When you’ve lived in the same place for a while, other pastures can start to look a little greener. This is especially true if you live in an expensive area or a state with relatively high tax rates. This question will most likely occur to you at some point: Would I be better off financially somewhere else?
But before you start packing those bags, consider your cost of living. While it’s easy to assume your lifestyle will be more affordable somewhere else based on a few pieces of information, it’s important to get an accurate estimate before you make any big decisions.
Here’s how you can calculate your true cost of living and how it would change in a new area.
Compare Your Biggest Expenses
The most important thing is to look at your biggest expenses and see how they will change when you move. Housing and transportation are usually the most expensive costs, and they can vary wildly.
For example, in some cities, a $150,000 house will be perfect for a family of three. In other areas, that amount wouldn’t even buy you a one-bedroom apartment. If the property is more expensive, taxes and maintenance may also be higher.
Transportation can also have a huge ripple effect, especially if you’re leaving a city with walking, biking or public transportation options in favor of a city without those options.
Owning a car comes with myriad extra expenses, such as gas, repairs, car insurance, registration, parking tickets and more. If you lease or take out a loan for a car, you’re also looking at regular payments.
Using public transportation, switching to a gas-efficient car or carpooling with friends can lessen how much you spend on driving. To cut down on housing, you can find a roommate, rent a room in someone else’s house or live outside the most desirable areas.
Compare Utilities and Groceries
The next biggest components of your budget are utilities, groceries and health insurance. To find out how much you’ll spend on food, look through the grocery store ads and see how the costs compare to your current food bill. Some states have exorbitant produce prices because they don’t have many farms, while others offer a slew of discount options, like ALDI.
Utility costs can also vary, especially if you’re a renter and aren’t required to pay for water, gas, electricity or trash. This can make it very difficult to estimate accurately, so don’t expect to narrow this figure down too much.
If you’d like to decrease your utility costs – either in your current home or a new one – there are some great options. Solar panels can substantially decrease your utility bill if they’re legal where you live. Improved insulation and other environmentally-friendly upgrades can also lower the cost.
Whether you’re employed with a company or starting your own business, how much you pay in taxes will affect the income you take home. Before moving anywhere, take a look at their local and state taxes to see how your income will change.
You should also compare property taxes, which could dictate what kind of house and neighborhood you can afford. A high sales tax can affect your spending if the differences are stark.
You can decrease how much you pay in taxes by upping your retirement or HSA contributions, giving to charity and other potential deductions. Talk to a financial advisor if you’re unclear on what you can deduct – they may even introduce you to deductions you never knew existed.
If you’re going to move somewhere, make sure to compare your current salary to your future one. You can use a cost of living calculator to see how they compare. Even though you may be making more money after you move, you may end up having less disposable income due to a higher cost of living.
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