Your phone rings with an unknown number and a 202 area code, and you quickly think to yourself…do I know anyone in Washington, D.C.?
After a few minutes indulging the stranger on the other end of the line, the phone call concludes, and you turn to your partner and say: I just got offered a job in Washington!
The manager of a new department at a reputable firm in the city was impressed with your skill-set and experience (LinkedIn is a crazy thing!), and felt you would be the perfect fit to join the team. Your initial thoughts are that the role seems like a tremendous opportunity and that it is right in your wheelhouse. A great offer monetarily, and plenty of room for upward mobility! Tremendous!
Before you call up your girlfriends to tell them the exciting news, you pause and think. Isn’t D.C. expensive?
Hmmmm.
Cost of Living
The cost of living in your given area (housing, food, taxes, healthcare) will determine how much of the pie you get to keep. Yes, you always pay yourself first, and sound financial decision making plays a critical role in wealth accumulation, but if basic necessities come at a premium in your town and your income isn’t high comparatively, it will prevent your balance sheet from growing.
Tampa to D.C
You currently live in Tampa, Florida, and, while not the cheapest place to rent or buy a house, there is no state income tax, and the cost of goods and services is pretty low.
Now, let’s say you currently have a pre-tax income of $50,000. The D.C. job offer includes a salary of $75,000 and, right off the bat, a $25,000 bump surely seems like an upgrade!
Well, according to the BestPlaces cost of living calculator, a $50,000 salary in Tampa would need to become $79,991 to maintain the same standard of living. On the NerdWallet calculator, they put that number at $89,879! Crazy, right?
Each calculator factors in health care, median rent/housing, food and transportation, with housing being, by far, the largest reason for the cost increase of moving from Tampa to Washington, D.C.
There are of course many factors when conducting such a comparison and every situation will be unique in its own way, but a fundamental understanding of the relative value of a dollar in a given location will be your greatest asset as you go to evaluate the financial implications of a decision to move.
Perhaps this is your dream job. Maybe your partner has family near the city, and you have always talked about moving closer to them. Whatever the case may be, study the cost of living so that you understand the financials of the decision when the time comes.