What is “cost of living”?
The best things in life are really expensive. But your best life can be more expensive in some cities than others. When making your spending plan, know that cost of living (the expenses that keep you alive) are typically the biggest spend bucket, so it's critical to consider where you live and how much it’ll cost you to live there when making career choices.
It’s a way to compare cities based on their “expensiveness”. Besides the obvious name, cost of living is a way to understand how far your salary will get you in a city. More specifically, if you make $50K/year in city X, what salary do you need to make in city Y to live the same lifestyle.
When someone says “Ugh, the cost of living there is so high” they are talking about these costs:
Housing (including utilities)
Transportation
Food (dining and groceries)
Healthcare
Entertainment (yes, gym membership fees hit different in different cities)
Calculating your cost of living in different cities requires a LOT of data points — the cost of an average apartment, a cup of coffee, public transportation, you get the point. Good news? Wonderfully nerdy netizens have your back, offering different calculators to compare the cost of living between different cities. We like the simple and straightforward NerdWallet cost of living calculator because it lets you not only calculate but compare dream cities.
If you are a new grad making big location decisions, using this calculator is a great way to build your spending plan.
Notice the link between high salary and high cost of living (hey there, Bay Area). So remember, when a company throws a higher salary at you, it doesn’t necessarily equate to more dough in your pocket if it means being lured to a more expensive city.
The next time a job asks you, “What’s your desired salary?”, not only will you do your homework on the fair range for the role, but also you’ll calculate the cost of your best life, look up the cost of living in the city and ensure the salary falls in line. It’s hard to make a spending plan (with goals towards saving and investing) if the cost of living were 100% of your paycheck.
☝Once you land on a target salary range that enables your best life, don’t forget that we always have you covered with all the negotiation strategies.