Tuesday, April 5, 2011

Cost of Living Comparisons

If you're curious about doing a cost of living comparison between cities, you've come to the right place. A cost of living comparison between cities can vary greatly and can play a pivotal part in helping you understand how far your salary will go in a particular city.

1. How can doing a cost of living comparison between cities help me understand my earning potential in one city versus another?

Doing a cost of living comparison between cities will help you learn what it takes to maintain your standard of living from one place to another. Pamela Villarreal, a policy analyst at the National Center for Policy Analysis in Dallas, gave the example of moving from Houston to New York City. While the move may include a significant salary boost, she said, you need to consider, for example, if you'll be able to afford the same size home in New York-and if you're not able to, would you be OK with that?
"I think sometimes people get so encouraged by the possibility of moving to another area that they may not stop to think what exactly that salary is going to buy them," she said. "In some cases they may have a higher standard of living and in some cases they may have a lower standard of living, but each person has a different standard or set of goods and quantity that makes them happy. So the key is looking at what your salary will buy to help you attain that."

2. Why is a cost of living comparison by city more useful than cost of living comparison by state?

Experts say doing a cost of living comparison by state isn't useful because different metro areas within the same state may have very different costs of living.
"It doesn't do any good to compare the cost of living from state to state," said Steve Reed, an economist at the U.S. Bureau of Labor Statistics' Consumer Price Index program. "Eureka, California versus Los Angeles is very different."

3. How do you do a cost of living comparison between cities?

Noah and Jessica Anderson recently made the trek from Atlanta to New York City, using cost of living comparison calculators to help gauge what it would cost to live in New York. The 27-year-old Noah, who works for a private equity firm in New York, said with the calculator's help, he was able to do very careful comparisons that proved accurate once they made the move."I was fortunate to get into something where the income increase did justify the increase in expenses," he said.

4. What's the difference between using a salary calculator and a cost of living comparison calculator?

salary calculator can tell you how much you should be earning compared to others with similar characteristics-people who live in the same metro area, have obtained the same level of degrees, etc. A cost of living calculator will tell you how far your salary will go when you're buying goods and services in a particular location.

5. What do cost of living comparison charts really tell you?

Noah Anderson said the charts provide a base of knowledge about how much it'll cost you to move from one city to another. "It's not 100 percent accurate, but it gives you a rough estimate of what your expenses will be and what you have left over, and what you can save," he said.
Anderson said he used six months' worth of data he'd kept on expenses he and his wife had while living in Atlanta, and worked it into a comparison chart between Atlanta and New York.
Penelope Trunk, blogger and author of Brazen Careerist: The New Rules for Success, recently moved her family from New York City to Madison, Wis., after conducting a year's worth of research, and cost of living comparison played an important part. But she said relocating is often more philosophical than some may realize.
"You should be doing a soul search on your core values. There's no chart or pull-down menu for that," Trunk said. "You can't predict how your life is going to change with a cost of living index."

6. Is there any way to do an international cost of living comparison?

Except for a few Canadian cities, the there isn't much international data available online. But the ACCRA website suggests several other sources, including the U.S. Department of State.
Other potentially useful sites for doing an international cost of living comparison are: