Minimum Viable Expense
Minimum viable expense are the bills we must pay in order to survive. Without going into extremes, these are the mandatory expenses to every human being living in the society on Earth. Every country has similar mandatory expenses. They might be called slightly different, but the end result stays the same. I will be talking about the UK market here explicitly. Please, adjust the figures based on your country of residence yourself, or leave a question in the comments section and I will try to help you out.
Mortgage and Rent
The main expense everyone has to pay is the mortgage or rent. There is no way you can live without this. If you cannot afford either of those, leave Starbucks and get a job first. The roof above the head and food on the table are the first things we need to sort out. Happy are those who live with parents rent-mortgage-free. You are saving even more. But don’t forget to contribute to the family nest.
The mortgage usually costs about 50% of rent if you bought your house right (I will write about this later too). Worst case scenario – it is 100%. Tell me, if you pay more in mortgage payments than the rent would be, in the comments section. The standard rent for a flat/house is about £600 outside of London, so the mortgage would start at £300 a month. Don’t forget this is a minimum viable expense and we do not target houses with £1000 a month or so. Make it work. This doesn’t mean you can’t live in a house for £1500 p/m, but then rent your spare rooms. There are quite a few websites to help with this – like Airbnb and SpareRoom. If you have a partner then rent together and share the rent. It’s gonna drop to £300 each and you are more than likely going to like your room mate. That’s just a few suggestions out of many.
Electricity, Water, Heating, Council Tax – The Bills
The bills is the second biggy. No one can survive without electricity nowadays. Luckily, this one is quite cheap and comes at £30 a month. The next one is water, but this one is cheap too – about £125 for half a year. It’s £21 a month. The third one is heating. This one comes at £90 a month for the half a year, cuz I use electrical heating. Gas would be cheaper, but since I do not have it, can’t comment on it for too much. How much do you pay for gas heating? Do let me know. Luckily, heating is needed for half a year only, so it ends up being £45 a month. The other one is Council Tax (CT). Not every country has it defined as CT, but more or less everyone pays something to the local government too. This one is £1100 a year, so £92 a month.
Food, Mobile, Internet – Miscellaneous
Food comes out as £120 a month. It’s quite a decent amount. Back in the student days I managed to live on £5 a week. Now I could call myself a Lord with such an amount spared on food. And, of course, mobile phone comes at £5 a month as Three – Pay As You Go, 123 plan. The network is crap, but it’s cheap. Good for now, but looking to upgrade. Remember – minimum viable expense? The internet comes at £17.40 a month. The cheapest Sky internet you can get. Enough to stream music and video. That’s about it. Let’s add everything together and see how it looks.
The Total Expense Table
|Subject||£, Cost (Month)||£, Cost (Year)|
That’s about £930 a month of real cash just to hit a bare minimum. If you live with a partner as I do, it would be 50% each – £465 p/m.
Let’s Be Conservative
The national minimum wage for the full-time employee is £7.20 p/h now (2016), if you are 25 and over. This accumulates into a gross of £14,976 a year. The tax-free personal allowance is £11,000 in 2016. Hence, you pay taxes only on £3,976, which is £795.2. You also pay 12% for National Insurance what you earn above £8060 a year, which adds up to £829.92. Deduct these from your total gross earnings and you get your NET income – £13,350.88 per year. After a year of hard work you end up with your NET minus survival expenses, which leaves you with a £2198.08 in a pocket at the best. Which is a hilarious £183.17 a month. You also need to have some cash for a safety cushion every month. Make it 20% – that’s another £36.64 p/m. After every possible deduction, if I haven’t missed any, you are left with £146.54 in a pocket. That’s considering you walked to work, didn’t buy new clothes and spent every evening at home.
|Subject||£, Cost (Month)||£, Cost (Year)|
|Rent + Bills||350||4,200|
Of course, not everything is that bad. We can save a lot on rent, food and council tax if we shared the house. Rent a room and all your rent including bills becomes £350-400 a month. Buy food in Tesco, Lidl, Aldi instead of M&S or Waitrose and you will cut another £40 a month. In the end of this game we end up with £350 for a roof, £80 for food and £5 for mobile phone. That’s £435 instead of £930 a month. Now we ended the year with £8130.88 in a pocket. This is x4 times as much. And that’s considering we were earning a minimum wage. Always think about minimum viable expense, while you are here.
Now that we learnt the basics and found some spare money, let’s start investing.