If you don’t consider the cost of living in the new location, you may end up facing unpleasant surprises. That’s what happened to Joanne and Andy:
Weary of working long hours to afford the seemingly high cost of living in Northern California, the couple viewed Andy’s Midwest job offer as their ticket to financial freedom. Although the pay was about what Andy was receiving in his present job, Joanne and Andy figured they’d be on Easy Street, given how much cheaper home prices were in the town where they expected to live.
So Andy happily accepted his new job offer, and he and Joanne quit their current jobs. They sold their house and decided to rent for a while after they moved so they could better assess exactly where they wanted to live.
After moving, Joanne and Andy spent the next several months in their new Midwest community looking for a home. Although they’d thought that housing would be far less costly in their new area, they discovered that replicating what they had in Northern California — a community with parks, cultural amenities, and a good school system — cost more than they expected.
And then they discovered that some of the other things that they spent money on each month were even more costly in their new area. For example, Joanne and Andy found that their first winter’s heating bill eclipsed the total annual utility bill that they paid out West! Food was more expensive, as were property taxes. And Joanne had great difficulty replicating her previous job because her profession was less in demand in the new area. When all was said and done, Joanne and Andy’s new home in the Midwest put them in the same financial boat they were in out in California.
Now, if Joanne and Andy had moved for nonfinancial reasons, then the fact that they didn’t end up being better off financially may not have mattered. But, except for the seemingly high cost of living, Joanne and Andy had liked their location in Northern California. As they found, however, high home prices are only a piece of the local personal financial puzzle. You must also consider the other items in your budget and figure out how your income and expenses may change if you move.
Five years after their move, Joanne and Andy moved back to the San Francisco Bay Area. They made some adjustments to their spending so they could accomplish their goals and live in the community of their choice.
Numerous resources are available for estimating the cost of living in a particular area:
- The American Chamber of Commerce Research Association (ACCRA) publishes a quarterly cost-of-living index (online at ACCRA’s Cost of Living Index website). It charges $7.95 for a two-city comparison (subsequent comparisons keeping one of the cities the same are reduced to $4.95 each).
- PayScale.com and Salary.com offer free salary calculators that enable you to compare salaries between two different towns or cities. Salary.com also has a nifty tool that allows you to value the benefits offered through a job.
- The U.S. Department of Labor’s Bureau of Labor Statistics calculates the cost of living for major metropolitan areas, and you can access this free information online.
Cost-of-living indexes and surveys should be used only as a starting point and as general guidelines. They shouldn’t replace a thorough budgetary breakdown that addresses the specifics of your situation. Sure, the indexes may tell you that Louisville is generally a less expensive place to live than Boston, but they ignore the fact that, for example, you never needed a car in Boston because you could walk to work and take public transit (if you’re willing) almost everywhere else. Your job in Louisville may require you to buy a car, auto insurance, and fuel for commuting, in addition to more airplane trips to visit your family in the Northeast.