This guide will briefly show you how to live on £20,000 a year in the UK.
To live on £20000 a year in the UK you will need to:
- Avoid spending out(no restaurants and no cinemas)
- Switch your utilities
- Refinance your credit agreement
- stick to a budget
- Hunt for cashback and introductory offers
- Claim benefits
- Use Government schemes
Living on £20,000 a year in the UK will mean that you are just living above the UK annual minimum wage and about £15,000 below the annual average wage in the UK of £35,423.
If these numbers are too be believed then living on £20,000 a year in the UK will require good budgeting, good financial habits and discipline.
To start, £20,000 a year in the UK after tax will leave you with about £17, 137.64 a year. This isn't too bad and over 12 months your £20,000 a year in the UK will turn into £1428.14 per month.
So how can you live with £20,000 a year in the UK?
Avoid spending out
Avoid treats, unnecessary outings and eating out. Its pretty simple. With £20,000 a year you can't afford to not pack your own lunch from home when you go to work.
Not packing your lunch at home could cost you £25 a week, £100 a month and £1,200 a year. That's a nice chunk of money which you cannot afford to waste if you want to live on £20,000 a year in the UK.
Packing a lunch from home every day could cost you less than £200 for the year in comparison.
Switch your utilities
When you have just £20,000 to live off you should look to continuously switch to cheaper utility products. There are services which will continuously look for cheaper utility providers and offer to switch you to them.
Refinance your credit agreements
Refinancing your credit agreements is something we should all do whether we live on £20,000 a year in the UK or £80,000.
You can do a car refinance, a remortgage, a credit card switch, a personal loan refinance etc
Stick to a budget
A budget will ensure you stick to your monthly spending targets and put some money away towards your savings.
You should first outline what your committed expenditure is, your lifestyle expenses and your monthly basic income.
Once you know how much goes into all of these 3 pots you could then see what is left after you have spent on your committed .
Hunt for cashback and introductory money offers
Many banks offer a switching bonus of £100 to £150 for simply switching your bank account to them. You could make £300 extra a year or more by simply switching your bank account to a provider who is going to pay you to join them.
If you want to learn how to live on £20,000 a year then this is one of the easiest things you could do.
There are also a variety of cashback deals available where you can earn up to 5% cashback on your spending.
If there isn't cash back and you are living on £20,000 a year then you simply shouldn't shop without that retailer.
We aren't saying because you want to learn how to live on £20,000 a year in the UK that you must now make fraudulent benefit claims. No! In fact, we are simply saying that with all the tax you pay and have paid over the years you should simply claim any and all benefits you are entitled to.
Use government schemes
With £20,000 a year you will almost certainly find it hard to live off your wage and certainly find it very hard to attempt to save up a mortgage deposit.
In this case, you should look to use every government scheme that is possibly available for you to use.
Here are some of the government schemes you could use to get on the property ladder whilst living off £20,000 a year in the UK:
Help to Buy: Equity Loan
This scheme lends you up to 20% of your mortgage for a new build home. You will need a 5% deposit. The London help to buy lends you up to 40%. Scheme ends 2021..
Help to Buy:ISA
This scheme will give you 25% in government bonus for every £200 you save up to a maximum £3000. The scheme ends in late 2019. See more.
Right to Buy
This scheme allows council tenants to buy their properties at a discounted price. The maximum discount is £80,900 outside London and £108,000 in London. See more.
Help to Buy: Shared Ownership
This scheme allows you to buy part of a home and pay rent on the remaining. You can then increase your ownership when affordable. See more
Starter Homes scheme
This scheme allows new build homes to be sold at 20% discount.
Right to Acquire
This scheme allows housing association tenants to buy their homes at a discount of between £9000 - £16,000. See more.
Preserved Right to Buy
This scheme allows housing association tenants to buy their properties at a discounted price. The maximum discount is £78,600 outside London and £104,900 in London. See more.
Self Build Portal
Priced out of the market, maybe a self-build might be the right choice for you. See more.
This scheme run by councils at random could provide properties between a 25%- 50% discount. See more.
This option allows you to buy the share of a shared ownership home which the old homeowner purchased. See more.
HOLD – Home Ownership for People with Long-Term Disabilities
This scheme allows you to buy a shared ownership home if you have a long term disability. See more.
OPSO – Older People’s Shared Ownership
This scheme allows people aged over 55 to purchase a maximum share(75%) of shared ownership home. See more.
Armed Forces Help to Buy
This scheme allows current servicemen to borrow up to 50% of their salary to buy or improve a home.See more.
The Lifetime ISA
This scheme pays you £1000 per year if you pay the maximum £4000 per year into it. You can use this towards your mortgage deposit. Withdrawal penalties are in place. See more
The Social Homebuy scheme
This scheme gives you a discount of up to £16,000. if you have been a council or housing association tenant for more than 5 years. You have to buy a minimum of 25% shares in the property. You pay subsidized rent on the rest. See more
The Rent to Buy scheme
This scheme allows you to save while renting from a housing association. You are offered a 20% discount on rent which you can put towards your mortgage deposit. See more
The Help to Save scheme
The scheme helps those on universal credit to save more and hopefully put that towards a mortgage deposit.
If you save the maximum amount(£3600) access to a bonus of £1200 over four years.