Latest News

How much should I spend on bills?

10th September 2020

With so much movement in and out of your bank account each month, it can be hard to keep track of your money. Whilst you’re almost certainly aware of what your income is, you might not be so on the ball when it comes to your expenses – even the fixed ones, your bills. Having an accurate overview of your outgoings is, afterall, essential for budgeting. But how much should you be spending on them? 

Average bills in the UK 

Gas and Electricity 

 

According to OFGEM, the average dual fuel tariff in the UK in the year up to July 2020 was £1,125. Surprisingly, this is just below the average across all European countries. 

 

Rent and Mortgage  

 

Understandably, there are huge variations in rent and mortgage payments according to regions in the UK. According to the latests statistics from the ONS, the average monthly median rent in the UK between 1 April 2019 and 31 March 2020 was £700. In London the median was expectedly much higher at £1,425 whilst the North East had the lowest average at £495. 

 

Internet and mobile phone 

 

According to new research, the UK is one of the cheapest places to get internet in Western Europe. With an average monthly cost of £27.39, it ranks as the 5th cheapest in the region. It’s worth mentioning, however, that the same research found that it also has some of the slowest speeds. 

 

And what about mobile phones? Data from Ofcom suggests that we spend an average on £12 a month on phone usage, and this is gradually falling as more people opt for sim-only deals. 

 

50, 30, 20 budgeting method 

 

Regardless of how much the average bills are in the UK, it’s important to have a budgeting tool in mind to keep your finances in good shape. One such tool is the 50, 30, 20 method; this no-nonsense  budgeting strategy is used to split your post-tax income into simple categories so that you can better manage your finances. The numbers refer to the percentage of your post-tax income that you attribute to different causes. 

50% – Needs 

 

According to this method, the largest portion should go towards ‘needs’ – the necessary costs that you’re required to meet every month. This category includes your utility bills, rent or mortgage payments, insurance, and groceries. In effect, these can be considered your ‘bills’ for budgeting purposes. Whilst you may consider some other things to be necessary (i.e Netflix, subscriptions, your morning coffee), they wouldn’t fall into this category. 

30% – Wants 

 

This category is for all non-essential, ‘optional’ items. This would include eating out, your gym subscription, streaming services, and any tech upgrades. Basically if a purchase is a ‘nice-to-have’ and you could do without it, it goes into this category. 

20% – Debts and savings 

 

The last category is reserved for building your savings and paying off debts. It’s the pot that helping you to secure your long-term financial stability. You could use the 20% to increase your pension contributions, put into an ISA, or reduce student debt. 

Example 

 

Following this model, if your monthly post-tax income was £3,000, it would be split as following: 

 

  • £1,500 – Needs
  • £900 – Wants 
  • £600 – Debts and savings 

 

Looking to cut down on bills and save some money? Check out our previous articles on the best money saving tips for 2020, and which apps can help you manage your finances

 

Return to news page
Gold star Gold star Gold star Gold star Gold star
"Our mortgage adviser Andrew Francis is brilliant. When we first met him we were first time buyers with very limited knowledge about the process of buying a first home in the UK. However, Andrew guided us through the process with his vast knowledge and professionalism. We had to recently re- mortgage our flat, Andrew got in touch with us well in advance he presented us with the best options for us and made the whole procedure painless. Of course, we were a lot more relaxed this time around, as we already knew that we are in good hands. Thank you for your help, Andrew!"

Vyara Panayotova , Feb 2020

Independent review from Google
Gold star Gold star Gold star Gold star Gold star
"Always been impressed We've used IMC for over 10 years and have always been impressed with the service. They have helped to guide us through various financial issues we've had and we've been able to make better choices as a result. I wouldn't hesitate to use them again"

SusB , May 2020

Independent review from Yell