Financial Questions to Ask Yourself if You’re Thinking of Relocating
Wouldn’t it be a dream come true to be away living in some remote small-town while experiencing a different part of the world every few months? I work from home full time. And to be honest, everything from international travel to simply moving to a larger city has crossed my mind. If we didn’t have kids, I think I would definitely give the digital nomad life a go.
A couple of days ago, my neighbor moved to Turkey for a two-year stint. And while I bet the job offer was extremely enticing to lure him to go there, I wonder what I would do if I was given the opportunity. For starters, the first question I would try to figure out was:
What is the Immediate Impact on Income?
Obviously, the headline salary number needs to be higher than my current income. However, we’ll also have to factor in insurance and other benefits. Will those be paid for by his employer? Could health insurance be even more expensive than what we are paying in the states?
The prospective job may pay a higher salary but require payroll deductions for insurance or have fewer other perks. Secondly, my wife doesn’t work so there’s no impact on her income but many families are dual-income families. If one person relocates, how will that affect the second income? Families will need to consider how long it will take for the second income to get back up to speed. In the meantime, would the family be able to live on one income for a few months at the very least?
What is the Cost of Housing?
Income and benefits are only part of the picture though when considering a job that requires moving. My neighbor had to move to a completely different country. How much is housing going to cost? My neighbor is keeping his house and renting it out. He didn’t say but there’s a chance his company is renting an apartment for him to stay in free of charge. That’s what one of my friends was able to negotiate.
He’s working in Japan now and has been living rent-free for the past six years. The rent he’s saved is already enough for a down payment on a house and he’s continuing to save every month.
On the other hand, many people may need to pay more when they relocate. This is especially true if you are moving from the suburbs to the city, where rents are much higher. Before you move, make sure you understand the housing situation because that can take a huge chunk out of any budget.
What Is The Difference in the Cost of Living?
Most people who aren’t local usually think that the cost of living in other countries will be higher than it is here. But that’s probably not true. I live in Southern California and few places charge a higher price than shops around here, especially now that all the restaurants in the area decided to increase their prices 20% to 30% in the past few months.
The silver lining of high cost everywhere here is that we don’t really have to worry too much about spending even more when we move somewhere else. For the rest of the world, they really need to figure out whether they will have to pay more to live at the new location. Factor in prices, but also think about transportation costs. After all, you save a ton of money if you relocate to a city and don’t need to pay for a car.
How Much Are Income Taxes?
You likely know that taxes can make a big difference but you may not know just how much of a difference it can make. If you are relocating to another state, then you just have to worry about state taxes.
The issue becomes more complicated if you are moving to another country. That’s because different countries have different tax treaties that you may be able to take advantage of. Before you move, you absolutely need to research all the specifics and make sure you understand what you are getting yourself into. The US taxes worldwide income but there’s a pretty generous tax-free amount you can claim each year. If your marginal tax rate ends up being much less than during your working career while you were in the States, then perhaps you can even make Roth conversions for a few years you are aboard. Don’t miss this opportunity!
What About Property Taxes?
I throw in property taxes in here because it’s such a big amount each year. You likely won’t get a place if you are just working in a remote country for a couple of years but you may want to buy a place if you are planning to relocate to another state.
Don’t just look at the housing price and think you have a good handle on the cost either. Tax rates differ greatly from place to place. California has high home prices but Prop 13 limits tax increases to at most 2% a year and the tax rates are roughly 1% of the home value. Connecticut, on the other hand, has much lower home prices but it’s not unheard of to pay more than double the rate Californians pay.
How Different Is Life at the New Location?
And speaking of Connecticut, the life there is very different than living along the coast. There’s the weather, but it’s much more than that. If you are looking at moving, you definitely want to think about what you’ll be doing every day and then use that as a basis to figure out how much the new lifestyle will cost.
Are you going to save? Are you going to spend more? Is the difference in cost worth relocating to a brand new place for you?
Can You Get a Job Before You Relocate?
My friend gets free rent as long as he works in Japan. My neighbor probably got a good arrangement too. When my sister moved to Hong Kong to work, her company paid for moving expenses and subsidized her rent for years.
It’s pretty common for companies to help pay for relocation expenses at the very least if they hire you before you move. That’s why it’s much better if you can find a new job at the new location if you are thinking of relocating there. If at all possible, look for work before you go instead of just going there and assume everything will work out.
How Much Will It Cost You to Move and Travel Back to See Family? Moving to a different country will probably mean that you’ll need to buy everything again. Moving across the country, on the other hand, would require hiring a moving van or hauling everything yourself. Alternately, you might choose to place everything in storage while you check the area out.
Don’t forget about traveling costs once you moved and settled down as well. The further away a job takes you from your family, the more expensive it becomes to travel for holidays and special occasions. Nowadays, you also have to worry about quarantines and the need to be paying for a hotel room for a few days if you are traveling to different countries. I had to quarantine at a hotel for 14 nights last year when I went back for my dad’s funeral. Let me just say that costs can get pretty high when you are talking about 14 nights of stay.
I am jealous of my neighbor’s adventure but I’m not as brave as he is. He even took his teenage girl and wife with him for the job opportunity. I bet he thought the whole thing through and I hope he has a great time there.
These are a few of the important financial questions we will need to answer as we consider the possibility of relocating to a new place. Being prepared for the financial impact will allow more freedom to consider all the other aspects and help us make an informed decision.
Tagged as: Career, Money Tips