In the following article, we define four lifestyle categories and the money needed to support them. In doing so, we highlight the impact of location and living situation on a person’s standard of living.

Covering all expenses

We categorise spending as all essential living expenses (such as utilities and council tax) as well as all discretionary expenses (such as consumer products, nights out and holidays). We also add 20% to cover savings, as this is a common rule of thumb.

Lifestyle categories

Essential

This would provide for little more than a subsistence lifestyle. It would cover the bare essentials but with little or nothing left for holidays, takeaways, or nightlife. It doesn’t necessarily reflect a person’s state of mind, as there are many factors that determine quality of life beyond money. However, they would need to scrutinise every purchase very closely.

Comfortable

This would provide for a comfortable life, with money available for going out, eating out, buying desirable products and going on holidays. However, it is unlikely to be enough to buy a property or to rent a place larger than a one-bedroom flat or in a premium location.

Affluent

This would provide greater freedom when making life’s biggest decisions. For example, living expenses jump significantly for larger properties or if buying a new car. However, this is unlikely to provide financial freedom, as discretionary expenses would increase significantly once purchases move beyond being value-based.

Luxury

At this level of spending, a person would be able to consider luxury purchases in most aspects of their lives. They would be able to afford a property with more space than they need, expensive holidays, expensive clothes and to go to expensive restaurants. However, even this salary is unlikely to provide financial freedom, as it wouldn’t cover the costs of the most desirable cars or properties.

Comparing living situations

Spending is highly dependent on location, living situation and accommodation size. We therefore considered London against the UK average using two categories, living alone or sharing with another person earning the same amount. It’s important to note that we haven’t considered any other factors such as additional support from the government e.g. help to buy, family help or inheritance.

(Figures from September 2022)

Living alone

London

UK average

Sharing with a partner

London

UK average

The implications

This illustrative example indicates the salary that you may require to support a desired quality of life. It is based on many general assumptions. However, a key takeaway is the impact of a person’s life situation on their spending. For example, a person sharing accommodation outside London may live a more affluent lifestyle with a considerably lower salary than another renting and living on their own in London.

We hope you enjoyed this blog. You may be interested in our analysis of a single person living in London. This provides an indication of the breakdowns we used to generate these figures. For anything else, please get in touch. We look forward to hearing from you.

Until next time.

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