London, Londra, Londres. What a city. Home of The City, Big Ben and Buckingham Palace. Hub of culture with galleries, museums and stunning architecture. Home to culinary delights and thriving nightlife. It is indeed a great place to live, but I’m not alone in that view.

The result of this popularity is many, many, people arrive from around the UK, Europe and the wider World come to experience what the exciting cultural melting pot has to offer.

My girlfriend came from Melbourne, the world’s most livable city for seven years running, to live in this city. I have many friends here from Spain, Hong Kong, Sweden, and the USA who love this city. I love this city and have lived here for 10 years in total (I myself came from Scotland to live here).

The downside to all this is of course that it is expensive to live in London. No shocks there I hear you say. However, what does this mean for my ambitions for financial independence?

High costs

I have been reading Mr Money Moustache’s (MMM) blog this weekend and I note that he lives in a rather dreary small town in the middle of nowhere in America. Although I love his blog, I am in no way ready to move to a place without the benefits of a world-class city.

To live in the UK in a similar place, I believe one would have live in a small suburb of Leeds or Norwich.

It led me to question, is my love of London hindering my development towards financial freedom?

MMM’s article points out, and rightly so, that your house is a place to live and not an investment. I have taken that view for many years now, but at the same time have benefitted from London’s surging property prices. I now have around a 60/40 ratio of debt to equity ratio.

MMM extolls the benefits of reducing costs to a minimum. Again, I completely agree and I am still on that journey and have made good progress. I was doing this before I’d heard of FIRE as I was simply broke for some time. I will continue to seek savings.

My elephant in the room is the cost of my mortgage and service charges on my flat.

What can I do to reduce housing cost?

I could move out and sell my flat. The main issue here is I will have to rent or buy somewhere else. I believe renting a similar place would now be more expensive than paying my mortgage. I could go back to share housing, but I’m going to reference MMM’s article that a house is meant to make you happy and I’m not sure that this would achieve that! I’m 35 and while I loved sharing a house in my twenties, there is value in having my own place.

Having said that, I rent out my spare room for a few nights during the week to a friend. That nets me £500/month which helps me pay my £838 mortgage. The income is tax-free on the ‘rent a room scheme’ the UK government runs. Apparently, this is called ‘house hacking’. I did not realise this until recently either so well done me as I’ve been doing it for 5 years.

I have £350 service charges per month this year so still, suffer massive expense. I hope this will reduce back to something more reasonable next year.

I remortgaged last year to the lowest possible level at the time so I think that I am getting good value (but one I would highly recommend you do yourself).

My girlfriend moved into my flat in November 2018. and that too has been great, but it has the plus side of saving us both money. It’s allowed me to seriously pay off some debt, and also to allow her to fulfil her ambition of being a yoga teacher by paying for the expensive training.

However, today, I am wondering what more I can do. At some point, I may want to have a family and we may need to move to a bigger place. I can’t stomach the idea of getting an even larger mortgage to make that move to a bigger flat or a house (We could manage up to £650,000 which would mean a large 2 bed flat in the area we live in or a shitty house out in the sticks). I won’t even mention the Stamp Duty tax I would pay on that… Too soon for that.

I think I will stay put for now and find ways to reduce and reach the % savings I want. MMM’s article on the percentage you need to save is mind-blowing in its simplicity and is what is leading me to improve my ‘ratio’. If I stuck to my budget I could get about 46% presently, so much room for improvement. Once I sell my car I could get up to 55% (ok I admit I’m dragging my feet on that one!).

The biggest expense I currently have is my home and therefore reducing this will increase my percentage by the largest margin. Perhaps the exercise of exploring options has been useful to see that I actually have an OK deal. Perhaps it is more the exercise of patience on my part that is the real thing I need to do. Either way, I would probably have to do something drastic to make a significant difference. The dramatic thing may be a step too far (for me).

I would really appreciate any ideas from the FIRE community to help me with this conundrum.