A career opportunity arises in a new city.
Met with a mix of excitement and anxiety, the first natural reaction is to imagine living in this new place. The new compensation package is larger than your current role, immediately driving assumptions about the lifestyle possibilities, opportunities for increased generosity, and new savings goals you will finally be able to meet by taking this new role.
You begin to think that taking the job is a no-brainer. Is it?
A new city means a new cost of living. Sometimes this works to your benefit and other times to your detriment. An increased cost of living could swallow the higher salary.
So before accepting the role, consider these 3 questions.
- How much more expensive are regularly budgeted items? Sticker shock isn’t just for large items. That local sandwich shop sub now costs twice as much, a single movie ticket at $20 causes you to shake your head with surprise, and the gas for your car is now 30% more than before. These are common examples of metropolitan inflation. Moving to this new city may come with a much higher daily cost of living.
- How much more does a comparable house or apartment cost? Let’s assume your current city offers the opportunity for homeownership. Owning a home now, even with significant equity, does not guarantee the ability to buy in the new city. It isn’t just NYC, Washington D.C., & San Francisco either. Many metropolitan areas are now pricing out homeowners. Being forced into a long-term rental strategy can have a major impact on wealth building. In 2017, homeowners are 38 times wealthier than renters. 38 times! This must be a crucial consideration as you evaluate the job offer.
- How much will my tax bill increase? The federal marginal tax rates are indiscriminate on the cost of living. A higher wage will lead to higher taxes all other things equal. The amount you must earn to achieve the same buying power could be much higher in the new city, and to make things worse, your wage may place you in higher tax brackets and disqualify you from substantial federal tax credits.
A new city means new expenditures. These costs can be lower or higher.
Getting a better job offer in a new city may appear on the surface like a step forward financially, but make sure to answer these questions to ensure that you are taking the financial steps forward that you expect when you sign on the dotted line for that new job in that new city.