The Financial Realities of Relocating
With the housing market and overall economy starting to improve, more Americans are packing up and relocating. According to the U.S. Census Bureau, the number of people moving for a new job or transfer numbered 3.5 million in 2013-2014.
Whether you're planning to move for a new job or transfer, or you're accompanying a spouse or partner who has accepted a new position, it's important to consider how your new location will impact your bottom line.
There are many costs that can vary from one geographic location to the next. Depending on where you're moving to, you may be in for a pleasant surprise or a financial shock. Here are some things to consider:
- Housing. The cost of housing is a significant financial factor in your move. Relocating from a high-cost area like New York City to a lower-cost area like San Antonio might translate into several thousand dollars' worth of annual savings on housing costs. Also, keep in mind that if you're buying property, higher housing costs will most likely mean higher real estate taxes.
- General cost of living. Aside from housing, will other items like groceries, transportation, utilities (e.g., heating/cooling, electricity, water, cable/phone/Internet), health care, and child care cost more or less in your new location?
- State and local income taxes. Seven states have no income tax--Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Other states have a variety of state and local income taxes. You can use an online paycheck calculator to get an estimate of what your net income will be in different states.
Bottom line--will your new location cost more or less? If you haven't already negotiated your new salary, you can investigate the salary you would need to earn at your new location to maintain your current standard of living. Many online job boards have cost-of-living comparison tools where you can compare the costs of different locations.
You may also have other considerations that partly involve costs, for example:
- Commuting time. Will your new commute be longer than your current one? In addition to costing more, a longer commute will mean less time for you to spend at home or on personal endeavors.
- Family and friends. Will you be moving far away from family and/or friends? If so, there might be airfare and/or other travel costs in your future. Unfortunately, airfares at peak travel times like holidays and school vacations are typically the most expensive. You may also find yourself allocating more of your vacation time for visits with family.
- Keeping up with the Joneses. No one wants to admit this is even a factor, but you might be surprised at the subtle influence this dynamic can have on your bottom line. For example, does everyone in your new neighborhood drive a certain kind of car, hire professional landscapers, or send their children to camp all summer?
- Your spouse's job prospects. Has your spouse/partner been able to find a job in your new location? If not, are there ample job opportunities for someone with his/her experience and skills?
As for how you'll pay for the move, some employers offer relocation packages that cover the costs associated with selling your house, hiring a moving company, transporting your belongings and vehicles, finding a new house, and paying for food, fuel, and lodging along the way. If not, you'll be on the hook. But you may be able to deduct some of your moving expenses; for more information, see IRS Publication 521, Moving Expenses.