If you are planning a move to another town or city, you may be trying to figure out the income you need to keep your standard of living the same in the new place.
Many people focus on the cost of moving but forget to figure out the cost of living in the new state they are moving to. Yea, you can use the moving cost calculator to get that.
But what about research on the cost of living?
Do you find the other cities on your moving list cheaper than your current home?
That is where you need a cost of living calculator.
The biggest expenses we all encounter can be different from one location to another. Therefore it is vital to make planning before your move. If not, you might get frustrated by higher expenses in your new home.
In this post, we are going to discuss the best use of cost of living calculator, how can you calculate your cost of living in a new city, and much more.
What is the Cost of Living Calculator?
Cost of living indexes and scores are a means to make a comparison of the total price of goods and services between different locations of the United States. The national average is 100, so when you consider the cost of living index of a place, you can immediately figure out how more or less your living here will cost you.
If the cost of living index of a place is 135, then that is 35% more expensive than the national average.
If 85 is the cost of living index of a place, then the place is 15% less expensive than the national average.
Housing costs (buying or renting a house or apartment) are the biggest factor in the cost of living. You get a personalized cost of living comparison that includes utilities, housing, food, transportation, taxes, healthcare costs, and child care prices.
Calculating Your Cost of Living
You can simply calculate your cost of living similarly to how you simply add up your monthly expenses, or a more difficult process that enables you to plan a budget for future or prudent spending.
Making use of your old financial documents and making a list of your financial targets will enable you to come up with an accurate cost of living calculation to control your saving, spending, and investing.
Below are the steps to calculate cost of living:
1. Find out Your Monthly Expenses
Knowing your usual expenses is one of the first steps in determining your cost of living. Get all your last year’s financial statements from credit card companies and banks. Create a list of your recurring monthly expenses, like rent or mortgage, groceries, phone, internet, utilities, insurance, cable, car payment, hair and nails, and entertainment.
Then, list out expenses you pay occasionally, like a quarterly insurance premium, and divide everything by 12 to determine your average monthly cost for the expenses.
2. Review Your Salary Deductions
The insurance, taxes, and 401(k) contributions deducted from your salary provides your after-tax income, and you might not want to add them in your list of a monthly expense.
Determine the costs you can stop paying, like your 401(k) contribution, in case you have cash flow problems and require additional income. If you stop making these contributions and take the income, don’t forget that there will be a tax on this money.
3. Calculate Your Spending Per Month
Know the average amount you spend per month, by summing your yearly expenses and dividing them by 12. Some expenses cannot change, like car, payment, which is stable all through the month.
Other expenses can change, like groceries. Group your expenses into fixed and variable lists and determine your monthly average for your variable expenses by using your last year’s spending and the coming year’s projection. Add the average monthly expense for your non-frequent regular expenses in your monthly total.
4. Include Emergencies
You never know when you might be facing a medical problem, a job loss, damage to your home, or other unplanned financial issues, so have monthly savings to create an emergency fund.
Considering your monthly expenses, current savings, possible help from friends and family, or access to investments, and calculate the amount you should have in your emergency fund. This can take between 30 days and 6 months of expense, based on your earning and savings potential
5. Make a Plan for the Future
You might look into a down payment on a house or contribution to an IRA as a cost of living, but if you find homeownership and a convenient retirement as a financial target, they need to be added to your monthly budget. Factor these expenses into your monthly expenses to find out your cost of living with long-term savings included.
How to Make Use of a Cost Of Living Calculator
Most of the best cost of living calculators or tools have designed to receive your details to calculate your living cost.
To use the cost of the living calculator, choose your current location and destination cities. Then, supply your yearly income. The information you enter will be the basis of which the calculator uses to update.
A summary screen will be displayed with the difference in the cost of living between the two locations and how they rank against the national average. You can see the comparison between housing and any other costs by clicking on them.
There is a breakdown of all the various expenses you need to consider before your move in the third tab. There are cases where you may discover that even though housing prices are normal, the other costs are on the high side than you hoped for. Taking a thorough look at the possible destination is important to make a perfect decision.
Now let us dive into expenses that are factored into your cost of living calculation.
Factors Contained in the Cost of Living
The United States Bureau of Labor Statistics reported that housing is the largest bill paid by consumers every month. Whether it is rent or mortgage, a large portion of your income will be spent on your housing expenses every month.
Home prices, monthly rents, and property taxes all vary by state, city, town, and even neighborhood. Homeowners have more expenses to consider than just the monthly-based mortgage payment. There are also taxes, maintenance upgrades, and fees to consider when deciding on the place to live.
Unless you are fortunate enough to work from home, you will need to consider transportation costs when deciding where to live. BLS reported that the second-largest expense consumers have is on transportation.
Public transportation is included in these costs for some people. For others, the costs involve driving your car, and that means adding costs for gas, parking, car repairs, and tolls. Closeness to a place of work is a very important consideration because it can greatly affect your cost of living.
Weekly travels to the grocery store can cost more, especially if the costs of food are high in your location. The latest BLS data shows that an average of $7,000 is spent annually by consumers on food expenses. There are ways to reduce that. You could reduce takeout, eat out less, and cook more often. Even at that, groceries’ price will greatly affect your cost of living.
A pint of beer, a movie ticket, box seats at a volleyball game can all cost differently based on your location. And it quickly adds up. Americans spend almost the same amount every year on entertainment as they spend on health insurance, as reported by BLS. Similar to food costs, you can reduce the amount you spend on entertainment by visiting your behavior.
Education and Childcare
Based on your specific situations, many other large expenses may affect your cost of living. The cost of education and whether there will be a need for you to obtain student loans to get or finish a college education. There is childcare cost if needed.
This could include the cost of your caregiver who comes to your home, of after-school daycare, or pre-kindergarten. If you or your partner is always at home or if there is an extended family in your home assisting, you won’t need to pay for these expenses. Anyone else will need to plan their budget the right way.
Why you should Budget When You Move
With a budget, you can monitor your expenses and make sure that you are living within your comfort, which is why keeping one at all times is great. A budget is so much important during a move because your spending ability change when your costs change.
Your cost of living can significantly change if you move to another part of the country. But this can also change if you are moving to a new city within the same state.
A person who resides in Winston-Salem, North Carolina can prepare an increase of 8% to their cost of living to relocate to Asheville and by 6% if they are aiming for the coastal life at Wilmington.
Residents of California can experience much steeper changes. Moving to San Diego from Sacramento will cause an increase of 23% to your cost of living. It rises to 26% when you move to Oakland.
Creating a budget will help you to account for those changes in your living cost, so you’re ready for them immediately you arrive.
It also helps to consider moving-related expenses, like hiring a moving crew to move your furniture or the cost of a rental moving truck if you are DIY.
Moving costs can quickly add up, especially if you don’t know how much you need as well as the amount you will spend. A budget can help have control over those costs and avoid running into debt before you’ve even got into your new home.
Start by the search for the Top 10 Cheapest States To Live In The USA 2020
If you are looking to move into a new city, make us of a cost of living calculator to find out the amount you will need to live in your destination city. You can find a lot of free online calculators that allow you to supply your current income and city, then the name of the destination city, to discover what you need to earn in the new city to meet the standard of living in your current location.
As a sample, you can read The Cost of Living in Miami Beach Florida.
Are you ready to move to your chosen city, check our best interstate movers that will get the job done for you.