Calculating The Cost Of Living
Cost of living can vary greatly from state to state. Lots of cost of living indexes consist of one number for each city. This is a very simple measure of figuring out costs but may not be accurate for every individual. We will quickly look at a more realistic way of measuring cost of living.
The idea is to get the most out of your money. In some regions in the US, new homes can be purchased for as low as $90,000. However, jobs in these regions may not pay as much as other regions and also, the area may simply be so undesirable that you won’t want to live there at any cost. The weather may be too bad, crime, bad schools, lack or jobs, or poor culture.
Once you find a list of cities that meet your needs, you will probably want to compare them to see what housing costs as well as living expenses are for each city.
If you move to an area that is too expensive for amount of money earn, you will most likely be spending all of your time working without much time or money left over. In the right area, you be able to work and accumulate earnings and have some time left over for family or fun.
Here is a comparison of two cities that you like as of May 21, 2004: The following assumes that you are earning $50,000 a year and filing your taxes as single. It assumes that you have car valued at $25,000 that gets 20mpg. Mortgage rates are based on 30yr mortgage at 7%.
|
City1
|
City2
|
|
| Housing | $240,000 | $150,000 |
| Property Taxes | 1600 | 1200 |
| Sales Tax | 7.5% | 8.1% |
| Personal Prop Tax | None | 420 |
| Car Insurance | $960 | $720 |
| Cost Gas | $2.20 gallon | $2.10 gallon |
| Avg Commute 16800 | $1848 | $1772 |
| Electricity | $730 | $940 |
| Natural Gas | $180 | $155 |
| Income Tax | None | $1550 |
| Misc Expenses | $5375 | $5405 |
| Total Expenses wo/ House | $10,693 | $12,162 |
| House Monthly P&I | $1596.73=19,160yr | $997.95 =11,975yr |
To have equal monthly payments, City 1 house should sell at $168,200 instead of $240,000. City 1 is overvalued by 42% or by $71,800 compared to City2. If you moved into City 1, you would need to make $5,716 more just to be even with City 2. So, you would probably be better off moving to City2. It is possible however, that City1 would pay more than $50,000. If this is the case, it could change things.
So, when I say that you will need to make $5716 more just to be even with City2, that really is true only if things continue as planned. That means that you continue to work and don’t get laid off. If you get laid off or can’t continue to make $5716 more than other city, things will not be even. So when you look at it from that perspective, City2 is also a safer bet. If you happen to lose your job, you will owe $5716 less per year. And this number could decrease a little because your income tax will go down.
Sources:
http://www.bankrate.com/brm/movecalc.asp
http://gasbuddy.com
http://realestate.yahoo.com/re/neighborhood/
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