Increased cost of living--what should I be thinking about?

March 19, 2022 2:15 PM

In the past, I've moved from NYC to Seattle to Chicago. Cost-of-living-wise, these moves were easy. Everything got cheaper! Now we're contemplating a move back to Seattle, and it feels a bit more daunting. Are there considerations I should be thinking about? Looking for experience from people who have made the switch from lower cost of living to higher cost of living.

I'm specifically looking for feedback on how to calculate what salary we need to successfully make the transition. Is it really as simple as figuring out the cost of living increase and multiplying our current salary, or am I missing something important? (The websites I've looked at, btw, show a CoL range from +31% to -2%, which is...not helpful.) Home prices seem like one metric, but how to calculate the rest?

Are there other variables to consider? Research to do? People to consult with? Any other advice?

I'd particularly love to hear from anybody who has moved to Seattle in the last few years of craziness, but anybody who's moved to a similar area would surely have helpful thoughts.

posted by soonertbone to Work & Money (8 answers total)

> how to calculate what salary we need to successfully make the transition. Is it really as simple as figuring out the cost of living increase and multiplying our current salary, or am I missing something important?

Approximately, yes. To get a more accurate picture you would need to consider how much tax you will be paying, due to different state taxes, and also different income tax brackets. If your expenses are 30% higher and your income is 30% higher then you will likely find that your taxes are more than 30% higher. Maybe build a spreadsheet to calculate savings after tax and expenses and have a play with it to get more of a feel of how much income you might need.

Another part of it is how much you are saving after subtracting income and taxes, and what you plan to use the savings for. If you are saving toward a house in the high CoL location, you might want to estimate how many years of savings it would take to build a down payment or pay off a mortgage. If you are saving toward retirement, and plan to retire in the high CoL location, then your expenses in retirement will be higher, so you will need to save more to reach similar quality of life in retirement. If you are not planning to stay long term in the high CoL location, this might not be a concern.

The other side of the coin is that salaries are partly influenced by cost of living but also by a bunch of other factors, such as labour market supply and demand. If you can land a job offer for a tolerable job where the salary increase is substantially in excess of the minimum you'd need to cover the CoL increase, the decision might be a lot simpler.
posted by are-coral-made at 3:51 PM on March 19, 2022 [1 favorite]

If you have a car, check the costs there. Car registration can vary by 100s from state to state.

Also worth thinking about things you buy all the time - Amy's canned soup, whole cabbage, Hanes cotton crew socks, etc. etc. - and see what that averages around town. I've moved or thought about moving for work several times and it's just weird how the COL indexes are completely off on the things I usually buy. And it adds up. From town to town, my typical shopping cart varies by a 100+ and multiply that by 12 and you're talking about money.

Dog grooming and vet care are other things that can be much much much higher, or lower, depending on where you live.

You will need a spreadsheet and also don't by Amy's soup unless they've stopped treating workers like donkeys.
posted by Lesser Shrew at 4:16 PM on March 19, 2022

The way I like to think of it is that cost of living is related to expenses, not income. I'd make a table/spreadsheet. In one column, current yearly expenses; in the next, expected CoL % adjustment; in the third, expected yearly expense increase (A * B). Once the dollar value of the increase is small, I'd stop worrying about accurately guessing the increase percentage and just use the pessimistic side of some general CoL estimation (i.e. your 30%), as it won't really affect the outcome. I'd expect housing to dominate this list, as both the biggest expense and the biggest variance between cities. So spend some time researching where you'd realistically want to live and how much of an increase that is.

So then you have the dollar value that your yearly income needs to increase to cover. Note that this is post-tax income, so you need to account for taxes. If your expenses increase by $X, then a rough estimation would be that you need a pre-tax salary increase of $X * (1 + the marginal rate for your tax bracket). This number could be a much smaller percentage of your total salary than CoL calculators would say (if your income is high and expenses are low) or vice versa.

One question left is that of savings. If you're saving for retirement and you think this move is likely to affect the city you'll retire to, then you need to include your retirement savings in the table of expenses that need to increase. If you're close to retirement age, this becomes a much more dependent on your current savings and the math is entirely different.
posted by davidest at 4:31 PM on March 19, 2022 [3 favorites]

With respect to CoL sites, one site I've found mildly useful for this sort of thing is Numbeo, because they actually tell you what prices they're comparing so you can adjust your expectations if they're off.

...like, I mean literally go price out a few things at your local store, compare them with what they've got online, and then adjust their estimate accordingly.
posted by aramaic at 6:16 PM on March 19, 2022

Seattle area has gotten way more expensive since you last lived here. Unless you left, like, last year. A lot of suburban neighborhoods have seen house prices double or almost double in the last 5 years or so.

Make sure you price out all your major expenses, not just housing! Labor costs also vary so if you need childcare, you want to hire house cleaners or gardeners or whatever, or you eat at restaurants a lot, get a sense of what that costs in Seattle compared to Chicago. We were surprised when we moved here that while many things were cheaper here than where we moved from, house cleaning and daycare were a lot pricier. My friend who made a similar move was shocked how much it cost to get work done on his house.
posted by potrzebie at 6:59 PM on March 19, 2022 [2 favorites]

One thing I would say, having made both kinds of moves multiple times: try not to fool yourself about how frugal you’ll be. For instance, don’t say “oh we’ll eat out less because we’ll be doing more outdoorsy things!” or whatever your version of that might be. For instance, when I moved from a (cheaper, several years ago) Seattle to DC, I told myself the increased rent would be canceled out by not needing a car. But whoops, turned out metro access in my neighborhood wasn’t great, so I wound up spending as much on Lyfts and carshares as I had been spending having a car.
posted by lunasol at 7:57 PM on March 19, 2022

Is it really as simple as figuring out the cost of living increase and multiplying our current salary, or am I missing something important?

Having done a few moves between different CoL bands (including moving to Seattle for a year in 2019) I find the overall cost of living multipliers to be very rough general guidance. While it's hard to cover everything I think it's worth spending some time trying to price out what it will cost to port, approximately, your actual current lifestyle from place A to place B. There are a lot of nuances that don't get covered on the CoL comparison sites.

Seattle-specific examples:

• Apartment complexes listed units as renting for $X,000/mo but had additional charges for water, sewer, trash, gas/electric, and parking adding up to an additional $Y00/mo. Where I moved from tenants in a complex like that are generally only responsible for paying gas/electric service so suddenly those "remarkably inexpensive" apartments weren't so inexpensive after all.
• Housing (perceived) value for money. It turned out that my housing costs didn't drop all that much when I moved from higher CoL San Francisco to lower CoL Seattle, but my place in Seattle was much larger and nicer. When I looked at places based on what they "should" cost given the CoL decrease they were generally unappealing or unsuitable.
• Check out some grocery stores. Turns out that foods I could get cheaply in California were more expensive and harder to find in Seattle so my food expenditures actually went up.
• Price out services you purchase regularly. E.g., pet-sitting became less expensive but house cleaning was $$$.
• Travel costs (well, post-COVID at least). Sea-tac is a major airport but nothing like Chicago O'Hare, so if you travel a lot you could find some flights are less available and/or more expensive.

Other considerations:

• Your personal earning potential in the local area. I previously did a low-CoL to high-CoL move where money was tight for a couple of years but later on, my income went up a lot more than my expenses did.
• Income and property tax burdens, vehicle registration costs, local sales taxes. Lots of local variation here and lots of changes over time.

posted by 4rtemis at 6:42 AM on March 20, 2022 [3 favorites]

Best answer: 2022 is gonna be a bad year for CoL comparisons. Last year's data may not mean much in the face of oil sanctions, supply crunches and inflation.

CoL essentially a regional inflation number. As such, it is an estimate of the price of a fixed bundle of goods. Your lifestyle will not match the average, so customizing your own bundle will always yield a better estimate than the BoL's bundle.

I've done plenty of moves in my career. What I do is this:

0. have an annual budget spreadsheet, documenting all the various kinds of incomes and expenses i expect, and how much i can expect net worth to increase, each row is a category, with three columns: planned (on jan1), adjusted (if the plan made a mistake), and final (what the actual number was). one tab per year.
1. clone this year's tab and name it "seattle 2022"
2. start estimating all these data points. housing is the big one that varies, but looking at advertised comparables will help.
2a. taxes is the next big one that will vary. As you presumably know, WA has no income tax; this may mean your federal taxes go up, since you can't deduct them! But also, WA recently paused some rando long term care tax until 2023, so do your homework. other variables like gas and utilities will be harder to estimate, on account of the Russia situation and climate. but thats gonna vary even if you dont move!
2b. childcare is kind of a shitshow in the west coast at the moment. maybe that eases up as vaccine approvals move towards the younger.
3. once you have a handle on expenses, compare net worth changes. increase your seattle salary until net worth changes match, or maybe increase by 5 percent as a fudge factor for whatever BS you may forget about, like sales tax on a car you bought last year.
posted by pwnguin at 11:34 PM on March 20, 2022