Main Street Finance

What Goes Into Cost of Living?

By Jeff

Cost of living is a relatively broad term. When people are considering relocating, looking at the cost of living should be an important part of the decision making process. But what exactly goes into that cost? Here are some of the biggest factors.

Transportation – Everyone has to get around, whether it’s commuting to a job or making a quick trip to the grocery store. How you choose (or are able) to do that can greatly affect your cost of living. According to AAA, the average cost per year of owning a sedan is around $9,200. With that cost in mind, look at the transportation options in the city you’re considering a move to. How do people commute? Can you take public transportation or ride a bike?

Taxes – As they saying goes, there are only two things in life that are unavoidable, and one of them is taxes. Looking into the tax rate and what is and isn’t taxed is key to figuring out the cost of an area. For example, California and Oregon have the highest income tax in the country. Yet both are considered hot spots to live with droves of people moving there.

Groceries – Everyone has to eat, right? How much you pay for food and household items is another factor that determines the cost of living of a city. If you want to live in Hawaii, that’s great, but it also has the highest grocery cost in the country. That makes sense because it’s small and doesn’t have a lot of access land area to devote to agriculture, meaning a lot of good need to be shipped in. High grocery costs may not be a deal breaker, but it’s something to keep in mind.

Housing costs – This is a big one, especially if you’re moving to a new city with a new job. Many of the hottest spots in the country for jobs like Boston, San Francisco, and Washington, D.C. are also some of the most expensive places to live in the United States and sometimes the whole world. Sometimes if you’re simply transferring jobs within your company, you’ll have to get a significant pay raise just to afford to live. It can be great to move to a city or a thriving area, but usually that means your housing costs are going up.

Determining the cost of living is an important factor to consider if you’re considering relocating. There are a lot of factors that go into the cost of living, but keep in mind some of the bigger ones that you know will have a big impact. Looking up things like housing costs and taxes will help you make a more informed decision about where to set down roots.

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