I was recently offered a $30,000 raise to move relocate to San Francisco. Hot dog that’s a lot of money! It’s a no brainer, I should take it right?

Not so fast, that raise might not be worth it.

How to calculate the true cost of living

There are many facets to how much it costs for you to maintain your current standard of living. How do you decide when you should make the move and when you shouldn’t?

What most people do when relocating for money is take the expected raise, divide by 12, and start formulating what they will do with the extra $2,500 a month (assuming a $30,000 annual raise).

Now, I know what you’re thinking…..you would never do that. You know that housing costs vary and things will be different.

Good. Did you go through an analysis of all your expenses? Do you know what your monthly / yearly expenses actually are? Can you pull up a spreadsheet in the next five minutes and tell me the average cost of your electric bill and grocery bill per month?

…I’m waiting…

I know how much I spend on cheese every month and it’s not enough! Bring on the gouda.

No? If you can’t answer yes to those questions, then you can’t truly calculate the cost of relocating.

Here’s a basic list of things that could vary widely depending on where you live:

  • Housing
  • Medical Care
  • Transportation
  • Insurance
  • Electricity / Water / Gas
  • Cable TV / Internet
  • Groceries
  • Eating out
  • Entertainment

These are the minimum things you should be looking at to compare your current location vs where you might relocate to.


This category is the one you should pay the most attention to and it’s likely the one you were planning on looking into anyway.

Let’s say you live in Orlando.

A quick search on rent.com showed a variety of 1-bedroom apartments going from $800 to $1,800 a month.

Now, let’s look at the average housing price in San Francisco where you got your job offer.

A quick search on rent.com showed a variety of 1-bedroom apartments ranging from $2,095 to $4,700 (I completely ignored the one available for $10,000).

Let’s say you’re paying in the middle of the range in each location. That means you’re paying $1,300 in Florida and $3,400 per month in San Francisco.

Oops. That $30K raise you were getting? $2,100 out of $2,500 a month will now be going to rent. Worse? You’re not going to get the entire $2,500 because we haven’t taken out taxes.

Medical Care

How much is the cost of your medical care going to change?

Did you find out what the benefits will be at your new company?

What was that? You asked what the monthly premiums will be and they’re less so you’re safe right? Wrong.

As important as knowing what the monthly premiums will be, you need to understand what the terms of the plan will be.

Is the co-insurance, co-pay, or deductibles different than you have now? Do they have dental insurance? Vision? What type of Rx program do they have?

While this may not be an important consideration for someone young and healthy, this could be a material financial change for families with young kids, those with pre-existing conditions or even an unlucky soul that suffers a horrendous accident right after switching jobs.

What can you do?

Before accepting your new position, get a copy of the plan documents. Go online to the new provider and do a cost comparison of services you use now or things you think could happen in the future. Simply saving $50 a month in premiums may results in thousands of out-of-pocket costs due to increased deductibles, co-pays or co-insurance that you weren’t expecting.


Do you know how much you spend every month on groceries? Do you know the average cost of a loaf of bread or gallon of milk? Expatistan does a pretty job of comparing prices between cities.

According to them, a 1 liter of milk will cost $0.97 in Orlando vs $1.21 in San Francisco. That’s a 20% difference.

On average, their website says that food costs will be 27% more expensive in San Francisco than Orlando. If your monthly food bill is $300, are you ready to start paying $381 instead? That’s almost $1,000 extra a year.

Commute Costs

Why is commuting so important? There are financial, emotional, and physical considerations when determining if you’re willing to drastically change your commute.


The biggest financial impacts to your bottom line:

  • Housing – What is the difference in housing costs between living close to your job, or having a longer commute and getting cheaper housing?
  • Gas – What is the cost per gallon of gas? How much will you spend if you commute increases from 1 mile to 5 miles? How about 20?
  • Automotive expenses – How much more will you spend on oil changes and car maintenance? If you’re driving in a big city do the odds of getting in an accident go up? Can you cover the deductible for vandalism or an accident if it happens?
  • Insurance costs – Different areas of the country have widely different insurance rates. Live near the coast in a hurricane zone? Live in tornado alley? Have a long commute or live in a big city with a higher accident rate? Expect to pay a much higher rate for your insurance.
  • Bus /train tickets – Is public transportation an option? How much more will it cost? Will you use it?
  • Parking – How much will it cost to park at your new office? Were you getting to park for free at your old job? Is there parking available at the new job or is it several blocks away?


I would argue the emotional toll of a terrible commute is a far worse fate than spending extra money on gas or parking.

  • Lost time – If you love driving, listening to the radio or a podcast, a large commute time might not be a big deal. However, calculate the extra time you will spend commuting in a way that’s meaningful. Let’s assume it’s an extra 30 minutes each way relative to your current commute. So one hour extra per work day. That’s roughly 20 hours per month. Over a year? That’s 240 extra hours. A typical work week is 40 hours. So you’ll be spending an extra six work weeks commuting. That hurts.
  • Stress – What happens when there’s an accident and you’re about to be late for that important presentation with the CEO? What about knowing you are late to pick up the kids from soccer practice and you picture little Susie standing in the rain waiting for you all alone? For me, commuting means higher blood pressure, anxiety, and the dread of knowing I’m stuck in a car without the opportunity to do anything else.

Is the extra commute really worth all that stress and anxiety?


  • Mental capacity – The mental toll commuting takes on your physical well being is astounding. Driving takes effort and focus. You need to pay attention to what everyone else is doing to keep yourself safe and away from an accident. That mental focus takes away from engery you could be spending on your family, your job or your passions.
  • Weight gain – Is your commute causing a downward trend in your health? Are you so hungry by the time you hop in the car to commute home that you grab an extra candy bar to munch on during the trip or worse, stop by the nearest fast food restaurant to grab dinner? Is sitting for an extra hour each way causing you to burn less calories or cause so much fatigue you can’t be bothered to hit the gym after work?


An often overlooked component of calculating the true cost of moving to another city or state is taxes. You’ll find that most “comparison” calculators have a convenient disclaimer that says “does not include taxes.” Well that just won’t do.

Federal Taxes

The change in federal taxes is likely to be less impactful than local city or state taxes but its something to think about.

Your biggest risk in federal taxes is that your new salary bumps you into a new tax bracket. You can use this tax withholding estimator on the IRS website to give it a try.

Personally, I wouldn’t worry too much about the change in federal taxes as you’ll more than make up for it with any salary increase you get. This is due to the progressive tax system the US has in place. It still may be nice to know what your estimated bill will be, but we have little control and few options to reduce our federal taxes.

State Income Taxes

Calculating your state tax income is key to avoiding a big loss in relative purchasing power. Why? Because the effective state income tax varies widely from state to state. It can range from $0 in a state (Florida among others) to paying over 10% of your salary, every year (California among others). Yikes, that’s a big difference.

Bonus: In Alaska, not only is the state income tax zero, every resident (including children) are eligible to receive a dividend from the “Permanent Fund Dividend Division,” just for living there full time.

Why should you care? That extra $30,000 should more than make up for it right? Let’s find out.

Old Salary: $50,000
New Offered Salary: $80,000
Current resident state: Florida
Effective Income State Tax: Zero
New resident State: California
Est. Income State Tax: 9.3% of 80,000 = $7,440.

Ouch. Now that $30,000 raise you thought you were getting? It just became: $22,560 from state income taxes alone.

Maybe you’re not living in a state with zero income tax. What if you’re living in Colorado with a maximum 5% state income tax rate. Well that $30,000 just went to $26,000. It’s still significant, however you look at it.

Other Taxes

If Federal and State Income Taxes aren’t enough, there a few others you should look into.

Food Taxes

Does your state tax food? Washington doesn’t, with some exceptions. Washington let’s you buy tax free food that isn’t prepared. That means your favorite McDonald’s hamburger will be taxed, but boxes of rice, raw meat, fresh fruit and veges, etc. won’t be.

Some states aren’t so kind and have decided to tax all food products, regardless of whether it’s prepared or not. A few examples? South Dakota and Alabama. Other states have more complex rules regarding food taxes. Even some cities in Washington charge a “sin tax” on things like candy, soda and alcohol.

Local sales/city taxes

You may get out of paying an income tax in places like Alaska, but you’re not likely to escape a city sales tax. Decide you want to live in Chicago or Long Beach? You’re looking at a 10.25% local sales tax. Ouch.

Besides the sales tax that most people are familiar with, what other types of local taxes exist?

  • Increased school district taxes
  • Infrastructure projects such as bridges or tunnels
  • A tax to pay for sick leave for all workers in a state (such as Washington)
  • Extra taxes on alcohol or gas prices to pay for road repair

The amount and types of taxes charged by local jurisdictions is only limited by imagination and local laws.

Property taxes

Another area you might not see the taxman coming? Property tax. States with high tax rates like New York or California might not surprise you, but what about Texas or Vermont? TX and VT are notirous for their high property taxes. Even different cities or neighborhoods in a given state might fluctuate.

The bottom line: Make sure you understand the impact of what your new tax bill will be when you move.

SALT Deduction

You might be thinking these taxes are no big deal as you can just take the deduction from your Federal Taxes. Before Donald Trump took over as President, you would have been correct. What happened?

Under the Tax Cuts and Job Act (TCJA) that President Trump enacted starting with the 2018 tax year, the deduction was cut back to $10,000 for all state and local income taxes paid.

For many of us, we’ll never hit that $10,000 number to deduct. What if you live in a really high income tax state such as California or New York. All of a sudden, the 9.3% income tax you’re paying on your $120K a year job ($11,160) plus the average 10.2% you’re paying on sales taxes for any goods purchased throughout the year, well you’re now capped at a $10K deduction.

Maybe that SALT deduction does matter.

Other expenses

What about other items? How about the average cost of electricity or the cost of cable/internet?

If you’re living in a mild climate right now and have no need to heat your house or use air conditioning, what happens if you move to Anchorage or Phoenix? Have you considered what the cost of your new electric bill will be? Have you considered what the cost to buy all new outfits will be? I hear mukluks are an absolute must in Alaska.

What can we do about this?

Ask for more money

Negotiating salaries can be tough, especially if you don’t have the experience the company is looking for. If you’ve run the numbers and determine you’re not getting the type of increase you think you deserve, you only have one chance to get it right.

Don’t be afraid to negotiate. You never know when a company will throw in a few extra thousand bucks.

Before going back to negotiate, arm yourself with information that will help sway the offer the company is willing to pay. How can you do that? Check out websites like glassdoor to find out what similar jobs are going for in the area you are relocating too.

Work out a flexible work arrangement

The corporate world is rapidly changing. Employers are becoming more flexible with work from home arrangements, casual dress and finding unique ways to keep their employees happy.

Attention future employers: you know what kind of perks I need. #unlimitedcheese

If you can’t afford to move to the new city your dream job is, what harm is there in asking to work remotely? Instead of living downtown San Francisco, maybe you live in Walnut creek and drop your living expenses to +10% over Orlando vs plus 25% and offer to commute to the office a few days a week.

Look for a different job in the place you live now

Can’t find a job that pays enough to make it worthwhile to relocate? It’s time to start looking in the place you live now. It might take longer to find a new position, or you may need to look in to a new field of work but it might be the best option.

Back to our example – should I take the job?

I examined my primary monthly expenses and calculated the minimum amount of additional money I would need to live in San Francisco. My comparison considers replacement of maintaining the same standard of living I have today. For example, if I live in a two-bedroom apartment in Seattle, I would price a similar two-bedroom in San Francisco.

ItemSan Francisco
Groceries +$42.00
State Income Tax+$620.00
Commuting Costs-$34.00
Total Monthly Cost+$4,173.00

The above expenses assumes a ball-park of what I think my additional monthly expenses would be if I lived in San Francisco vs Seattle. So how much extra would I need annually? $50,076after tax.

Wait a minute, you said you were only getting a $30K raise to move down there.

Yep, and that was before tax.

If I take the job, (assuming a 20% federal tax rate), I need to make an extra $62,595, just to break even.

Suddenly that $30,000 raise doesn’t seem so attractive. I would be losing money by taking the job.

But what if the new job gave me something else? Like a better work/life balance or exposure to my dream career?

When making money isn’t the only factor

Lest you walk away with the idea that only money matters when deciding whether to relocate for a job, there are many other factors at play.

Friends/ Family

Relocating to another state may give you the added benefit of moving closer to family and friends. If that’s the case, perhaps the extra expenses you will incur being closer to family outweighs the cost.

On the flip side, if you’re moving away from all your friends and family, is the extra money worth it? Will you have enough left over to come visit your loved ones as much as you’d like? Is the move temporary and you’re planning on coming back soon? Will your loved ones be willing or able to come visit you in your new home?

Advancement towards a life long goal

Taking a step back in pay or purchasing power may be 100% worth it if you’re chasing a dream.

For example, if you are dying to be an actor or an actress, if you don’t move to Hollywood are you really interested in that profession?

Have a dream to be a high powered hedge fund manager? It’s probably best to take the expense hit and move to NYC immediately.

Work/life balance

Unless you absolutely love your job and want to spend every waking minute of the day pursuing that work, I would wager a guess that work-life balance is important to you.

Will your new job maintain your same work-life balance that you enjoy at your $50K job per year? Or will that new $80K a year job require you to work nights and weekends and travel 3-weeks out of the month.

A higher salary doesn’t always mean a better quality of life, it just means a different type of life.

The bottom line

Before accepting that fancy new offer with an incredible sounding title and a great sounding raise, do the extra work to find out if it’s really worth it. Extra financial expenses, a loss of free time and spending your days at a job that makes you miserable isn’t worth it.

Have you relocated for a job? What do you wish you could have done differently?
