Your Finances: Why Cost of Living Matters

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This article is part of the MH4C Writers Challenge. I’d like to see which articles you like the most. If you like an article, please take a moment to ‘Like’ it on Facebook, ‘Tweet’ it, or give it a ‘Plus One’ on Google +. (To the right of the title, you’ll see each of those buttons so it should make your job easier.) The winner of the MH4C Writers Challenge is the article that has the most social media shares.

The following entry is by Tom Drake. Tom can be found on multiple personal finance and marketing blogs. He sits on a financial stewardship committee for his Anglican church and also teaches Sunday School with his wife. Visit Stupid Cents, or you can also follow him on Twitter.

When it comes to money, too many of us consider only salary. This can be a mistake if you aren’t careful. Before you get too hung up on your salary, consider your cost of living. A high cost of living can reduce the effectiveness of your salary, and reduce your overall wealth over time.

The Effects of a High Cost of Living

As you consider your financial situation, you need to account for your costs, as well as your income. There are some areas that feature high living costs, including expensive housing, transportation, and food. These costs can easily cut into your salary.

Indeed, in some cases, you might find that you might be better off with a lower salary when you live in a place with a lower cost of living. The key is determining your disposable income, and figuring out what living arrangements can provide you with the highest amount of disposable income.

If you live in a place where your salary is $4,500 a month, but your necessary costs are $4,000 a month, it doesn’t leave you with a lot of disposable income. However, you might live in a rural area where your monthly salary is only $3,500 a month, but your costs are $2,500 a month. That leaves you with $1,000 in disposable income. Even though the salary is lower, the cost of living is so much lower that it makes a big difference.

It’s true that some jobs provide a high enough salary that it’s possible to do well with a higher cost of living. It depends on your job, and the costs that you incur.

Before You Move to Take a Higher Paying Job

Instead of moving just for a higher salary, it’s important to consider the costs involved, and determine if your situation would really be better. There are cost of living calculators online that can help you determine what expenses you would see in your new city.

Estimate your costs, and subtract them from your new salary. Then, look at your current disposable income. How does it compare? If you would actually have less disposable income by making the move (even with your higher salary) it might make better sense to stay where you are, or to look for a job in a smaller town.

Also, don’t forget to figure some of the other costs involved. You will have to pay the costs of moving, as well as the costs that come with setting up a new residence. These costs should also be factored in, since they can make it difficult for you to start out in your new town.

And, even though it doesn’t directly impact your family’s finances, it’s also a good idea to consider the emotional toll moving will have on your family. Sometimes that can be a bigger issue than your salary or your cost of living. If your family will have a hard time adjusting, it might not be worth it to make the move… no matter how big your salary would be.


  1. says

    Recently i just started really digging into my monthly expenses, just to see exactly where my money was going. I was definitely over-spending on eating out and i also was buying clothes at a rate that i really shouldn’t have. I don’t buy a ton of material things, but there are absolutely some things that i can cut back on.

  2. says

    Few realize that many could be better off taking a lower paying job in a place with a very low cost of living. Don’t forget to calculate how a higher or lower income impacts what you pay in taxes. Even small things like what coffee breaks cost and how much it costs to eat out can make a difference.

    If you work online and can work from anywhere, seriously consider living more than an hour from a major city. Rural areas are far less expensive, especially housing and land.

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