Purchasing Power

Hi!

I searched around a bit and I didn't find anything recent about this topic.  I currently live in Chicago and am a US citizen. I got an interview with a company in London and I have a question that I was unable to figure out.

For a single person interested in letting an flat, and will not have a car, does anyone have thoughts on what equivalent purchasing power is?  For instance, if I make $75,000 and live in Chicago how much would you think I would need to earn if I'm living in London to have the same purchasing power. I understand rents vary greatly, so if you want to touch on that, great, but I'm more interested in just some ballpark thoughts. Because of tax issues, healthcare, and rents etc is $75,000 closer to GBP 60,000? You don't have to use these numbers, but I'm looking for purchasing power, not "live comfortably" since there are wide interpretations of that means!

Thanks in advance.

It depends on what you're purchasing.

I'm visiting the US right now, and I just spent over $45 buying ingredients for one meal (for 5 people, with leftovers, but still!). In London I'll do a big grocery delivery once a month or so ("big" in the size of the items, not necessarily a huge quantity of stuff), and it costs £40-50. That, plus a once-a-week trip to the corner shop to buy odds and ends (~£10 per time) is more than enough to feed me for a month.

Clothing is generally more expensive in the UK, at least for what I buy (jeans, sweaters, etc). Cell phone service is far cheaper ($80 in the US vs £15 in the UK).

FWIW, I'm single and living in London, and I'm getting by quite well on £35k/yr post-tax.

If you check the links under the Taxes board, you should find a post with links to a tax calculator.  This should help you figure out your net income.  After that, what you choose to spend it on will make a big difference in how far it goes. 

My suggestion is to essentially put together your own 'market basket' of items for sake of comparison.  Figure out what you spend money on here each week (groceries, entertainment, etc.), month (rent, utilities, phone, transport) and year (electronics, clothing, etc.).  Then, check out various UK websites to see what the same/equivalent items cost.  Gumtree.com is similar to Craigslist, so you can check there for rentals.  All the major grocery stores (Tesco, ASDA, Waitrose) have websites, so you can check your food costs.  Upmystreet.co.uk can help find tax & utility info for different areas.

It's a bit of homework, but you'll end up with a much more meaningful comparison than just asking 'what will x get me.'

7 years ago when I moved over to the UK, I was on a basic salary of $38K and I moved over to a basic of £29K.  At the time the exchange rate was pretty close to $2 to £1.  I found that afforded me a similar lifestyle.  I moved from Boston to London for reference for cost of living.  

One thing I hadn't really taken into consideration at the time, but found out quickly, was the cost of travel back to the US several times a year for holidays and weddings etc, wasn't factored into my US cost of living.  So that was a bit of hit each time I had to go back and probably made it seem like I had less spending power in the UK than in the US.  But the reality is, I didn't have those travel expenses when I was in the US.

I would say that if you are used to $75K, that £60K should be your absolute lowest salary you are willing to accept to afford you the same lifestyle you have now.  Anything less than that you may find you are cutting out the extras in your life that you really enjoy, travel, eating out, shopping etc.  

Good luck!

One thing I hadn't really taken into consideration at the time, but found out quickly, was the cost of travel back to the US several times a year for holidays and weddings etc, wasn't factored into my US cost of living.  So that was a bit of hit each time I had to go back and probably made it seem like I had less spending power in the UK than in the US.  But the reality is, I didn't have those travel expenses when I was in the US.

I was just thinking about this today. Five years ago it was affordable to go back a couple times a year and still have enough money to go on a few holidays throughout the year, but as the years went by costs like visa fees popped up and of course establishing a nest egg to make the next big move, unemployment, buy a car, new place, etc, etc, keep appearing the longer I have been settled here.

I came from California and made the switch quite easily dollar for pound.

Ahhh a pretty highly debated subject on here! Here are some threads in the last year you might find interesting 

A Highly Subjective Poll on the Standard of Living

Quality of Living

Pros and Cons between life in the UK

Salary Expectations

£27k needed for life's basics