If you are headed for the United Kingdom (U.K.) or have been living there for a while, it is your financial obligation to have a picture of the cost of living in the country, without much exaggeration. Similar to any other country, the UK has expensive cities as well as affordable ones.
London, the UK's capital and a global financial hub, is one of the most expensive cities in the world, and naturally, the most highly paid jobs are available here. Cities like Birmingham, Manchester, Glasgow, Bristol are cheaper to live in and with remote working an option offered by most companies, evaluate the cost of living to see if it fits your needs.
You will see big differences in the costs of living in different parts of the country. Also, moving to an entirely different country means you have to take into account the exchange rate differences. The cost of converting your home currency into pounds also adds to your expenses.
If you are sending money to the UK, you should send it through a money transfer company to get higher exchange rates and the best value for your money.
We know everyday living costs money, but what exactly are those costs? And how to calculate the cost of living?
The cost of living is the amount of money needed to cover your basic living expenses such as housing, food, clothing, healthcare, transportation, taxes, mortgage payments, educational expenses and to maintain a certain standard of living in the city of your choice.
In the cities or places where living expenses are higher, the income levels of the people are also higher. This means the cost of living is often tied to income level. Based on the city you are residing in, you could earn less than the people working in a similar field. For example, it is expensive to live in London but you will get the highest paying jobs.
Before moving to a new location, you must determine if your wage is sufficient to cover the living expenses. Let's say you are earning 2000 per month in Birmingham and it is more than enough for maintaining a certain lifestyle. But if you were to live in London with the same lifestyle, you will need to earn 3000. Or say if your income in India is 10 lakhs per year, you will need to earn 30k a year if you were to live in London.
The cost of living is a theoretical index that is determined by finding the costs of a representative sample of goods and services that are required for maintaining a basic living standard. The cost of living index can help you gauge the expenses you would incur and make a comparison of the living costs between two or more locations.
Do keep in mind that the cost of living estimates are based on survey samples and it might differ specifically from your own living expenses.
The cost of living index gives you the percentage of the difference between living expenses in two different locations. The value 100 is considered the baseline for comparison. For example, if London is the base (100) and Manchester's index is 80, then the cost of living in Manchester is 20% cheaper than London.
Let's look at the cost of living index and index of rent, groceries and eating out at restaurants, local purchasing power (ability to buy goods and services) of some popular UK cities as per Numbeo, a user-contributed database platform.
Given below are the average costs of some of the basic services in the UK according to Numbeo.
According to the latest Family Spending report by Office for National Statistics (ONS), the average UK household spending in 2020 was 2,548 per month (30,571 per year) for an average of 2.4 people in a household. That's 588 per week spent on living expenses including rent, groceries, transport, clothes. The expenses are higher if there are mortgages to pay or include expenses on education, healthcare, or childcare.
To give a wider perspective, here is the household spending in the UK by region as per the ONS survey.
Since the costs vary across the UK, it is hard to pinpoint the exact cost of living. You can get an almost accurate estimate of the cost of living by using a living expenses calculator and a cost of living adjustment (COLA) calculator (COLA-adjustment to wages or benefits to keep up with the current cost of living).
Calculating the cost of living that varies depending on location is useful if you plan to move to the UK. You can compare the cost of living between two or more cities to figure out your living situation.
The cost of living is fairly high in the UK, especially in popular destinations like London. But as we have discussed there are affordable places where you can have a decent standard of living in the UK without going broke. If you are flexible about your locations, you can move to a place that is best suited for your circumstances.
Knowing how to budget and staying in a place with a lower price tag will keep your costs to a minimum.