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Given that most graduate jobs in London pay at least £18,000 a year, the prospect of a job in the city offers the majority of graduates more financial freedom than they’ll have ever experienced before.
But as one of the most expensive cities in the world, your monthly paycheck can disappear all too quickly – especially when expenses and the cost of living in London tend to be significantly higher than in the rest of the UK.
In order to survive (and thrive!) in the city, budgeting is key. By taking the extra time to think about your spending in advance, you’ll be able to work out what you actually spend your money on, highlight anything that is unnecessary, and fashion a realistic plan that will enable you to make the most of living and working in London, and help you decide where to go in London.
So if you’re considering graduate jobs in London, what are the factors you need to consider - and how can you make sure that you stick to your budget? Here's how to budget your money and save effectively.
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 flat mates 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.
When deciding where to go 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 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.
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!
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 in to the cost of living in London, though. To work out the total amount you’ll repay, and to make sure you're properly budgeting your monthly salary, you can use GOV.UK’s Student Finance Calculator.
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.
Broadband, water, gas, electricity and council tax are all important bills to factor in – though sometimes they are included in the price of a room in London.
If they are not already included, it’s worth shopping around to ensure that you are getting the best deal possible, because bills for the month can really add up. If you're living on a budget in London, there are hundreds of articles on saving money on bills - try reading up on the best ways to save money before you commit to anything straight away.
It's important to remember that council tax will vary depending on where you live in London, so think carefully about where to go in London when deciding on a place. For example, the London Boroughs of Westminster and Wandsworth have the lowest Council Tax; whereas Hackney, Islington and Southwark are particularly high. Find out more about the most expensive and cheapest places to live in London on this Council Tax Index.
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).
This is the area where you can save the most money by making small lifestyle decisions such as buying own brand food, bringing your lunches into work, and being 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.
Where 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.