How Much Money Do You Need to Live in London?

London is one of the largest and most influential cities in the world, historically playing a central role in fashion, industry, finance – and is a global cultural center. It's also one of the most expensive cities in the world, measured in terms of absolute cost or general affordability. The city is a hot spot for professionals and artisans and boasts strong wages. In fact, average wages in London are the highest in the United Kingdom and are very competitive with any city in Europe. If an individual is able to find an affordable living space, London might even prove to be comparatively cheaper than many other urban settings, due to the high average wages. 

Unfortunately, finding an affordable place to live in London isn't easy. The Greater London Authority released a study in 2017 that demonstrated why property and rental prices were the number one reason London was so expensive. Outside of housing costs, London also ranks high in terms of food costs, transportation costs and entertainment costs.

Affordability, ultimately, comes down to income and lifestyle. It makes an enormous difference whether an individual is a student or an established professional. And retirees face different costs than workers in their 20s and 30s. London is never going to be mistaken for a cheap city, but expenses are relative depending on personal circumstance. The following costs are listed in terms of U.S. dollars using a conversion rate of $1.42 for every £1.

Housing costs are normally one of, if not the, largest expense in any budget. This is particularly true in London, where two-bedroom apartments in the city center cost a median of $2,529 per month. Things get less expensive as you move away from the financial district, with prices dropping to as low as $1,400 per month.

Food markets and restaurants can be pricey in the city, with milk prices as high as $5.50 a gallon and some cheeses costing $6.50 per pound, which is higher than some American cities and lower than others. Cigarettes average $14.25 per pack. Other market prices are commensurate with costs in major U.S. settings such as Miami, Chicago or Denver.

London is home to a huge number of restaurants, both fine-dining and casual. A nice three-course meal might cost between $80 and $100 without alcohol, but you can still grab a cheeseburger combo at McDonald's for $7. Coffee prices range between $3.25 and $5 for a cappuccino, and the average pint of beer is available for $6.50.

A monthly pass for public transportation, the most common method of travel in the city, is about $186 for just zones 1-2, which encompasses most of central London. Taxis cost about $3.75 per mile with normal rates. If you drive your own vehicle, you can expect gasoline prices north of $6.75 per gallon.

Most students who travel to London for school need to pay a deposit of at least four to six weeks of rent. Student housing is relatively cheap, so $800 to $950 per month is often enough. It is also important to note that students usually have to wait to open a bank account until after they register for college courses.

A study by the London School of Hygiene & Tropical Medicine estimated that the average student is able to live modestly for a year with $24,000 in the bank, though $18,000 is feasible. This estimate did not include the costs of tuition, travel or school supplies.

London does not really have "college areas" as can be found in suburban American cities, although if you're looking for clubs with lots of other Americans, Shoreditch is where you want to go. There are low-cost college destinations such as pubs, sandwich shops, libraries and coffee shops. The typical glass of wine in one of these pubs runs about $7.50 and the average beer about $6. A common meal at a lunch destination costs between $6 and $10, though pubs tend to be pricier. 

Professionals have to worry about a slew of costs that most students do not, such as insurance or school for kids. London is the most expensive city in the U.K. to raise a child; bringing up a child to adulthood can cost as much as $350,000, almost one-third of which is attributable to the costs of education.

According to recruiting data from Guardian Jobs UK, the average salary in London is approximately $51,200. Of this, more than one-third goes to cover average housing costs, and more than half is needed for housing, groceries and transportation. In fact, peak-time train passes cost the average working Londoner an incredible $9,000 per year.

As in much of the U.S., costs in London have been rising faster than the average salary since the financial crisis of 2008. Taxes have also risen a little, and the average worker earning $60,000 per year can expect to pay an effective tax rate of 18%, which is roughly equal to the U.S. average.

London is not an easy place to live without an income, although there are some potential public support programs that ease the burden. As of February 2019, the unemployment rate in London is at about 4.5%. The London Unemployment Fund is available to those who have lost a job and are looking for work, while there are even larger benefits for single mothers. In fact, for many Londoners, the benefits of raising a child without work exceed the potential benefits of working a low-income job and paying for child care.

Those who are unemployed should seek out the closest Jobcentre Plus Office. This organization provides support, advice and job-seeking services. Those who have an illness or injury that prevents them from working should seek out the Employment and Support Allowance (ESA). Other possible benefits include rent support through the Housing Benefit, a Council Tax Reduction for unemployed and low-income earners, and Access to Work Grants for disabled individuals.