses – but even if you can only afford a small amount, saving a little of your paycheck is a great habit to get into early in your career, and can make it easier to pay for big-ticket expenses like holidays.

And with 70% of students in their overdrafts after university, regularly putting money aside can be the best way of getting out of it as soon as possible.

Living and working in one of the world’s priciest cities can be tricky on a graduate salary – but even with the cost of living in London so high, with a clear strategy in place it’s more than possible to make the most of the city, whatever your budget.