While many college students know exactly what kind of career they want and where they want to live after they graduate, many face a number of dilemmas about life after graduation. Not least of these dilemmas is understanding how cost of living can affect your ability to live comfortably, repay your student loans, and plan for the future.
What exactly is meant by the phrase “Cost of Living”? Well, simply put, it’s how much it costs to pay for the basic life necessities, and it can vary dramatically depending on geographic location. I think everyone understands that rents are going to be higher in densely populated cities where apartments are at a premium, but it’s a bit hard to recognize that in most cases, it’s not just rent that costs more—it’s food, transportation, entertainment, services, and everything that you need not just to survive, but to enjoy life. And you also need to consider that taxes—state and local income and sales taxes—vary dramatically as well.
The economics behind it are too complex to discuss here. However, what is relevant to our discussion is the need to make sure you are aware of what it would cost to live in the city where you are considering employment. A salary of $60,000 a year may be fine if the job is in Greenville, North Carolina, but if the job is in Chicago, you may have difficulty making ends meet unless you’re making more than $70,000.
There are some excellent resources online that can help you calculate how much you need to earn to live comfortably in any given area, and you can find most of them with a simple Internet search on “cost of living.” I’m going to describe three sites that I think could be useful in your efforts to determine what salary you would need in a particular location.
The Massachusetts Institute of Technology offers a Living Wage Calculator where you can look at recent statistics by city, county, or state. The site suggests hourly wages, a variety of expenses (such as food, housing, transportation), and typical wages in different occupational areas. This one could be the most useful because it doesn’t assume you’re already working. Most of the other sites I have investigated ask you to enter your current salary and then calculate the salary you would need in another city to have a comparable life style.
Sperling’s Best Places is one of those sites that allow you to compare the cost of living in two cities. So, for example, if you know how much you would need to earn to live comfortably in the city where you currently reside, you could see how much more (or less) you would need in a different city. The resulting data also shows how each of those cities compares to the national average cost of living in the major areas of food, housing, utilities, transportation, and health. This is a good site for getting a quick overview comparison—so if you know what you need in one place (for example, if you have a friend who graduated last year and who will tell you how they’re faring on their salary in their city), you can get enough information to help you determine if a salary offer is reasonable.
BankRate.com provides the most detailed comparison, telling you now only what you would need to earn in the comparison city to maintain the lifestyle of the current city, but providing information about the cost of a wide variety of typical expenses—everything from apartments to potato chips, bowling to toothpaste, newspapers to jeans. This site will give you a good idea of the cost of many specific items or services that are important to you. But, again, it helps if you have a salary in mind in a particular city to use as a reasonable starting point.