With my birthday fast approaching I've spent a little bit of time reflecting back on the year that has just passed to give myself a view on how things have developed, and what a hell of a year it's been for all of us (you can say that again!). There's many different thoughts that I'll undoubtedly visit over the next few days as I continue to reflect but in today's article I wanted to write about budgeting, more specifically my budget that I keep while living in the most expensive city in the World.
To start off here's a brief history; I grew up in Cimla which is a little suburb of a Welsh town called Neath, just outside of Swansea. I went to school, college, had my first real job and even went to university in or around Swansea. It was a lovely childhood and there are many fond memories, but as soon as I graduated in 2011 I packed my bags and moved to London.
London is pretty expensive, which I'm sure many readers will agree with. Housing costs are high, you don't get change for a tenner if you buy two pints, and when you're new in the city you tend to get caught up in a social life since you're looking for new friends.
Give it a few years however and I did manage to find my financial bearings and was able to keep to a decent budget which allowed me to save and invest for my future. At a rough estimate I would say I was spending about £1,350 each month on living and leisure, which would be rent (house share), groceries, TFL monthly pass for travelling around the city and to work, and those two pints.
If I strip away the leisure spend I was probably looking at roughly £1,035 in essential spending each month. Not bad at all for London to be really honest, and with only around £300 being spent on fun stuff I'd say I was doing quite a good job. Needless to say, any further money beyond that £1,350 mark was going into my savings and investments.
I had London figured; all I needed to do was keep plugging away at my savings each month, raise my income to increase that savings rate, and voilà.
But then in September 2019 I decided to up my game and move to Hong Kong, the #1 most expensive city to live in the world according to Mercer's 2020 rankings (also #1 the previous year). With London being ranked down at #19 in the same report I figured that I might be in for a bit of a ride when it came to my cost of living.
To give you a sense of the difference in cost of living the average house price in London is at around £670,000 with the average annual salary at £38,000, whereas in Hong Kong the average house price is over £910,000 with the annual salary at about £35,000.
In a few words, Hong Kong is fricken expensive.... or is it?
Well I've lived here for a year now and here's how much I roughly spend each month on living and leisure... wait for it... £1,390. Strip away the leisure spent and that goes down to £1,215.
Turns out if you're not going crazy with your money and making some smart decisions then you can actually keep you living costs very reasonable on a relative scale. Essential costs have risen by about £180 but you'll see later in the article that I'm getting good value for this.
Now it should be said that if I was moving from Cimla to Hong Kong then the jump would've been quite considerable, but I am going from #19 (London) to #1 (Hong Kong) nonetheless.
Are there certain sacrifices? Yes, but none that I wasn't already making in London.
Am I living like a broke university student? Absolutely not (Sorry Mark Cuban).
I get to eat delicious meals and enjoy a range of activities, and I can get my two pints. So without too much more story telling set up let me get into the key areas on how I make this work, what the differences are between Hong Kong and London, and what are the similarities.
Rent & Bills (£1,095 per month compared to £750 in London)
This is the biggest cost out of everything I spend in a month, but that's no different to any other place in the world. I live in a small one bedroom apartment in the heart of Kowloon by myself, which is on the mainland of Hong Kong (most people think of the Island when thinking of Hong Kong).
Rent is at HKD10,500 (about £1,050) with electricity, gas and water coming in at about HKD450 (£45). I have a phone contract that costs me HKD275 but since I also use it as my internet hotspot for work I get to expense that back to my company, so I don't count that.
When it comes to location there's basically three areas to separate pricing; Hong Kong Island, Kowloon, and New Territories.
Hong Kong Island is the place you are looking at when you see iconic pictures of the beautiful city skyline and is where the central business district is located, thus it is the most expensive. Kowloon is just across the sea which is only about 0.5km wide between the two harbours and is just as busy in its own right, but despite that the rental costs drop considerably. The New Territories are furthest away up north, about 45 minutes by train, and cheapest in terms of rental costs due to this.
I live in the city centre on the Kowloon side, near the harbourfront which is about 10 minutes away by walk and very much in the mix of everything. Restaurants, cafes, gyms, theatres, shopping malls, tourist attractions, parks, cinemas and more are all within walking distance of my apartment.
Back in London I lived in West Ham which is close to Stratford so you could argue I also had easy access to some of these options, but they weren't in walking distance and Stratford is a poor replacement for London's city centre or Hong Kong's for that matter. However, rent was down at £750 a month with bills included so there's definitely a premium on the extra things I can enjoy these days.
The biggest plus is that I now live by myself rather than a house share and the extra personal space and privacy is well worth the increased cost in my opinion. If I were to go back to a house share (or more likely flat share) I could probably cut around HKD2,500 (£250) off my rental costs which would bring me back down to London levels.
In terms of size my Hong Kong apartment is about 250 square feet and has a bedroom, living room, kitchen and bathroom. For us Brits this is crazy small but I actually have much more space than I did in a London house share (5 people). Back then I basically just had my own bedroom and en-suite as a private space, with everything else being communal. Now I get an entire fridge to myself!
Space might be an issue for people who haven't done the whole house share thing but if you're living by yourself then it doesn't take too long to get used to it. After all, what are you going to do with that third bedroom besides store junk that you shouldn't have wasted money on?
Local travel (£20 per month compared to £135 in London)
Living in Kowloon and near the harbourfront it takes me just 3 stops on the MTR (Hong Kong's underground transport) to get to Central, which is where all of the towering skyscrapers are; 10 minutes max, 15 door to door.
Compare this to London where a 45 minute commute into the office would've been considered fast, and that's only counting the time spent on the TFL when it was actually running "smoothly". In the entire year I've been in Hong Kong I've never experienced one of their underground trains randomly stopping in between stations, and there's never been more than a 3 or 4 minute wait for the next train.
I needed to use the London TFL every working day so I used to spend around £135 each month for a Zone 2 monthly travel pass. I did calculate at one point that I might be able to save a few quid if I worked one day a week at home, but that saving would quickly be lost if I decided to head out on the weekend so it wasn't worth it.
In Hong Kong, since I'm so close to everything I can practically walk everywhere. I also work from home on a permanent basis so I don't actually need to travel to any office at all now. That obviously saves me a lot of money but even if I needed to travel everyday I'm pretty sure the costs would still come in cheaper. Travelling from Sheung Shui, one of the north most stations in the New Territories, to where I live in Kowloon costs HKD11.5 (£1.15) per trip so even if I needed to do it every working day it would only come to around £50 each month.
I would estimate I spend about HKD200 (£20) in general on miscellaneous travel. This might vary a little but not by a lot and is used whenever I decide to go beyond my walking distance in my leisure time, such as taking public transport to a hiking location or something like that.
Groceries (£100 per month compared to £150 in London)
The way I've worked this out is by calculating how much each homecooked meal costs on average. In London I was hovering around the £2.50 mark and I would typically get my products from Tesco just like anybody else. I think I did well since I shopped for the yellow stickers in many cases, but I did use a lot of brand name sauce jars which bumped my costs up.
In Hong Kong I've refined this a little to be more healthier, plus I've had to adapt my recipes to be based on more local products since a jar of Dolmio's costs like HKD40 (£4). My go to meal is chicken and broccoli with rice, plus a fried egg. This meal costs me about HKD16 (£1.60) and shopping for it breaks down in the following way:
420g chicken breast for HKD38.9 (£3.89)
lasts 4 meals at HKD9.725 (97p) per meal
2 heads of broccoli for HKD9.9 (99p)
lasts 4 meals at HKD2.475 (25p) per meal
20 eggs for HKD50 (£5.00)
1 egg at HKD2.5 (25p) per meal
8kg bag of rice for HKD109.9 (£10.99)
Roughly 110 meals so HKD1 (10p) per meal
Taking the per meal pricing and adding that all up it's:
97p + 25p + 25p + 10p = £1.57
And I've rounded it up a little to account for oil, garlic, salt and so forth.
Obviously there's going to be some variance in terms of changing up what I cook and making different meals, but in general the price mark typically settles around this level.
In all honesty I think the cost of groceries in both Hong Kong and London are quite comparable (except for those eggs....) if you know where to look. We can get some Tesco and Sainsburys products here but they're expensive so you have to settle for more local brands but that's all good.
Additionally I've reduced my portion sizes since coming to Hong Kong to get a bit leaner, so that's probably helped get my costs a bit lower.
The Gym (£25 per month compared to £21.99 in London)
I joined the gym in London a couple of years after moving there and probably got lucky by finding a deal that gave me a price guarantee, with access to multiple locations around the country. At the time the price of £21.99 each month was already quite good but as the years went by the price guarantee has really paid dividends.
Nowadays it costs a new member £29.99 for single location access to the gym I joined, and £34.98 for multi-gym access, whereas my own monthly bill has remained the same as before. In fact I haven't cancelled my membership just in case I decide to move back to the UK one day in the future, plus I'll sometimes travel to London for work so it's not a complete waste.
Joining a gym in Hong Kong was quite a strange experience because there's some bartering that goes on. There's loads of personal trainers that are probably in need of new clients to keep making a living and so the joining process becomes more of a sales push. It's a bit weird to us Brits since we only really expect an induction and some offers of classes or a free 1 to 1 training session, but it does open the door to price negotiation.
If I remember correctly the opening price that I was offered was HKD450 (£45) a month for a 1 year contract. The gym is nice with all of the equipment that I was looking for but that's a bit of a jump compared to what I was used to paying in London, plus I had been tipped off that getting the price lower was possible ahead of time.
So I started negotiating and telling the gym membership sales manager who was trying to sign me up that I was really looking for something close to my London prices. We had some back and forth where we took away certain things such as classes that I wouldn't attend, and fresh towels (I bring my own anyway), and in the end he said he could go as low as HKD300 (£30) a month, but only if I signed up for a 2 year contract and paid up front in full.
To me this would've been fine if I didn't need to pay up front since that's basically HKD7,200 (£720) all in one go, so I said that I wanted to think about it and made a move to leave. I wasn't trying anything funny at this point, I genuinely just wanted to think it over.
But seeing his chance potentially slip away it made the gym membership sales manager quickly offer to apply certain bundles on top of what was already being considered. In the end he offered to put me onto the 'Get 2 months free' package which was "only applicable" to new joiners on the original price tag of HKD450, and added another 4 free months on top of that which each sales manager had discretion to offer from their own quota. Payment could also be made in two instalments, half within the week of signing up and the other half after the first 2 free months were over.
That basically meant 2.5 years for HKD7,200 in total which works out at around HKD240 (£24) a month, but since I still needed to pay for the entire membership within the first 2 months I've added a little premium to account for inflation. We'll call it £25 a month.
Still, £25 a month is not bad at all as I do go to the gym regularly and after a year into my contract I'm lifting heavier than I was back in London.
Fun Activities (£150 per month compared to £250 in London)
Fun activities accounts for all of the non-essential spend ranging from going out for dinner & drinks, seeing a show at the theatre, or simply going out for the day and spending a bit here and there. My budget is actually HKD2,500 (£250) which would make it the same as the budget I set in London, but in reality it turns out that I'm spending much less in general despite getting up to similar amounts of activities. So the key to this comparison is how much can you get up to for a particular amount of money.
Obviously the amount you can get up to with this budget will largely depend on your own choices; a nice steak meal at Hawksmoor on Air Street in London (great choice) will set you back something like £60 or £70 depending on your choice of cut and wine, or you could go to Nando's (equally great) on three separate occasions for the same price. And if you're really looking for cut price you can go to Wetherspoons for a burger and a pint (top choice).
Hong Kong offers a similar range where you could blow your entire budget at the Wooloomooloo steakhouse, or you could opt for other places that are much, much cheaper yet just as enjoyable in their own right.
But the reason why Hong Kong wins in this area is that the city is all about food, and the variety and range of choice beats London by literal miles. With the mass amounts of different family owned food stores, street snacks, cafes and fast food restaurants (Hong Kong style) you could eat out every evening without needing to repeat the same location twice in a month, or even a few months. The best part is that it's easy to stay within the HKD2,500 budget which would be HKD83.33 (£8.33) a day. For reference, the following meal cost me HKD62 (£6.20) with the drink included:
You can also make £8.33 a day work in London but your range of choice is far more limited and there's only so many Thursday Curry Clubs you can handle before it starts to get boring.
I don't often go out to drink in Hong Kong but on the occasions where I've had a pint or two with my meal the price is roughly the same. You still won't get change for a tenner if you order two pints but the choices in London are nicer, so I'll give that one to the Brits.
Besides eating out, which I only actually do on weekends since I cook during weekdays (hence the lower than budgeted spend), there's the different activities you can get up to and how much they might cost you for the day.
I'm a fan of doing things for free like going to the museums and galleries in London or going on a hike along one of Hong Kong's numerous trails. So I can actually fit quite a lot in for not a lot of money. I kind of only need to spend money on public transport getting to the place, and snacks.
So it really comes down to the range of choice and variety again, and this one I would give to Hong Kong but that might be because I haven't been here as long as I was in London.
London has loads and loads of different galleries and museums that are mostly free to enter. I once did an A-Z thing where each weekend I went to a gallery beginning with a letter of the alphabet; 26 weeks of fun and a great idea for dates if you're single and looking. Sir John Soane's Museum and the Freud Museum were particularly interesting, plus I had the pleasure of seeing one of Ai Wei Wei's exhibitions at the time.
Besides the galleries there are plenty of parks in and around London, and a hike along the river on a sunny day is a really relaxing experience. I highly recommend spending a day just chilling and exploring the Richmond area in the summer.
But the reason I give this to Hong Kong is that it has all of the above plus even more. If you want to get out of the city and into some nature then it's very easy to simply jump on a bus or a train to one of the numerous hiking trails that actually go up a mountain. It's a little surreal as you could start your day in the heart of the city which is a concrete jungle, but within an hour or so you can be surrounded by trees and greenery in a vast nature reserve; you can't really get that in London.
Additionally if you need a break from the city and you're not really up for a hike you can easily hop on a boat to one of the little islands and spend a relaxing day there. Or, if the weather is nice (which it usually is in Hong Kong) there's a number of beaches for a bit of sunbathing.
Both places have great variety in terms of options and there's so much more I could mention but all in all the range is just a little wider here in Hong Kong. Like I said before, that might just be because I've not been here as long so I still need time for my options to start feeling a bit repetitive, but there's no way that will ever be the case when it comes to the food options at such low price points.
Taxation (15% max income tax compared to 45% in the UK)
To illustrate the tax differences between both places I've taken the highest tax bands from both. In a single statement you can put it like this:
The highest tax band in Hong Kong is lower than the lowest tax band in the UK
This is not counting any tax free allowances which are offered in both places and essentially cancel each other out in terms of advantages.
Obviously if you take into account the cost to get onto the property ladder here in Hong Kong the lower tax is somewhat needed (not that it helps much), but imagine yourself earning your UK salary while living and being taxed in Hong Kong. You could get to keep up to 30% more of your earnings!
There's also no capital gains tax or dividend tax in Hong Kong so your savings and investments can go that much further without any concern on what you should do with any money above your "ISA allowance" which is effectively unlimited (it's not an ISA here, it's just a GIA).
The only drawback is that anybody accustomed to investing into Vanguard funds may need to find some alternatives since liquidity of HKD denominated Vanguard funds appears to be quite low in comparison to the GBP counterparts. In addition to this, there isn't a taxation treaty between Hong Kong and the US so your dividends from any US companies will be withheld by the whole 30%.
It's not that big of an issue though since you can easily find a broker here that will allow you to buy GBP or USD denominated funds located in Ireland which can help you bypass the double taxation rule and also give you access to funds with more liquidity.
So to sum it all up, tax in Hong Kong is way better than in the UK.
Despite the relatively big jump in rankings according to Mercer's report on how expensive it is to live in each city the result, if you're conscious of your spending, is pretty much the same.
Rent is the biggest outgoing and is the cause for any increase in my expenditure since moving to Hong Kong, but that has been a decision made in the favour of having more personal space and privacy.
If you are someone who has a good grip on your levels of spending then you can totally make this work for you. It also should be considered that both London and Hong Kong are very large, world renowned metropolises so the differences could only be so much at the end of the day. Had I made my move from Cimla straight to Hong Kong then this would have been a much different story.
I suppose you get what you pay for in terms of opportunities, exposure to different cultures and cuisines, and simply more life experience.
From my perspective, be it from Cimla or from London this move to Hong Kong has been completely worth it despite all of the events in the past year and I foresee myself staying much longer into the future.
I highly recommend anyone, especially my fellow British Born Chinese (but everyone else is very welcome!) to consider it. And I'm not only recommending it for the tax advantages ;) .
To finish up, here's a picture with two pints.
My mission is to help people understand their money by making financial scenarios or concepts easy to understand.
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