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How to Compare Costs of Living

Salaries are important, but they are not the complete picture of a job offer. In an expensive city such as Washington, D.C., where food, transportation, and housing costs are high, your salary won't go as far as it would in a less costly location.

That’s why, in addition to evaluating the job’s benefits and employee perks, you should be sure to consider the cost of living in the city where you'll work.

Do Your Research

You can see just how far your salary will go in a particular area of the country using a cost of living calculator, like this one from Bankrate.com.

Investigate how much you’ll pay on average for each of your essential expenses, such as housing, food, transportation, and sales tax. Once you have an idea of those expenses, you can estimate your prospective budget, using your approximate monthly after-tax take-home pay.

Evaluate the Job Offers

Let’s say you receive two job offers; both pay a starting salary of $35,000. One job is in Bloomington, Ind., and the other is in Washington, D.C.

Groceries, housing, and utilities all cost more in Washington, D.C., so your $35,000 salary would go a whole lot further in Bloomington. To have a comparable standard of living in Washington, D.C., you’d need to be making about $19,000 more per year.

The 2013 average cost of rent in Bloomington, Ind., was $818.74, compared to the $1,851.94 cost in D.C. That’s a difference of $1,033.20 every month! In Bloomington, you could buy a dozen eggs for $1.91 in 2013, but could expect to pay $2.36 in D.C. Your money is going to go a lot further in Bloomington compared to Washington, D.C.

Before you accept a job—or even apply for one—compare salary and cost-of-living expenses in areas of the country where you would like to live and work. It is important to understand how far your salary will go where you live.

[Any reference to a specific company, commercial product, process, or service does not constitute or imply an endorsement or recommendation by CashCourse or the National Endowment for Financial Education. These courses and related resources may be used only for nonprofit, noncommercial educational purposes. CashCourse makes every effort to keep the information in these courses current, but, over time, new developments as well as legislative and regulatory changes may date this material. If you discover inaccurate information, please contact us.]

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