Reader Case Study: Not Quite as Easy in London

benWhen it comes to optimizing your financial life, one of the biggest advantages you can gain is a sense of perspective.  Beyond boosting your finances, perspective can make all the difference between spending your days worrying and complaining, and going out into the world having a great time as you get some serious shit done.

When confronted with a hardship, the standard consumer’s brain floods with negative emotion and shuts down, grappling for a remote control or a convenience product to dull the pain. In this scene, there is nothing but the consumer, and the problem.

But as a Mustachian, you’ve learned to step back immediately and survey the scene from a broader perspective. Suddenly there’s you, the problem, and all the other people who live in this world and those have lived before you. Some of those other people have solved problems just like yours, often with fewer advantages. With the narrow view, you might only see the bottom of a hole you just fell into. But zooming out, you see the flowers, grass, and overhanging tree branches you can use to pull yourself out.

So today we take a trip to London, where a young Mustachian-in-training wrestles with his savings rate, and we get to contrast the UK financial scene with our own.


I recently discovered your excellent blog through a UK financial blog called Monevator which I’m sure you’re aware of.

I am a 25-year-old working in finance in London, earning about £50k p.a. (c. $78k in your money!)  This is quite a bit more than the UK average though I suspect not atypical for London.

After tax my take home pay is just over £34k p.a., or £2833 per month.

Living costs in London are ridiculously high – I share a 2-bed flat with a flatmate and we *each* pay £910 per month for the privilege including council tax.

I do live in a nice area of London, and yes I realise that my situation lacks the economy of a larger household of 3-4 people, but the cost of renting probably wouldn’t change materially while keeping me the same distance from work (might save £100-150 per month, which is a lot but I’d be much less happy in a different area).

Other bills:
– water, energy, internet total £75,
– mobile phone at £25/month
– a bus pass at £120/month
– interest on student loans: £25/month

 Total Bills: £1155/month

Savings/investments: Each month I invest

– £200 pcm into an ISA in shares/funds (a tax sheltered account)
– £100 pcm into a cash savings ISA
– £270 put aside each month into my SIPP (pension account similar to 401(k).
– Principal portion of student loan repayment on a $19k balance at 1.5%: £125
Total: £620/month

So after all that we get to just over £1k left per month for food plus everything else.

Current balances are:
SIPP (only accessible at 55 years old) £6,500
ISA £1,350
Cash £2,500
Total – just over £10k

So after housing, bills, food, transport and savings I have about £700 left per month. I guess the main difficulty I have is that given I have high fixed costs at the moment (rent being the bulk of it), I struggle to see how I can save as much as you propose throughout your blog.

I can see that transport is an area I could save a lot on. The bicycle is sensible and I enjoy riding it, but I currently have an unresolved health issue and until that becomes clear cycling every day is out. I am toying with the idea of a motorbike but that remains an idea.

So then we get to reducing my monthly spend on food, entertainment etc. from £700. I have started making my own lunches for work, and I rarely buy new clothes or other such items. I don’t drink a huge amount but don’t want to stay inside my whole life either!

The long and short is that it seems drastically more effective/attractive given the high living costs here to a) implement the easy changes you suggest like cutting costs where possible and b) then trying to increase income as it all drops through to savings (once the 50% tax has been taken…)

PS – as an aside UK housing market is pretty horrible too. London prices have just about returned to their peak of 2007 levels, and buying for many people is a silly notion. The average house/flat in London costs £371k which is 2.3x the national average, and something north of 15x the average wage! While it is tempting to buy what with exceptionally low interest rates, the deposit required is enormous, and the fear of an impending crash always looms at these levels.

To make matters worth the government has just announced it will guarantee mortgages for up to 20% of the value, which serves only to inflate prices even further.

Jack London

Dear JL,

From what I can tell, you have very little to worry about. I can’t make fun of you for credit card debt, car commuting, or even the student loan, given that you pay only 1.5% interest on the balance and you are investing most of your savings at higher rates. Moreover, I commend you on being a Monevator reader, as that will keep you on top of the UK financial scene.

Your main “problem” is that you’re young and just starting out in your career. So your income is relatively low for a London finance worker, and you have no built-up investments compounding to push you ahead.

While it’s hard to tell the difference between a 25-year-old and a 38-year-old if you stand them up next to each other in a pub, there is an enormous difference in things like career progression and the amount of time they have had to amass the ‘Stash of cash we refer to as a Money Mustache. When I was 25, I had just arrived in the US, with savings very similar to your own. I had just barely made the jump from new-graduate salary to a solid middle-income one similar to your own.

With £2855 of after-tax income and £620 of savings per month, you’re at a 22% savings rate right now. That’s far better than average, although it still yields a 35-year working career, ignoring government subsidies and pensions for now.

But if you can eventually double your take-home pay while maintaining the same expenses, you’d be at a hefty 60% rate, which drops the working years down to 12.

By living in London, you are maintaining access to one of the world’s most productive money machines. To justify the high cost of living there, you either need to tap into it in order to get a suitably high income, or acknowledge that you are just there for the experience, and be willing to work much longer than you would in other cities with lower living costs.

And there’s still hope for you on the expenses side. I would never suggest that a young, single man curtail his nightlife too much while living in such a fun place. But as you get older and settle down a bit, this will probably happen automatically.  These days, my whole family can’t seem to spend even $700 US dollars per month on food and entertainment. It’s not that we don’t have lots of fun around here – it is just a different kind of fun than I had at age 25 in a big city.

Regarding housing, I think you have the right instinct. Always compare the price of owning with the price of renting, and don’t stretch uncomfortably to buy property in a hot real-estate market. Someday you may find a way to own, using renters as a way to subsidize your own cost. But building up a nice asset base first is a reasonable prequisite to property investing.

I always find stories of other countries interesting from my vantage point here in the US. I moved to this country partly because of the world-leading conditions for early retirement. High salaries, low taxes, and amazingly cheap food and consumer goods, on top of the beautiful landscapes and climates available. 14 years later, the US remains at the top of my list for get-rich-quick destinations, and I hope more of those born here will come to appreciate how good we have it.

With this perspective, spending less and investing more becomes a privilege – there are not many other countries where you’d have such a surplus available to buy yourself some freedom.

  • Lisa May 2, 2013, 11:27 pm

    It’s nice to get some perspective. I had always thought it would be easier to retire early in a country that provided health insurance. I have a “pre-existing” condition and know I will have some extra costs during early retirement after I leave my “corporate” insurance policy behind. However, for the reasons you have listed (Low cost food, high income, high saving rate, etc.) the US provides some great opportunities for early retirement if a person is willing.

    • Joe May 3, 2013, 12:46 am

      I look forward to the US sorting out its schizophrenic health system, and when we do I would love to see a single-payer system like the UK has.

      • rjack (Mr. Asset Allocation) May 3, 2013, 6:15 am

        I also would like to see a single-payer system like the UK’s system. However, Obama Care is a big step in the right direction.

    • Sandy May 4, 2013, 12:07 pm

      Make no mistake: I live in The Netherlands where health insurance is not only ‘provided’ as you call it, but mandatory. And we still pay € 3.700 (or $ 4.850) per year for this ‘provision’.

      On top of that, countries such as this one (like most in western Europe) have the most ridicules percentages of income tax (up to 52% in The Netherlands) to subsidize this ‘provision’ of health insurance (amongst other things – such as social security and unemployment: and both of these things you pay for the masses).

      What I would’t give to be able to move to the US and enjoy the low cost of living and food and consumption goods… :) You guys have it made!!!

      • Albert May 18, 2013, 7:24 pm

        You could move to Switzerland instead. I’ve lived in US (8 years in OR and PA) and I find it even better here. Prices are indeed very high, but taxes are very low and salaries even higher than in US.

        And just to add – great blog MMM, just discovered it few days ago. I though I was the weird one who saves/invests 30-40% of his income, but you are much further advanced than me.

      • Nick June 11, 2016, 6:05 am

        I’m not sure how you got to that figure of €3,700.. If you absolutely max out all of your health insurance with the smallest possible deductible you’d be paying about €110 a month. €3,700 would pay for 3 adults (and keep in mind that insurance for children under 18 is free in the netherlands). As a dutchman I am currently paying a measly €69/month with an annual €885 (the maximum amount possible) deductible. I know this post is 3 years old, but I do not appreciate seeing flat out lies about my country on a big website such as this.

        • Dutchy November 7, 2017, 12:45 pm

          I know this is an old post, but I agree with Sandy. As a Dutchman I feel like I have to warn (progressive?) Americans when Europe is being put on a pedestal. Things are NOT what they seem.

          Maintaining a socialist health care system leads to many problems. For example:

          As the elderly population rises as well as healthcare expectations in a modern society, cost will rise. Consequently, both the people, who are forced to pay more money to insurance companies, and the government, who tries to make sure everyone can afford the insurance, becomes creative in keeping down costs. Examples are the government promoting home birthing, which (although comfortable I can tell from experience) can be risky. Women who are not daredevils have to PAY to give birth in a hospital.
          Another example is the government raising the ”personal risk” (amount of money you pay out of your own wallet each year for medicine or specialist care you received). When you have reached the limit of you ”personal risk”, the rest of the health care you receive that year is free. However, next year, you need to pay the ”personal risk” again! So chronically ill and elderly people actually end up with a large bill our Dutch health care system. However, if the government would not raise the ”personal risk”, the monthly insurance cost would rise too much, leading to young and healthy people protesting.

          Also, people may (and do) decide to raise the ”personal risk” themselves, meaning they pay less money each month to their insurance company and pay more if they were to get sick.

          When poor people stop going to the doctor the government may decide to raise a subsidy here and there and take it else where. For instance, a few years ago average Joe would receive an extra subsidy to be able to pay the mandatory health insurance (I know, very complicated) but now, with rising health care costs, Joe has to fend for himself. Other groups may or may not receive more subsidies now. I don’t know, no one really knows how the system works at some point…??

          If you ask me, solidarity in itself seems to be a lofty ideal even in a relatively socialist country such as the Netherlands and the real crux is that you will ALWAYS have the problem that health care according to 21st century expectations is very expensive and that basically no one wants to pay that amount of money (and come can’t). Nice thing about the USA seems to me to be the fact that the government is not running around redistributing arbitrarily and changing its mind about who deserves a little bit of cash today and who doesn’t. As an American, you seem to be able to plan stuff. Save money for this and that, knowing the money will BE THERE when you need it. In a socialist country you never know what’s gonna happen next year. As a young or healthy person you may pay more than health your salary only to wake up one day to hear that the government has changed its mind, and you’re not getting anything!

          Short summary: the grass maybe greener on the other side of the Atlantic but its made of plastic!!! Also: Never trust someone who always asks for money!

          Nick: How can you pay 69 a month? ?? Is your health insurance subsidized? Do you have an extremely high ”personal risk”?

  • Grant May 2, 2013, 11:27 pm

    Wow. That is a lot of rent. When my wife and I lived in London, we were paying £185 per week for a decent sized studio in the less-good end of Notting Hill – but it was still an amazing to live, and accessing the cuty was easy. I could walk or ride to my job (North Acton secret data warehouse!), and she could ride in to the Barbican for study.

    I’m sure you could save a bit if money there ;)

    • Kristina June 13, 2013, 10:00 am

      I thought the same thing. He could save money on rent if he was willing. There are perfectly acceptable locations in London available for less, especially given the excellent public transport and bus pass he is already paying for. Perhaps he thinks he would only be happy in his current location. However has he tried another one just to see? He can always move back to the pricier locale if he is dissatisfied. I know he could save about 320 pounds a month and still live in a good location for a young single finance guy. That would bring his savings rate to 33%

  • Giddings Plaza FI May 2, 2013, 11:34 pm

    London is one of my favorite cities on the planet. So much so that I was looking into getting transferred there by my company while I still worked for a corporation. Taxes, though, as you know, are killer there. And at 25, you can’t know whether your tax investment will pay off when you need it, in the form of social security and health care when you’re old. London does have a lot of free stuff to do, and some of it is amazing, like galleries and museums. But yeah, at 25, or really any age, you want to go out to bars, restaurants, music…all at a price. It looks like you’re headed in the right direction with income and savings rate–good luck! (http://www.guardian.co.uk/travel/2012/jul/23/50-free-things-to-do-london)

    • Matt May 3, 2013, 5:37 am

      Taxes are high depending on the comparison. I find my London take home pay compares well with what I used to get in DC (admittedly a relatively highly taxed area). If you throw in health insurance, this compares even better.

  • Eljay May 3, 2013, 12:01 am

    Unless you expect your salary to exponentially increase, you should run the figures for moving out of London. Sure the salaries are less, but in a Midlands city you could pay £300/month for a studio flat in a nice area that you could bus(£60/month)/walk/cycle to work. Or buy property. Plenty of activities (half the price of London for a pint!) and only an hour by train from London if you want to go for the weekend.

    • Cormac Friel March 12, 2019, 6:46 am

      When I graduated, I got a job in Leeds while all my friends ended up moving to London. Five years later, I work as a Consultant in London (so I get my travel costs from Leeds paid and I get my accommodation covered), while still based up North and my mates are still there. I was able to purchase a house at 23 and I could probably pay it off this year if I wished whereas my friends in London are struggling to get deposits together. Granted, my salary is just £49,500 compared to one of my friends who is on £55k but I still think that the math of London life just makes zero sense.

  • Contender May 3, 2013, 12:25 am

    We currently live in London and also rent a 3 bed terrace house (I am a 36 year old recently full time father of 2) for £1300 (~$2000) per month.

    London house prices are so horribly expensive. To buy the house would be in the region of £475K + fees so the interest repayments alone would be higher than the rent. Secondly renting has the advantage that we do not have to pay for insurance and maintenance. Renting has also provided flexibility and the avoidance of any worry of a very large mortgage.

    We have been fortunate to save at least 50% of our income – inspired by ERE and MMM. It is mainly held in dividend stocks, funds and cash (to buy a property and live off the income). We have been able to do this by being cautious with our expenses and as MMM pointed out working in London can lead to highly paid work. London also has the benefit of competition so consumable goods are held down in price and you can shop around.

    As pointed out by giddings plaza we do benefit from lots of free activities. We have a small garden and a park behind the house for the kids to play in. The museums are awesome and most are free. There are lots of free playgroups for the kids and resources such as library’s, city farms and swimming pools – London has it all. Some of it can be overly expensive.

    London has been good to us and I recommend it as a great place to get ahead in life however for us it is time to leave.

    With a young family we have decided to downshift later this year to the French countryside. Both of us will be able to spend quality time with the kids while they are young.

    Our living costs will drop dramatically so we are hoping the dividend income we receive from our investments will tie us over while we take this new direction.

    Is this our Early Retirement? Perhaps not yet, we still want to be productive so some type of work will be needed. While we find out what this is we have to be extremely frugal!

  • Psynz May 3, 2013, 2:07 am

    Having lived in Brighton, and with family living in London, looking for a cheaper flat should be on this guys to-do list! You can get a reasonable place near good transport links for less than £910/month.

    • laura May 5, 2013, 11:43 am

      I agree. My daughter lives in South London and pays £390 for a shared (with friends) house. Her transport costs are similar,to yours, £120 a month – she works across the river in Victoria, a 40 minute commute.

  • L May 3, 2013, 2:13 am

    Mr London,

    I made the same journey as you, from monevator to this fantastic blog. I am also a London dweller and I share my sympathies that is hard to save. I am of a similar age and wage. I managed to save around 40% last month. However, I am fortunate in that I live with my ladyfriend. Thus we share the load of the fixed costs. Given the costs of living in London are so high, economies of scale become important! My best advice is to walk to work. If you live in zone 1 (city center for the US readers) then it will take just as long on public transport to get to work as a good walk will. Plus, it helps you feel invigorated and awake after a long one the previous night.

  • MrMonkeyMoustache May 3, 2013, 2:54 am

    I just thought I’d add some info on UK tax for employees in the table below.

    Income Net
    0 0
    10000 9620
    20000 16420
    30000 23220
    40000 30020
    50000 36553
    60000 42353
    70000 48153
    80000 53953
    90000 59753
    100000 65553

    (This is just a quick spreadsheet calculation based on current tax bands.)

    Of course, there are several other taxes. The least avoidable is probably council tax at £75 to £500 per month for a household, should you choose to live in a permanent dwelling. This is dependent upon where and how extravagent your house is.

    VAT (effectively a sales tax) is 20% on most items. Some things, like fuel (gasoline), alcohol and tobacco, have additional taxes. Fuel is >£5 ($8) per US gallon.

    I’m not sure how these all compare with the US, but should add perspective for those there.

    As noted in the article, UK house prices are extremely high, and have been since ~2005. 4 to 5x average gross income is typical for a starter apartment in most cities. We haven’t had a housing crash in £ terms. Instead our currency has been devalued by ~30%.

    Regarding wages, graduate engineers can typically expect to earn between £20k – £40k. Starting salaries rarely exceed £30k. Of course there are exceptions, e.g around the South East/London or in the oil/gas industries.

    Despite all this, early retirement is still do-able over here. Check out blogs such as Monevator, Simple Living in Suffolk and Retirement Investing Today for some UK persepectives.

    We do enjoy a more comprehensive social safety net, with (most of) our healthcare paid in those tax rates and less expensive education (although it’s got a lot more expensive recently).

    Personally, I manage a savings rate >50% and my income is less than £20k. This month I nearly hit 80%, but it was exceptional. I still live a luxurious life in many ways.

    • scott May 3, 2013, 8:19 am

      Does anyone have a sense for whether the “free” healthcare/tax burden tradeoff between the UK and the US is a wash? Free healthcare would be great but it appears to come with a higher income tax burden. So, the US has lower taxes but expensive health care. UK has higher taxes but free healthcare. I am not interested in debating the merits of universal healthcare. I am just wondering, as a Mustachian financial planner, what is the best way to calculate the cost/benefits of the two different systems.

      • Mr. Frugal Toque May 3, 2013, 11:08 am

        I would just look at the raw health care cost numbers:

        Then, if you wanted, you could look at the health outcomes, like longevity, infant mortality and such.

        Then you could see that countries with public health care pay *less* money for their health and get better results.

        • squashroll May 3, 2013, 3:27 pm

          Frugal Toque, that’s an eye-opener!

        • Dutchy November 7, 2017, 1:00 pm

          Apart from those cancer/rare disease patients who keep organizing their fundraisers to be able to get some new and fancy American treatment unavailable in Europe of course.

          Maybe it depends on your income? Wealthy people having better health care in the USA compared to wealthy Europeans whereas the poor are better of in Europe. That seems to be the general rule anyway, that it’s better to have money in the USA than in for instance France…

          Also, sometimes not receiving any health care may be in your best or national best interest. Such as the American way of overdosing on antibiotics compared to Dutch ”Well, maybe you should go to bed early” diagnoses. Maybe you should go to bed early!

      • Cynthia May 3, 2013, 11:55 am

        Hi Scott,
        The key issue that gets lost in the discussion about ‘high european taxes’ is that, at least in France, the government KNOWS everyone is cheating, so they tax what seems to be a high rate because they know that a huge chunk of our incomes are not reported or other kinds of accounting magic. So they may tax 30%, but only on say 60% of our income.

        We live in France which, as all my British friends tell us, is a godsend compared to the UK system. Having healthcare is one of, if not the main thing, keeping me from moving back to the US.
        It doesnt cover everything, only 70% of most things and that coverage moves to 100% if you get a serious illness like cancer. My self-employed taxes, which covers EVERYTHING: the govt retirement, health care, the public debt, widows and orphans, is 20% of my sales/revenue. On top of that there is income tax once a year, which you dont pay at all if you are in the lower to middling tax brackets.

        I find the pay off is worth it, especially if you have children to put through college–because University here is like 400 euros/550 dollars a year!

        • Dutchy November 7, 2017, 1:10 pm

          But what about the government changing its mind? Who says University will still be that cheap once your kids reach college age? Wouldn’t you rather save the money yourself than pump into into the system hoping it will get pumped right back when you need it?

          Look at the Netherlands for instance, where suddenly it isn’t so cheap anymore and students have to loan money from the government instead of receiving the ”Basisbeurs”. I was among the lucky ones, but two years after me, students suddenly have to go into debt if their parents do not have enough savings. These ”not enough savings” parents, however, have been paying a socialist tax rate all their working lives!
          Funny thing, resting in the hands of a fickle God…

      • Samantha M. May 3, 2013, 1:34 pm

        Can’t comment directly on the UK health care, but having been born in Australia and now living in the US I can offer some insight on something similar. In my income bracket, which has in both countries averaged out to around US$50K a year (doing a rough and ready currency conversion). I actually come out ahead tax wise in Australia.

        The tax is more, but health insurance is paid as a percentage of income (a 1.5% levy) so its not the the same cost for everyone, and insurance rates are lower as a dollar cost for lower income people. So basically I paid $500 a year for insurance while I lived in Australia, with some small AUD$10 or so co pays etc I could have avoided if I’d really hunted around for doctors etc that bulk billed. My father had full on 2 years of treatment for lung cancer and was never billed for anything as he was retired and on a low income, this includes top of the line care at a major teaching hospital and reimbursement for petrol and accommodation as he had to travel from the country to the city for treatment.

        Of course someone who earns way more than I did when I worked in Australia may have a different story to tell. Oh and private health insurance is available in Australia if you want it.

      • Katie May 4, 2013, 1:27 pm

        I would think this might depend on circumstances.

        The MMM family can live comfortably with inexpensive, high deductible health insurance at less than $300/month.

        My daughter has spina bifida and has appointments with pediatric neurosurgeons several times a year (you should see their hourly rate! whoa!), requires routine MRI’s, physical therapy and a host of other expensive medical visits.

        Health insurance for our self-employed family runs closer to $1000/month (and we have shopped around and done the math!).

        It seems we would benefit from a higher tax rate and lower health care costs. Other families, such as the MMM’s, may be better off in the current American system.

        Of course, if all the families like mine could easily get into a universal system, and families like MMM’s could opt out, it wouldn’t work very well!

        PS – MMM, I’d love to have you look at our finances and do a “reader case study” about a family with high health costs. Any insight is very welcome!

      • Neil Allen May 7, 2013, 12:06 pm

        Hi, as a lucky relatively healthy person living in the UK (Manchester), I very rarely visit the doctor and so you could say that I’m getting a low return on investment regarding my tax contributions for health. However, the system is always there just in case, regardless of cost or time involved. Some people need access to health care throughout their whole lives, and without the NHS I just can’t see how they could possibly afford such great care. I wouldn’t consider myself a socialist, but this is certainly one of the better post war reforms we live with.

    • A pair of blue eyes May 3, 2013, 10:35 am


      Not sure whether you are using the personal allowance for 2012/3 rather than 2013/4 which is £9440 for those born after 5th April 1948? His pay after tax and national insurance assuming that is his personal allowance, should be £35963 but then the student loan will be taken at source which would bring it to around the amount he is quoting net.
      See tables: http://www.moneysavingexpert.com/banking/tax-rates
      or: http://www.hmrc.gov.uk/rates/it.htm

      But agree that food costs don’t need to be that high. See this blog where this young woman has been feeding her son and herself on £10 a week and some of her recipes are really delicious, I have tried them

      • MrMonkeyMoustache May 3, 2013, 11:35 am

        Oops, I missed the reduction of the higher tax band down to 32,011, which would bring the post tax down to the 35963 (or just short of £3k pcm) you state.

        That still leaves ~£160 in the budget presented that is being double counted as both a deduction and a saving (i.e. the student loan repayments).

    • Jeff June 16, 2013, 2:49 am

      The UK ISA tax break needs to be factored in. You can put approximately £11000 a year into a stocks & shares ISA and it all rolls up almost tax free.

      Do that for over 10 years and you can easily have over £200,000 bringing in dividend income.

  • Neverland May 3, 2013, 2:57 am


    Having lived in the UK and the US I can tell you that consumer items (food, clothes, electronics) cost the same price in £ as they do in $. This is because the costs in the UK are much higher (sales tax on a lot of items is as high as 20%). The National Health Service employs over a million people and has to be paid for…

    (Probably the OP could stop buying cook’n’chill ready meals, which is what most people eat in the UK, which would cut the bill a bit)


    Rent in London has been rising just under 10% a year for the last several years, more in some parts


    Note the average price of a property that the OP is quoting is for a flat

    A 1,000 sqft/90 sqm house in London would cost around $1m on average (within 5 km of Central London)


    You need to invest everything you make over basic rate tax into a retirement account to defer paying tax until you aren’t eligble to pay any higher rate tax. You will probably find your employer will match addtional contributions you make up to a fairly high level. Therefore more than half the money you are putting into your retirement fund to compound will come from other people (deffered taxes and your employer), which is nice

    In the UK it is actually quite easy to organise your affairs to minimise your effective tax rate with a little discipline and planning. Minimising tax is one of the ways to actually be able to build-up any wealth, as well of course as earning it in the first place and not spending it

    • BeatTheSeasons May 3, 2013, 10:06 am


      Re retirement tax planning – this is all true up to a point, but why the obsession with avoiding higher rate tax? Once you earn about £42,000 your rate goes from 20%tax+12%NI=32% to 40%tax+2%NI=42%.

      So with a private pension (SIPP) you save 10% tax and lock your money into an account which you used to be able to access at age 50 but has now changed to age 55. With retirement ages going up all the time, what’s the betting that the government will move the goalposts again?

      (I do take the point that it’s worth contributing to an employer matched scheme, but sadly they’re not available to everyone).

      While this is all sensible conventional retirement planning it doesn’t really lend itself to early retirement in your 40s or younger…

      (For those not familiar with the UK retirement system, unlike the US you can’t access your funds early and pay a penalty; they’re completely locked away by the government).

      • Mike May 4, 2013, 2:55 am

        Are you sure about that? I didn’t think NI relief was available on pension contributions. As such the tax saving rate is 20% as you move from higher rate to basic rate tax bands (ie 20% to 40%).

        • BeatTheSeasons May 4, 2013, 8:18 am

          @ Mike May – you’re absolutely right, unless you can persuade your employer to pay directly into your private pension.

          What I meant (and didn’t express very clearly) was that people seem to think avoiding higher rate tax is very important because the rate ‘doubles’ from 20% to 40%.

          Whereas in fact total tax/NI only goes up from 32% to 42% once you become a higher rate taxpayer as NI falls from 12% to 2% at the same point that income tax doubles.

          Of course this still makes it very favourable for higher rate taxpayers to contribute to pension schemes as their marginal tax rate falls to 2% (NI) – just as long as they don’t mind not being able to use the money to invest in residential property and they trust the government to give it back to them when they reach age 55 and the public sector pension crisis is even worse than it is now.

          The biggest benefit is where your employer will match your own contributions. It amazes me that so many people decide not to take this ‘free money’ because they don’t want their payslip cut by a few percent in the short term.

          • Erica May 4, 2013, 9:57 am

            As an example, my husband has just taken his employer up on a superannuation contribution matching package. For a £132 drop in his ‘in hand’ monthly salary, £402 goes into his superannuation fund. When I found out about it I couldn’t complete the paperwork fast enough.

      • Bryallen May 5, 2013, 3:53 am

        Actually, employer matched schemes soon WILL be available to pretty much everyone! New rules mean that big companies are starting to match contributions this year, with smaller companies following over the next few years.


        Initially, employers will have to match up to 1%, rising to 3% by 2018.

        • Penny September 4, 2017, 9:34 am

          Bit of a late reply, but if you find the right employer there are some really good deals around at the moment. I currently get “double + 2%” matching (ie, I put in 6%, they put in 14%), and my last employer gave an extra 11% on a 3% contribution. Even with average returns, I’m expecting to be a multi millionaire once I turn 55 (probably 60 after the government move the goalposts again). Just a shame that comes with the penalty tax for going over the lifetime limit!

  • Aussie A May 3, 2013, 3:26 am

    Great case study MMM! I really enjoy a view over the fence to other countries. This is a really useful table to compare purchasing power in other countries to the US (http://stats.oecd.org/Index.aspx?datasetcode=SNA_TABLE4) which takes into account not only the exchange rate but also the cost of living. As an Australian I find it useful to apply our multiplier of 1.46 to all the $ values MMM gives, and other international readers may wish to do the same to get equivalent real values in their own currency.

    So while I earn $100k AUD annually, which sounds good, as its actually slightly more USD given average exchange rate for the last 2 years of around 1.03. However, in real terms is it is equivalent to only just over $68k USD ($100k/1.46) given the higher cost of living over here. :( To give just one example, the current median house price here in Perth is $499k AUD and an equivalent house would rent for around $2000 to $2500 AUD per month. I was actually in Colorado over Christmas and it was amazing comparing how cheap most things were compared to back home given the exchange rate is almost 1 to 1. So American friends, MMM is spot on, you guys have it good!

    In contrast, JLs £50k income is worth around $73k USD in real terms (using the UK divisor of 0.68), although of course it is probably a bit less than that given higher cost of living in London compared to the rest of the UK. Still, not bad for 25 year old living it up in one of the worlds greatest cities!

    Perth is a nice place to live don’t get me wrong but not exactly a happening hotspot by international standards so really the only reason I’ve moved back here is the family ties and I’ve accepted I’ll have to work longer than if I lived elsewhere. However, after visiting Colorado recently and the way MMM describes living there, I just might have to reconsider my options!

    • Neo May 3, 2013, 8:05 pm

      In Australia you would pay 22.8% tax as a flat rate including the medicare levy on 50,000 pounds. He is paying 32%. That would be an extra 4600 pounds net p.a.

      I lived and worked in London for a year in my twenties we had four in our flat that went up to 8 peeps at times sleeping on the lounge, the floor, wherever there was a spot,touring Europe and checking out the pubs, good times..

      • Aussie A May 6, 2013, 3:06 am

        Hi Neo,
        Correct me if I’m wrong but I don’t think you’ve taken the personal allowance into account which we don’t get here. A quick calculation showed that tax on £50k is just under £10k plus about another £4k for National Insurance for a total of about 28% which is still a bit more than here, but not a huge amount. No question London is an expensive place to live, but it is an international city with good public transport and facilities. Can’t say the same about good old Perth unfortunately!

  • Nathan May 3, 2013, 3:29 am

    Nice one JL, don’t get sucked into the London finance bubble lifestyle and everything else will eventually fall into place.

    When I was starting out I rented a room in a house of ever changing travelling Kiwis (bright times!), to get my saving rate up when I lived in London. Then bought a ‘fixer upper’ an hour outside London.

    Worked out Ok, but what I’m doing now bears no relation to what I wanted to do then, but a stash never goes out of fashion.

  • RetirementInvestingToday May 3, 2013, 3:29 am

    I’m London based and can confirm that as a location it is no different to any other place on earth when it comes to investing for retirement – It is still possible to live frugally and opt out of consumerism. I’m saving 60% of gross earnings and will have the opportunity for early retirement in 3 years at current run rate. I’m currently 70% of the way to retirement and have achieved all that while living in London.

    My analysis of the UK property market suggests that housing today is affordable when compared with long run data but is certainly not good value. I therefore also rent for now. I continually present plenty of data for debate on that topic.

    • Neverland May 3, 2013, 9:44 am


      I read your blog sometimes and like it but I think you are being unfair here

      It doesn’t just how much income you save but how much income you have to start with

      As MMM says, if the original poster was making £100k, his saving rate would be 60% as well

      With a bit of luck & effort he could be making £100k in a few years

      • Marcia @Frugal Healthy Simple May 3, 2013, 12:56 pm

        This is a very good point, one that I’ve found myself making AD NAUSEUM at work lately (to my boss and other coworkers).

        I work at a startup company. Our salaries are pretty low for the industry and on the low side for the area. (And about 20-40% lower than Bay Area). However, as we’ve grown (from 21 employees when I started to 150 now), we’ve had to start paying closer to market rate for newer employees.

        Problem is that existing employees haven’t gotten raises, only occasional bumps for promotions.

        When some of the upper level managers talk about “lack of dedication” I have to make this point: You know, it totally sucks that I could be making $30k more a year somewhere else. It’s not fair. But I’m frugal, my husband gets raises and bonuses every year, and he makes 50% more than I do. So, I’m not hurting.

        It’s easy not to sweat 5k or 10k or 20k if you are in your late-30’s, 40’s, or 50’s and have settled into a particular salary/ job level. Some of our newer upper level managers had to take big pay cuts…but I guess I have less sympathy when it’s a pay cut from $260k to $200k, or from $180k to $160k. But a difference between $60k and $70k is huge.

        When you are just starting out, it’s waaaay harder. Sure, in some ways, their needs are lower (no child care, no mortgage). But overall, it’s much more difficult. I think some people just forget what it is like (that’s what time does to you.)

      • Retirement Investing Today May 4, 2013, 1:44 am

        Hi Neverland

        Apologies and let me re-clarify. I wasn’t having a go at Jack London. I was really just trying to dispel one of the “excuses” people use for why they aren’t saving through my own anecdotal experience.

        It’s not impossible but just a different lifestyle that you have to live to that of somebody living in a small village or northern town. With that different comes pro’s and con’s.

        I also agree with you on the topic of earning more during the accumulation phase. It’s something I have definitely practised and sounds like a post I should make.


  • Mrs PoP @ Planting Our Pennies May 3, 2013, 3:44 am

    I think MMM is right on the income side of the matter – in the finance world you’ll likely increase your pay more rapidly than in most fields, which will automatically increase your savings rate so long as it’s not spent on bottle service.
    But one other thing I would add is to be open to other locations should opportunities present themselves. Here in the states, there’s a misconception that if you want to be in finance you have to be in Manhattan or Silicon Valley for tech. In reality, there are smaller pockets of these industries in many places around the country that are competing for similar workers and pay similar salaries, but in areas with significantly lower cost of living – and IMHO better quality of life. That’s been a big part of making savings pretty easy for us.

  • Stevo May 3, 2013, 4:05 am

    The biggest area you could save money is in accommodation. I’m in an ex council flat in Barnsbury/Angel with 2 other people and we each pay £530 per month plus £35 council tax. On the outside it doesn’t look very pleasant, not a lot of social housing blocks do, but on the inside it is delightful and ultimately that is what matters. Since I’m in Angel I can walk or cycle to anywhere in central London though if you work in Canary Wharf it might be a stretch. In that case I would pick a similar ex-council flat in East London which would be even cheaper.

    Then your commuting costs disappear and you can get home at night via a Boris bike/Bus/Walk instead of a taxi saving more money.

    I’m in a similar position to you. Work in finance in London, 27 and earning a damn site more than I deserve to (£75k/$116k) yet don’t see to have much to show for it… I think the answer has to be getting on the property ladder in a 2 bed and renting the second out to cover the bulk of the mortgage. I’ve been looking at Stoke Newington/Hackney and there are still some ‘affordable’ places there (sub £300k/$466k) that you actually want to live in. The trick is building up a big enough deposit to get a mortgage.

    Hope this helps,


    • GM October 2, 2013, 7:34 am

      Just wanted to give a shout out to ex council flats (i.e. privatized social housing). Agree, they aren’t the nicest places on the outside, but they are CHEAP. You can live very centrally and pay way below market rate in London.

      Thanks for Margaret Thatcher, a lot of social housing has been sold at a ridiculous discount since the 80’s (“Right to buy”). You can argue that is was unfair to sell public assets and such steep discounts, but the unintended benefit was she created an underclass of housing that most middle-class British people would rather die than live in, so they’re remarkably inexpensive, even in Central London. And since most were built 30+ years ago, the minimum size standards are much larger than ordinary London houses/flats.

      JL, this unfair social stigma against ex council housing can be used to your benefit. You just need friends who don’t care otherwise…

  • Chris May 3, 2013, 4:30 am

    Another UK reader here, glad to see you’ve had a look at the UK scene MMM,
    I currently work part time in a clothes shop in Leamington Spa, and am working out where I want to move to next (am living back at home right now) and Manchester currently strikes me as somewhere I could get to live in a vibrant city with lower rents than in london,
    any MMM readers have any ideas on where is best in the UK for a young person to live in the UK while keeping costs down?

    • laura May 5, 2013, 11:48 am

      Are you just looking to move to a big city Chris?

      • Chris May 17, 2013, 7:53 am

        Pretty much, though for some reason I keep focusing on Manchester, Birmingham is a bit too close to where I grew up, and London is just so expensive, so Manchester seemed liked the next biggest city, plus it has good transport links, and a friend moved out there for her degree and loved it, but I’d be open to other places aswell

  • Simple Economist May 3, 2013, 5:05 am

    So, fellow readers, is America the best place to grow a money mustache? I’ve been wrestling with this question amongst my financially sound friends. I’ve come to the conclusion that we must be pretty close to the best place, if not the best, when it comes to the income vs taxes/housing/transportation cost. It seems like we have a ton of advantages considering the margin of wages and expenses. I feel like Americans are so inefficient, you actually get questioned when you live an efficient life (like most of the 2ed world already does). Well, I’ll enjoy the margin and opportunity and take advantage of inefficiencies while I can and debate the details after I retire early!

    • Pretired Nick May 3, 2013, 9:25 am

      My take (so far) is the U.S. is the best place to build up your pretirement fund, but once you have it, moving somewhere with lower cost of living and health insurance might be the way to go. Once you’re supported by passive income, moving abroad isn’t as scary and you’re more likely to be allowed permanent residency. Plus, the adventure!

  • Shandi76 May 3, 2013, 5:11 am

    Nice to see a UK case study. Yes, we are taxed more highly here and petrol (gas) is much more expensive, but we do get benefits that US citizens don’t, such as our universal healthcare system.

    £50K is a decent salary even in London, and I think Jack could easily up his savings rate to around 40% by moving to a slightly less nice part of London, and finding cheaper forms of entertainment. I checked out rightmove,co.uk and found some studio apartments for £130pw (£563pcm) in central London, and plenty of 2 bed flats in central London in reasonable neighbourhoods for under £1500pcm (£750pcm each).

    I would also recommend moving to another part of the UK if possible, once you have served your time in London. I currently live in Kent which is still pretty expensive, but much more affordable than London. A friend of mine did a 2 year graduate training placement in London but managed to get her next placement in Scotland where her £40K salary goes much further. Edinburgh has a pretty large financial services sector too and you could live very well, or live comfortably but frugally there and stash a high proportion of your income if you were prepared to move there. I was living very well on about £1200pcm in Edinburgh and saving £10K a year on a gross salary similar to Jack’s net income.

  • BeatTheSeasons May 3, 2013, 5:40 am

    Great to see a UK perspective on this blog.

    With the median UK salary around £25,000 I’d say Jack is earning an astonishingly high salary for a 25 year old, even for London. So he might need to focus on cutting costs rather than increasing income.

    From what I’ve read on MMM I’d say the main FI/ER differences between the UK and the US are:

    1. Free healthcare in the UK means lower target income required.

    2. UK council tax is much lower than US property taxes so again lower target income.

    3. The UK is much more dependent on imported food and fuel than the US, which makes these necessities massively more expensive.

    4. House/rental prices are much higher close to City centres and where there are jobs in the UK, but cheaper in the suburbs. So whereas in the US you can save travel costs by living closer to work, in the UK you have to choose between more expensive housing or more expensive travel. This means it’s harder to save a lot during peak earning years, but does mean you can move to a cheap place with no jobs once you’ve built that retirement pot.

    5. You can avoid (defer) ALL income tax by paying into your pension (SIPP) in the UK, so that allows for a huge savings rate. However, you can’t get it out before age 55 (which the government has already increased from 50 and might increase again). Whereas in the US you can withdraw your retirement savings at any age and pay a tax penalty.

    And two more bonus points:

    – the mayor of London is a cyclist

    – in the UK you can rent an ‘allotment’ for about £50 a year. This is a patch of land about 200 meters square on which you can grow all your own vegetables and even keep chickens. In most towns and cities this land is scattered throughout the residential area, not out in the countryside. Mine is a 5 minute walk away from home!

    • Argenbrit November 20, 2015, 6:08 am

      Thanks for adding salary perspective to the comments. Please note that £100k gross salary is the managing director salary in the company I work. Hence, that income is rare and comes with age, significant experience and luck in London.

  • Mario May 3, 2013, 5:54 am

    I always think it still has to do with how bad you want it.

    New York and London are certainly two different cities, but a favorite pastime among folks here is to say, “OMG, $xxx,000 isn’t rich in New York!”

    Great, but you can stretch it if you want it bad enough.

    Like you, we have an extensive light rail system, and a 30-minute commute to Brooklyn, Queens, or even (gasp) New Jersey can cut your rent by a large multiple. Of course, I don’t get to live in the hippest neighborhood…

    For food, much has been said of New York’s expensive restaurants and bars. But we also have very inexpensive farmers markets and co-ops that require a little more work — the first, I have to wake up early on the weekend and the latter is literal work in that the co-op rules require me to do a shift working in the store.

    I could go on, but there’s the point. New York could be expensive (and flashy and fun) but it has, for me, been inexpensive because I don’t live as exciting a life and am willing to work for lower prices.

    • Johnny May 3, 2013, 8:37 am

      Yep, similar experience to ours. We paid a little more to live in the city (Upper East Side), but we still found the cheapest option for what we needed at the time. We walked everywhere, we rarely felt a need to eat out, and we took in all of the sights and experiences NYC has to offer without shelling out cash for tourist traps. We were able to pay off most of our student loans while living out there as a result of choosing our frugal lifestyle.

      Like you said, we wanted it bad enough (beside being a smart career choice) and we made it fit our financial goals. You don’t have to live to the world’s standards of “most expensive cities.”

      • Mike May 3, 2013, 11:32 am

        I agree, i work in NYC (tribeca) and moved to Hoboken, I’m amazed more people working in the city don’t look at new jersey, my rent is probably around half of what most of my co workers pay, and it takes me maybe 25 minutes to get to work.

  • SamWise May 3, 2013, 5:54 am

    From a fellow english man’s perspective:

    £50k is a hell of a lot for a 25 year old to earn, even in London. That is really a great achievement to be earning at age 25. You must congratulate yourself good sir.

    If you were a teacher, accountant, or other type of white collar worker you are earning way above the average for somebody with just a few years experience.

    As a comparison, I am a 23 year old software writer, and earn £25000 per year with my day job, after 18 months experience. I live in Manchester (200 miles north of London) and can well live off £1000 per month, and that includes £530 on rent and bills, with the remaining £470 spent on badass meals, and regularly going to clubs and bars dancing around and (very unsuccessfully :P) attempting to be charming and date women.

    If you really wish to cut your spending I think you could do so, but it sounds like you’re doing quite and perfectly happy as you are.

    Ways to possibly cut spending:

    *Rent:-there are some really great sociable house shares in London in great locations including all bills for £750 per month (saving £235).

    *£1k per month living allowance after bus pass. This is really quite a lot, even for London. Even some very spendy people wouldn’t spend this much. This could easily be cut down if you put your mind to it. You can quite easily eat in London if you cook your own food for £40 per week. Even with an extra £60 per week for the pub, cinema and dates, this would bring your living expenses to £100 per week (approx. £450 per month) (saving £550 per month).


    Of course another option would be a change of location. Sounds like you have pretty good skills to be on £50k at age 25. Would you consider a move to Birmingham or Manchester? They can both be pretty good for finance related jobs. Plus London can became a bit disorientating at times, and this makes it hard to keep track of how much you are spending. I used to live in London, and you can live there for around £25k per year (before tax), not uncomfortably. It depends how much you enjoy your current life style and If you’d want to change it.

    • chris May 3, 2013, 6:42 am

      I’m looking at moving somewhere that is a bit more vibrant than home (leamington spa) and manchester seems like my main target at the moment, any particular places you reccomend for living? and any other tips you may have for manchester would be appreciated, thanks

      • SamWise May 4, 2013, 4:45 am

        Hi Chris

        It totally depends what you’re looking for, if you would like leafy nice suburbs with a friendly atmosphere and nice cafes then its worth looking at Chorlton or Didsbury.

        If you’re looking to live in a swanky apartment and be close tothe beating heart of the city centre, then it’s worth looking at ancoats, the northern quarter, piccadilly basin or the green quarter, although rents are slightly more expensive in these areas.

        I hope that helps!

        • Chris May 17, 2013, 7:57 am

          cheers for the advice, I’m not too bothered about living anywhere too fancy (at least not for a few years) but close to the city centre would be where I was interested, I don’t know too much about the public transit in Manchester, but somewhere that is easy enough to bus/bike (walk at a stretch) would be good I think, the young people I know in london seem to live MILES out of the city centre, but if there are busses and whatnot that run most times, then its not too much of a problem, where I live at the moment last bus is around 21:45

    • 205guy May 4, 2013, 2:54 am

      Indeed, I found it odd that MMM did not even suggest trimming the food and entertainment budget just a wee little.

  • Matt May 3, 2013, 5:58 am

    On location, maybe it’d be worth re-visiting what you mean by “nice”. I don’t know from your post where you live, so I’m making assumptions here. Apologies if they don’t apply.

    I also can’t tell from your post (maybe I read too quickly) whether you’re an expat, but there’s a tendency for expats to have a very strict view of what is “nice”, eg Notting Hill (which became a desirable scene because of the bohemian culture which has long been priced out, so now you get to live with other bankers in badly maintained blocks for tons of money), or marylebone, or South Ken, or Clapham (anything sadder than wannabe Fulham??) etc. For entertainment, all of these places are packed with either very high-end places that you can’t enjoy on your salary, chain places that aren’t worth spending a penny into, or fake “trendy” places that attempt to ape what’s happening in real hipster areas (where 2-bed flats certainly don’t go for £1,800).

    Another common mistake is to try to save by moving to cheaper areas within central London. There’s a reason they’re central yet cheap.

    Anyway, point is that there are areas that are genuinely nice, better suited to meeting other young people (perhaps with different interests, and who may not work in finance, but that’s a good thing), and with more potential romantic partners. Some places are surrounded by slightly rougher areas, but try walking due north from Notting Hill until you cross Harrow Road and you’ll see that areas generally thought of as nice are no different in that regard.

    I don’t know what float your boat, and I’m not sure where you live now, but I’m pretty sure that you’d find somewhere £200/£300 cheaper in places like Newington Green, Dalston, Stokey, Crouch End, Muswell Hill, Greenwich, Archway, Whitechapel, Oval, South Kilburn/Queen’s Park, Holloway, nice bit of Bow not too far from Victoria Park etc…

    Personally, I’ve passed the 50K mark nearly ten years ago and I certainly don’t think I’m too good for any of these areas. I own a nice 2 bed flat with garden that would rent for about £1,700 – 200 less that what you guys pay, and probably much more house than you need as you start out building your stash.

    Just some thoughts…

    • Matt May 3, 2013, 6:28 am

      sorry – i meant to write my flat would rent for about 1,600 (according to zoopla.co.uk, which has the value within 1/2% of what i think is correct)

      • Neverland May 3, 2013, 9:57 am

        @Matt May

        The climb in rents and house prices has left the middle aged in London very rich and young people on even apparently high salaries a lot worse off

        I think the rent in these place you are quoting “Newington Green, Dalston, Stokey, Crouch End, Muswell Hill, Greenwich, Archway, Whitechapel, Oval, South Kilburn/Queen’s Park, Holloway, nice bit of Bow not too far from Victoria Park” will not save the OP £200-300 a month

        Remember he is sharing so the saving to him will be halved

        Moving to your flat at £1,600 a month will only save the original poster £100 a month

  • My Financial Independence Journey May 3, 2013, 6:51 am

    I’d agree that you (JL) is doing pretty good. A 22% savings rate out of college in London is great. I had around a 25% savings rate when I started my first postdoc, in a city nowhere near as fun.

    At this point, I’d say that growing your career is probably going to yield better results than just cutting back your expenses. Figure out what you need to do to advance up the ladder and aggressively pursue it. If you can keep your expenses from rising in tandem with your salary, your savings rate will increase handsomely with every raise or promotion.

    • BeatTheSeasons May 3, 2013, 8:37 am

      It will yield better results if it is successful. But as there are fewer jobs the higher you go, by definition not everyone will achieve this. Ability and even luck play a part.

      Controlling expenditure, on the other hand, can work for everyone.

      Anyone who manages both can retire in about 5 years!

      • My Financial Independence Journey May 3, 2013, 8:50 am

        He didn’t give any information on his career, so it’s hard to give any specific advice. But there are all kinds of options from being a better employee, to networking, to getting additional training/education, to taking on challenging projects, to job hopping. The list goes on.

        By definition, not everyone will achieve career growth. But by observation of my own field, a large swath of people aren’t even trying.

  • Chris May 3, 2013, 7:03 am

    I’d second the idea of investing time and a bit of money in your career while you are still young and without family.
    Evening classes would also keep you away from the pubs for some nights ;-))

  • Owen Evans May 3, 2013, 7:30 am

    That’s a fortune for rent. My friend lives in a house-share in Clapham and pays £650 and I consider that a lot. Move to a less salubrious area and you can pay £450. Easily.

    Sure, it might not be as nice as you’re paying – but that sounds like Fulham/Chelsea prices, not Bermondsey/Lewisham prices…

    And I’ve lived in both areas, and much prefer the cheap and cheerful Peckham to Chelsea…

  • A San Francisco Early Retiree Hopeful May 3, 2013, 7:47 am

    Thank you for this, MMM! I’m in a similar situation – 23 and just out of college and grad school, and living in San Francisco where rent is insanely pricey and buying even more insane. I earn about $60K before taxes, but still have about a 40% savings rate. I’d been beating myself up over how it should be higher, but I live very frugally aside from housing costs.

    Good to hear that perhaps I should focus on earning more at this point if I am going to have all of the opportunities the big city offers rather than worry about how high some of my fixed costs are like rent!

  • JaneMD May 3, 2013, 7:57 am

    If you are a young single guy who cooks, it will do amazing things to your dating life. Your place can be the entertaining place for pregaming and parties because you will be the only guy who cooks!:)

    Hey MMM, Nashbar is having a nice sale this week. I took the plunge and bought the bike trailer for Child1 and Child2. I’m off now to bike to the library.

    • Mr. Money Mustache May 3, 2013, 1:50 pm

      Congratulations Jane MD! I too have noticed some deals at Nashbar, and Mrs. MM is actually working on a scheme to sell her fancy road bike (which she rarely usues), and instead buy a nice city commuter bike to replace the old mountain bike she uses every day.

  • mucgoo May 3, 2013, 8:08 am

    Your target really should be maxing out the yearly ISA limit so that’s £11.5k a year and then putting everything your paying tax on at the 40% rate into a SIPP. That leaves you with about £18k post tax to live of which is enough even in London. In the final few year before financial independence your’ll probably need to make some additional taxed saving as well in order to tide you from retirement till 55 when the huge SIPP pot can sustain you.

  • MrMonkeyMoustache May 3, 2013, 8:26 am

    Firstly, congratualtions to Jack for having his head screwed on far better than I or any of my friends had when we were 25 year olds. It’s impressive that he is saving and not flushing all of his huge salary away.

    However, here’s my take on some of the figures given.

    Firstly, income tax/NI. I calculate he should be clearing ~£36.5k if he is earning £50k. (+£200 pcm). Please let me know if I’m wrong on this!

    Secondly, the savings listed total £695, not £620.

    So straight away we can go from a savings rate of 620/2833 = 21.9% to a potential 895/3042=29.4%.

    This leaves a massive £992 pcm for food and other spending. That’s nearly 160 hours worth of minimum wage every month. Even allowing a generous £10 per day for food and £100 per week for entertainment, there’s still £250 unaccounted for.

    Putting this £250 into the original figures and we’re up to 1145/3042 = 37.7% saving rate. That’s with Jack spending more than a worker on the median UK salary receives.

    The bills seem slightly high, but not wastefully excessive. However, Jack chooses to pay a bit extra for living in a good area, which is perfectly understandable. He also pays for commuting due to health issues. Is there no compromise whereby he can only pay for one or the other?

    I see no reason why Jack cannot save at least 50% of his take home while still being very spendy!

  • Gerard May 3, 2013, 8:36 am

    This case study gives us a nice perspective on where we have it easy or hard, but it works the other way around, too. There are things in London that offer great quality for the price, at least compared to Canada: cheese, beer, museums, vegetables, wine, bread, walking, art galleries, advance-booked train tickets, last-minute flights. And a big Indian (Bengali?) community means that Asian groceries can be crazy cheap, especially staples like spices, rice and lentils. On the other hand, cafes, restaurants, and housing are crazy expensive for what you actually get. So you engineer a slightly different life than I might!

  • Savvy Financial Latina May 3, 2013, 8:41 am

    I find our housing costs are the most expensive part of our budget. It doesn’t seem like much at first, after all you have to live somewhere, but then you try lowering your expenses, and you realize it’s really hard to lower your housing expenses, if you started at a higher level.
    Something I’m trying to keep in mind while we look at houses. Keep housing costs as low as possible. I do not want to be house broke.

    I think for 25, he is doing pretty good! Keep saving and hustling!

  • Naners May 3, 2013, 8:42 am

    May I humbly recommend Canada as another Mustachian alternative, especially for the risk-averse? MUCH lower taxes than Britain: someone with 80K salary would pay around 35% marginal tax on income, plus 13% VAT on some goods (not including necessities like food). Yes, there is somewhat higher property tax etc. but in return you get excellent guaranteed healthcare for life, solid public schools, and excellent universities where your kids will pay $7K/year. In some places the climate is not great, but there are some gems, and much of it is no worse than Chicago or the Northeast. Bonus: the economy is reasonably solid (no debt crisis) and the politics are less insane than in the US, so it seems less likely that the next government will take away the health care and spend the money on nuking North Korea. There are also people who are doing the ER thing in Canada, so it can be done (see Canadian Dream for example).

    • Lisa May 4, 2013, 8:54 am

      I would love to see more Canadian case studies – especially in SW Ontario.

  • scott May 3, 2013, 9:05 am

    The bus pass seems very expensive. That is equivalent to a monthly car payment in USD for a decent new car financed at low interest rates. Is the underground a cheaper way to get around London compared to the bus? If health issues constrain biking or walking maybe the cost in unavoidable. But it seems like you could play around with the rent, commuting distance, and transportation mode variables to further optimize your spending.

    • Neverland May 3, 2013, 9:38 am


      A typical one way journey on the underground is $5-8

      A bus journey is maybe $3-4

      A Starbucks is $5-6

      Just to drive into Central London you have to pay $15 a day…

      • AJ May 3, 2013, 10:02 am

        Scott transport in London is definitely expensive but that’s an exaggeration.

        A bus trip is $US2.20 and that’s a flat rate no matter how far you go.

        Tube is about US$4.30 for a zone 1/2 trip which would cover most visitor’s journeys and almost certainly JL’s commute. I’m not very central but I’m still on the edge of Zone 2 so that covers a lot of ground. Zone 1 only is cheaper and avoiding zone 1 is cheaper still.

        Definitely expensive but not $8!

        Driving in London should be punishable by death so I’d be happy if that doubled.

        • Neverland May 3, 2013, 10:15 am

          @ AJ May

          I think the appropriate term around here is complainypants? :)

    • AJ May 3, 2013, 9:55 am

      Actually a bus-only travelcard costs about £75 per month, so I suspect he’s talking about combined tube/bus.

      The tube is expensive! Buses are much cheaper.

      It’s worth checking if it’s actually worthwhile getting a travelcard or not. I used to get one but then realised that actually it was costing me MORE than if I just paid per trip. So do the maths before assuming it’s worth it!

      • Jean May 4, 2013, 2:32 pm

        Agree, 120 pounds for bus pass doesn’t sound right — monthly bus pass is about 75 quid. Monthly Oyster card (tube/bus/some overground) is about 116 quid per month, which is closer to the stated amount of 120 pounds. For either form of travel, the monthly pass can be made cheaper by buying an annual pass: bus travel would reduce to about 65 per month (10 pound savings per month), and Oyster card would reduce to just over 100 quid per month (15 pound savings per month). Either way, an annual travel card might be an easy way to save some money, if it isn’t feasible to switch to biking or walking.

  • Monevator May 3, 2013, 10:01 am

    Very nice to see this post here, on the evil money pit of fun, vice, and villainy which is London.

    Ah, home sweet home!

    I think MMM’s advice is spot on, JL. If you stay in financial services and hold on tight, you could easily be earning six-figures by 30. The absolute key is not to get sucked into the lifestyle that goes along with it. Somehow you have to stay outside of this, and from observation of friends/peers in The City it’s not easy, especially in your 20s.

    In fact, about the only reason I’d suggest you move to a scruffier area is so you don’t start running with too rich a crowd. Ideally get and keep some more Bohemian chums, though I know they’re a dying breed in London.

    I don’t unlike some think your rent is insane for London though, and if you’re a typical financial services sort you could be doing some crazy hours, and not wanting to return to anywhere too dodgy at midnight every night.

    Generally I think people ought to leave London if they can, as the quality of life to income ratio has just gotten entirely out of whack for most. How younger friends in their 20s who work in media and public services can ever expect to ever own more than a tiny flat is beyond me. But if you’re in financial services, you’re the exception for now.

    Sensible comments on health care from the others on this thread. Much as I moan about the NHS now and then, you need to read US blogs to really understand what a deal we have, especially if you do things differently from the masses (e.g. entrepreneurship or downsizing) and you don’t suddenly get cold sweats from healthcare worries like you would in the US.

    Thanks MMM and others for the kind words about and links to Monevator. We try! :) I do need to dial back up the lifestyle stuff a notch, I know. I am just such an investing nerd, that’s the problem.

    Sunny evening in London today, there’s a thing! Best go enjoy it. Cheap.

  • Retire By 40 May 3, 2013, 10:16 am

    I think you’re doing very well right now. You can’t save that much, but you have a lot of upside on your earning. The most difficult thing you’ll have to deal with is lifestyle inflation. As you make more money, you’ll be tempted to spend more.
    London is an expensive city and it would be so easy to spend more.
    Good luck

  • Tara May 3, 2013, 10:28 am

    As others have mentioned, I built up my stash in the US and am retiring to Canada where I can have decent healthcare. The insurance provided by my US employer is excellent, but once you leave that, you are on your own and I find the independent health insurance market quite scary. Medicare doesn’t look too reassuring either. I am happy to have the opportunity to retire to Canada with their stable economy, milder politics and single payer healthcare.

    • Naners May 3, 2013, 12:03 pm

      A quick note for anyone thinking about Canada: you would need to immigrate though, and there is no “retirement visa” where you can just draw funds from abroad as in places like Mexico. So you need to immigrate while working, or though relatives, or as an investor if you have big money and want to buy a business. My impression is that if you’re high-skill (either while or blue collar) it’s not too difficult to do employment immigration.

    • Tara May 3, 2013, 2:34 pm

      Funny – my name is also Tara and that’s something I have strongly considered. I think MMM has discussed it at some point and I also would feel like I was taking advantage of the Canadian health care system. I’m assuming you are also a Canadian citizen. I have yet to start the green card process am still unsure whether I will do so or not…

      • Tara C May 6, 2013, 9:53 am

        Yes, I am a Canadian citizen – I have worked there in the past and plan to work there at least part time for several years before retiring, so I don’t think of it as freeloading.

  • AC May 3, 2013, 10:33 am


    As a fellow worker in the financial industry, I can assure you that while your starting salary may be comparable to other recent grads; you have much high higher growth potential. You could easily earn 2,3, or 4X your current salary by the time you hit your thirties. The trick is to keep your spending in check as your income grows. At that point, you will be on the fast track to retirement! Good luck!

  • Alexandria May 3, 2013, 11:57 am

    I think MMM is spot on.

    We chose to move from a high cost region early on because we were feeling the same way. We weren’t in the right careers for the big-money jobs and we moved somewhere with about 1/3 cost of living, being able to keep our “starting salaries, ” which obviously stretched much further in new city. What’s interesting as we fast forward a solid decade is that I am once again considering old city for future jobs. It’s because the jobs there would actually pay significantly more, further into my career. We have also been able to amass some decent assets in our lower income/just starting out years, having made this move. I think we have kind of tapped out here and see more opportunity for growth there. The cost of housing isn’t quite so daunting with triple the salary today (potential for even more if we move back) and with actual wealth to fall back on. But it seemed kind of crazy insane scary when we were 23. Reader may well be on a career path that will pay very well in a short period of time – he may be where he needs to be. Or he may be spinning his wheels and better off considering cheaper living options.

  • jlcollinsnh May 3, 2013, 12:04 pm

    While it has been too many years since my last visit, London is one of my very favorite cities. Truly world class and, as Mr. MM points out, a virtual fountain of economic opportunities.

    I agree, you are off to a great start and I love hearing the international stories.

    In his introduction, Mr. MM makes some excellent points. But one he expresses even better elsewhere here. I can’t remember where, but I have it. I used it in a blog post I did titled “I could not have said it better myself.”

    The post is a collection of some of my favorite quotes, mostly from famous dead people. But Mr. MM’s made the cut:

    “But there’s also no doubt that many people, with fewer advantages than you, have overcome them to achieve much greater things”

    – Mr. Money Mustache

  • Johnny Moneyseed May 3, 2013, 12:28 pm

    It seems to me that it’s pretty standard for people to flock to large metropolitan areas for jobs that boast higher wages for employees. But most people seem to only look at what they’re going to earn as opposed to what they’ve have to spend in the process. It isn’t unheard of for someone in my industry to make $120-$150k with only 4 or 5 years of experience, but those jobs aren’t available in rural Kansas (or an equivalently low population area) so you have to flock to areas that are extremely populated and expensive like Washington D.C. or New York City. You’d be better off making $75k in Kansas than $120k in D.C.

    • Jayhawk1 May 3, 2013, 9:38 pm

      Shhh…you’re going to give away our secret! Wife and I each make around that in a Kansas city (not rural here- but its a small-mid sized city). We could do much better in a larger metro. However, housing and cost of living prices here are quite low, so it’s very easy to save a big chunk of income. We have a large house in a good neighborhood/schools (very close to our jobs) for around 1.5x our annual incomes. Sure, there are trade-offs, we have to put up with a lot weather wise, and not a whole lot of enteratainment wise- although there is a much larger city not too far down the road, But hey- if you have young kids at home, it’s not like you can go out partying much anyway!

      We use a little bit of our income/savings to take trips/vacations to more fun spots- so we get enough beach/play time in for the time being. And in a few years we’re out and will probably move somewhere a little more exciting. Places like this are underrated for your working/child raising years. One other good thing- mustchians can blend in easier- much less peer pressure to keep up with the Jones’ and drive a new car etc. I get very little of that – except I seem to recently be getting a few “When are you going to get a SUV/minivan” type questions? Answer-NEVER! we have 6 and 12 year old cars that do an excellent job of getting from point A to point B when we’re not walking/biking.

    • Jenni May 4, 2013, 9:10 am

      Yes, I am amazed at housing prices when I watch House Hunters and other RE shows on HGTV. Even Mr. money Mustache’s Colorado prices seem very high compared to where I live in rural Kansas.

      I know that life isn’t perfect here by any means but even in college towns the cost of living is still quite low in comparison. Mustachians, please move here and help us develop and grow our biking culture!

      • Mr. Money Mustache May 4, 2013, 9:16 am

        Nicely put! I support this idea too, that as a people we might be happier if we distribute ourselves across the country a bit more. Right now all the high-earners have to scramble over each other like a tower of fighting ants to get access to the big jobs in DC, NY, San Francisco, etc. With the Internet, location is no longer so important.

        If people started calculating cost of living and insisting on no car-commuting, it would change where companies started doing their expansion. I like the idea of a bunch of bike-friendly little towns around the country.

  • Michael May 3, 2013, 3:24 pm

    Here’s some perspective: $78,000/year puts this young man in the 94th percentile. And yet for MMM, this is characterized as “a solid middle-income”.

    • lentilman May 4, 2013, 6:34 am

      Link? It’s above average, but it’s hard to believe that is the 94th percentile.

      Edit: Wow- found an online calculator that puts OP in 92nd percentile. So desribing him as solidly middle class might be not giving enough credit as poster above stated. http://www.guardian.co.uk/society/datablog/interactive/2012/jun/22/how-wealthy-you-compared

    • C May 4, 2013, 10:18 am

      Relative to his specific geographic area, he may only be “middle income”. Relative to the UK generally, he’s a high earner, but the rest of the UK is presumably not paying London rents.

    • Emmers May 19, 2013, 1:57 pm

      Always be skeptical of percentile calculators for income; as other commenters have stated, they vary wildly based on your geographic region. $50k in New York City means you’re barely scraping by, if that, but in a more rural area it’s quite comfortable. So for that to be the “median” income across the entire US isn’t very informative.

  • Linda May 3, 2013, 3:31 pm

    Crunch the numbers, understand the tradeoffs, understand your goals, and then make your decision. Re-visit it every so often.

    As a mid-30-something-year-old, I wish I am able to tell my 20-something-year-old self to save a little more than I was saving, in order to reach financial independence sooner (which I didn’t even think was possible until I started reading this site).

  • Jeff May 3, 2013, 3:53 pm

    The UK health care system is a Soviet style state monopoly.
    If your GP is useless, they can fail to diagnose things like cancer and serious life threatening infections. I’ve seen this happen to relatives. These clowns ask a few questions and the diagnosis is based on guesswork.

    You really need to push them to adopt scientific methods and get blood tests etc done, so they can make a diagnosis based on fact & data. If you want to change GP, it’s very difficult, because we have a state monopoly.

    As for taxes, well once you do start saving money, there are some nice tax breaks for investors, such as ISAs.

    • Dutchy November 7, 2017, 1:23 pm

      Same thing here in the Netherlands. Took me a while to figure out I had to diagnose myself or my family members BEFORE going to the GP. Then you go in like this: ”Hi there. I have decided my child needs a blood test. Don’t forget the vitamins!!” And then you have to pay 100 euros for the blood test out of your own pocket (symbolically) cause we wouldn’t want to encourage people doing blood work for fun!

  • Lisa May 3, 2013, 7:05 pm

    Hey Jack! Great work so far! I had early stage cancer a few years ago that left me feeling exhausted all of the time. I bought an electric bike for $500 (Canadian) and used that as my primary mode of transportation. The cool thing was that on days when I had energy, I would cycle until I felt tired, and then would use the motor. I wonder if something like that might work for you.

  • Mike @ Uncommonly Brilliant May 3, 2013, 7:20 pm

    In regards to high housing costs, here’s an idea:

    If you went to the Landlord, told him how appreciative you are of his renting his place to you, and in addition, if he’d ever consider work done on his property/properties in exchange for a lower rent.

    • kathryn October 10, 2014, 6:20 pm

      As an owner of 40 rental properties, we hate it when tenants ask this. In general their quality of workmanship is below par.

  • The Accumulator May 4, 2013, 12:53 am

    Great to see a UK post and so many familiar faces (gravatars?) from the UK scene. I knew it was harder for us ;-)

    With so much of the advice on this thread pivoting around the lifestyle choices made relatively early on in a working career, it makes me wonder how important ‘settling down’ and family is to the velocity of a budding Mustachian.

    Two incomes are better than one, especially when both are harnessed to the same goal of early retirement, but also the lure of those bright (and expensive) lights pales next to the deeper satisfactions of family and love.

    Now I’ve got the need to ‘live a little’ out of my system, I find I’m much happier living life my own way with the people that truly matter.

    London is amazing, no doubt, but the world class city is down the road when I need it, it’s just that I rarely do.

    • Dom May 4, 2013, 7:59 am

      I think that being married, or equivalent, is a huge game-changer. For the same total household income, you pay far less income tax and NI. Your utility bills are far less than twice what a single person would pay (don’t get me started on the 50% single person’s penalty charge for council tax). Of course, the satisfactions of family and love, as you so succinctly put it, mean a lot less going out – or at least it seems that way when I look at all the people I know who’ve got married or settled down in long-term relationships – hence reducing the need to live in London with all its expense.

      • BeatTheSeasons May 4, 2013, 8:07 am

        As they say, “two can live as cheaply as one”.

        And that’s the time to save the pennies, because when children come along you have half the income (or less) and lots of expense.

    • Emmers May 19, 2013, 2:00 pm

      Yeah, it’s exponentially easier to save money as a married couple than as a single person. “Two can live as cheaply as one” isn’t really true, but you do start to get into economies of scale.

  • KB May 4, 2013, 7:23 am

    I don’t think there is anywhere on the MMM site where he talks about sacrifice, deprivation or leading a less fun or exciting life. As someone in their early forties, I don’t recommend someone squander their youth or any age really. It is simply having a change in attitude and awareness towards money and the environment. For example, walking or cycling to work should be a pleasure because you are a fit young able bodied person that can enjoy the outdoors and get some exercise instead of driving to work or using transport then buying a gym membership and doing the treadmill for half an hour for extra $$$. Walking to work is not a chore until you save up to buy a car, it is better than driving a car!
    There are many ways to cut back on spending but not on experience. You can still go to a pub for a couple hours but after 1 or 2 beers order ginger ale or water and if you tip the server or bartender nicely for water they will sometimes garnish it for you with fancy pineapple, orange slice or lemon wedge and if you tip them you don’t feel bad about asking for a lemon wedge. You are still saving money and being healthier than running a $100 bar tab. You are still hanging out with your friends and having a great time not sitting at home miserable because you can’t afford to go out.
    MMM and family have always lived a very full and happy life from what I have read and you don’t see MMM telling his son we have to make toys because we can’t afford them, they’re making toys because it’s more fun and interesting! Mrs. MM does Crossfit and even though expensive, I’m sure she loves it!
    MMM is all about having an amazing and abundant life not about a bleak miserly existence. That is what I take from the blog anyway.

  • John@MoneyPrinciple May 4, 2013, 7:26 am

    Interesting to see so many UK folk on MMM!

    Many years ago I used to work in Putney and was recently back there. Nice apartments (ex social housing) are available for a tad over £200k but it is a long commute to the City. Taxes have increased, particularly sales tax (VAT) and income taxes (the national insurance bottom limit has not increased of course) unless you are on £150k or more! Free health care is still available – and the price of prescription drugs is capped too. The NHS can be outstanding but the present govt seems determined to undermine it, along with the rest of the economy.

    The reason for the housing costs is that for over 30 years now insufficient housing has been built. But at the top end of the market, the sky is the limit – I saw £10m houses in Putney only a stones throw from the £200k apartments. It is just the type of housing – they aren’t bulding Edwardian houses any more!

    @Chris – if you want to move to Manchester (where we are), then south manchester is the place to be. North and east manchester are generally not too good in particular but are correspondingly cheaper. South manchester is between the city and a pretty good airport. Look at Chorlton, Whalley Range or, if you can afford it, Didsbury. Some parts of Stockport or Trafford are fine too. Manchester is a very vibrant city with 2 of the largest UK universities plus Salford Uni and Media City. There is an excellent music and theatre scene too and everything is so much closer than in London. I moved here from choice many years ago – when things were very dark – and have never regretted it. I come from Sussex BTW and love London as one of the world’s great cities but I wouldn’t want to live there now!

    • Mr. Money Mustache May 4, 2013, 10:02 am

      I think the biggest reason for UK people showing up here is the Monevator(s). Those guys have an almost-weekly link to this blog, and I’ve done nothing to deserve the favour other than occasionally typing some shit into the computer. It is like a free permanent advertisement for Mustachianism on one of Britain’s top sites. If you don’t believe the blatant promotion, check out this article:


      So, thanks always Monevator!

      • Monevator May 10, 2013, 11:03 am

        You’re more than welcome — your stuff is ever-fabulous MMM.

  • Tom Street May 4, 2013, 8:15 am

    This blog is brilliant and I discovered it by way of the theoildrum.com Perhaps some of the people who commented there might have made more intelligent comments if they had bothered to actually read your blog.

    I live up the road in Estes Park and retired relatively early but certainly not nearly as young as you. I was riding a bike to work in 1975 and always found a way to live close to work throughout my career.

    I know there are those who seem to think that one should be formally employed until they drop dead. So all power to them and if they have a problem with this blog, then don’t read it.

    So, anyway, keep up the good work; this blog is a blessing and an inspiration.

  • Iforonwy May 4, 2013, 8:24 am

    Many moons ago when I was 25 I had just qualified as a teacher – I earned £990 yes less than £1k for my first year. I retired 5 years early 4 years ago and never earned more than £15k per annum. DH was not earning much more but as soon as we could we took the decision to live on one wage where possible. The rest was our stash and was there for house repairs and other emergencies.

    I know that the NHS is perceived as being free and I suppose that it is but we all pay in through our taxes and NI payments. But it is something to be very grateful for and to be able to go to the surgery or hospital and the first question not being where does it hurt but what are your insurance company details.

  • terry May 4, 2013, 7:37 pm

    I just discovered your blog and am reading it obsessively. Really great info. Maybe you could comment on wage slaves like myself who are working and also accumulating a defined benefit pension. How does that affect the numbers in calculating one’s ability to retire? I assume it reduces the amount needed because the pension kicks in at 55 (with a reduced pension) or 60 (unreduced).

    I am a 40 year old Canadian, making about $3600/month in take home pay (Gross $65,000). The mortgage is paid off, and I have about $240,000 in savings. Savings rate is 45%, and I don’t feel a lifestyle crunch at all, even though I live in Vancouver. My spouse and I vacation twice a year. I wish I didn’t have to drive to work, but I need it for my work and am reimbursed $0.54/km. That doesn’t cover the 15km commute to and from the office, though. Comments?


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