New City, New Expenses: Can You Afford to Move?

Americans are on the move according to the U.S. Census Bureau. A press release reported that roughly 13 percent of the population moves on an annual basis, a steady trend since 2008. Whether you’re accepting a new job or moving closer to family, the decision to relocate is complicated. How will it affect your budget? Will a wage increase cover new expenses? Will a move help or hurt your credit repair efforts? The answers to these questions often depend on:

• As the main factor in the cost of living equation, housing plays an important role in the decision to move. Although online calculators provide general conversion numbers, reality can paint a different picture. For example:

Steve and Grace Bennett are a young urban couple. They live in Chicago in two-bedroom condo, purchased new for $185,000 in 2009. Recently, Grace was offered a job in Seattle, prompting the couple to visit the area and look at housing. Although online research prices the average two-bedroom at $390,000, the couple has trouble finding a decent property for less than $450,000. Unfortunately for the Bennetts, Grace’s $10,000 raise won’t cover the cost of housing in Seattle.

The moral: Don’t rely on research alone. Consider doing the legwork before committing to a new city. Visit the area, meet with a real estate agent, and view available properties. What you see could affect your decision.

• The average one-way commute time is 25.4 minutes according to the U.S. Census Bureau. In addition to time gained or lost, a change in commute will affect your:
  • Fuel usage. If you’re moving states, the change in fuel is twofold: time and cost. For example, while a 30 minute commute in Indianapolis may cost $2.21 per gallon, you’ll pay $2.79 per gallon in San Francisco.
  • Need for help. A longer commute means more time in the car and less time at home. While this may not bother you, consider the effects on your family. If you have children or pets, it may require additional caregiver help, an expense to factor into your budget.
• Uncle Sam is everywhere, and the price you’ll pay to move often depends on:
  • Property tax. If you plan to buy a home, consider property taxes and their effect on your mortgage. While the 2019 property tax rate in Naperville, Illinois was 0.6937, properties in neighboring Elmhurst enjoyed an assessment rate of 0.6159. Consider these differences as you determine cost of living.
  • Sales tax. Even the smallest move can have a large impact on sales tax. Metropolis areas tend to have higher taxes than their rural counterparts. Check your new city’s tax rate and calculate how it will affect your bottom line.
  • State income tax. While income tax doesn’t exist for in some states e.g., Washington and New Hampshire, others like California and Minnesota take a healthy bite of their residents’ wages. Consider your tax burden as you contemplate a move. Don’t let a tax increase eclipse a new salary.
• Food and utilities. Food, water, electricity: these are the basics of living, and yet, many forget to factor them into a moving budget. For example, suppose you’re moving from Phoenix, Arizona to Bloomington, Indiana. You’ll pay an average of 14 percent less for electricity, 20 percent less for pizza and 11 percent less for orange juice. Refer to a cost of living calculator to estimate expenses and revise your budget accordingly.