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Calculating Cost of Living: Where You Live Matters

Posted By Miranda Marquit On 08/29/2012 @ 12:07 pm In Personal Finance | 3 Comments

When someone offers you a larger paycheck, it’s tempting to just rush in there and take it. You might have to move cities, and spend money on all that entails [3], and make other adjustments. However, it’s important to realize that just because you make more money, it doesn’t mean that you will have more money available in your budget.

Your cost of living can make a big difference in your discretionary income. Where you live depends on whether you can afford a middle class lifestyle [4], or whether you will be scrambling to make ends meet. While a bigger salary can be a big deal, you need to consider whether or not your new salary is enough to overcome the costs if you are moving to a more expensive location.

Figuring Your New Cost of Living

The cost of living that you pay depends on a number of factors. You need to take into account the cost of housing, transportation, food, clothing, and utilities. Don’t forget the costs of services like doctors, hair cuts, dry cleaning, and child care. All of these costs can easily add up before you know it.

One way you can compare the cost of living is to use an online calculator, like that offered by Bankrate. Bankrate’s cost of living comparison calculator [5] allows you to enter your current city, as well as the city you plan to move to, and compare the cost of various items. The calculator also lets you see your required change in salary to retain your standard of living. Right now, I live in Utah. If I moved to Portland, I would need to make 23.41% more in order to maintain the same standard of living that I enjoy now. Moving to the White Plains, New York area would require a 34.75% increase in my salary. However, if I moved to a town in Iowa, I would only need an increase of 1.19%. And, of course, if I moved back to Idaho Falls, I could live on 6.89% less¬†than I make right now and still have the same quality of life.

As you can see, whether or not you are rich, and able to live comfortably, depends a great deal on where you live. $50,000 in a rural area can get you a lot more than that same $50,000 in an urban area. It’s important to take that into consideration before you move, ensuring that your salary increase will be enough to cover your higher costs.

Trade Offs

Of course, there are trade offs involved. You might be able to live comfortably on less in a rural area, but what are you giving up? If you like a variety of shopping and entertainment options, a rural area might not provide everything you are looking for. You will need to make trade offs in terms of educational opportunities for your children, as well as ease of travel to other areas of the country.

Personally, I’m fairly happy in my small town of around 70,000 people. We have a university, and that draws in some arts opportunities. We also have a fairly diverse population, considering the size and location of the town. We can eat at a variety of restaurants, and a major metro area (with its airport) is only 85 miles away. For us, it has worked reasonably well; we live quite comfortably, and we can spend our money on things we want, rather than just worrying about survival.

What do you think? Where do you prefer to live?

(Photo: Sids1 [6])


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[3] spend money on all that entails: http://www.bargaineering.com/articles/furnishing-your-new-place.html

[4] middle class lifestyle: http://www.bargaineering.com/articles/middle-class-income-middle-class-family.html

[5] Bankrate’s cost of living comparison calculator: http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx

[6] Sids1: http://www.flickr.com/photos/sids1/1406449370/

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