Photo by Wong Yu Liang via Shutterstock
During 2020, Americans saw record numbers in those moving between states. The increasingly digital workplace and a switch to online homeschooling has removed the constraint of living near the office and local schools. Workers no longer have to make the commute and kids can finish out the school year with greater flexibility. After a year of being stuck indoors, many people are hungry for fresh scenery or a larger home to accommodate changing needs. While a big move may seem like a great idea while you’re browsing digital listings, take the time to count the costs of living to avoid tons of stress and regret.
What Is Cost of Living?
A cost of living index covers all the common costs of daily life: food, shelter, transportation, energy, clothing, education, healthcare, childcare, and entertainment. When preparing to move cities, people often use these indexes to consider whether the move is financially wise in the long term. The property you’re looking at may be a good deal, but the general location may come with surprising financial pitfalls.
An easier way of explaining costs of living is: how many goods and services does a given sum of money purchase in a certain location? What you can purchase for a hundred dollars in Los Angeles is vastly different from what you can purchase in Peoria.
Watch Out For Taxes
As the idiom says, you can’t escape death or taxes. However, it can often surprise homebuyers how different taxes can be in a given region. Some states don’t have much by way of income tax, but will have higher property tax. If you’re budgeting for home ownership, this difference can be a bit of a surprise. Other states have significant sales tax or none at all. Failing to consider an extra seven cents or more taxed for every dollar you spend can put a significant ding in your monthly budget.
Income & Cost of Living
When looking at a salary offer in a new city, don’t get wowed by the number, or the qualifier of “average” salary. A median income in an area may be below the cost of living. It also may not take into account your lifestyle stage. A single person has different needs than a married couple with children. For example, the Economic Policy Institute found San Francisco was the most expensive city to live in for parents with two children. The cost of living was estimated at slightly more than $148,000 per year, but the median income for San Francisco was approximately $104,000 per year. Although a salary of $104,000 is attractive on paper, it doesn’t cover what it costs to live where you work.
After considering all these elements, you’ll be vastly more prepared to make a big decision. Remember, a home’s price tag is just a part of what a move can cost.
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