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Budget & Cost of Living

Suppose you receive a salary offer of $50,000.

  • Will this be enough to pay all of the bills, student loan, cover emergency expenses, and enable you to start a retirement account?
  • If you move from the Midwest, will $50,000 have as much buying power on the East or West Coasts? 

Before you can accept a job offer, you need to (1) create a budget and (2) determine if your cost of living may be higher or lower in a different geographic area.   

1. Create a annual budget.  If you have never created a budget before, it's fairly easy. Start with your actual monthly expenses. (You can make cost of living adjustments later.) Add projected future expenses e.g., student loan payments, insurance, or retirement savings.) Total the monthly expenses.  Multiply by 12. This gives you an estimate of your annual espenses for budgeting purposes. Example:

Item     Amount 
Rent & Utilities $
Groceries $
Transportation $
Insurance $
Clothing $
Student loan $
Retirement $
Monthly expenses $,$$$
Monthly expenses x 12 = Estimated Annual Expenses $$,$$$

Tip: You can find free budget templates in Excel. See our buget and loans page for more resources.

2. Determine the Cost-of Living in a different area. If you are staying in the US, the Census Bureau provides data on cost of living and other facts about states and counties. You should also analyze available data from the local Chamber of Commerce, city government, or Convention and Visitors Bureau.

You should use more than one source of information to estimate your expenses. Probably the most helpful tool you can use will be an online Cost of Living Calculator, such as this one offered by CNN Money. By entering your current city, amount you wish to make, and the city where you hope to live, you will get a comparable salary figure for that other city. Additionally, you also receive a breakdown of basic living expenses for that area. At a glance, you will know if your living expenses will be more, less, or about the same as where you currently reside.

Final Step.  Make adjustments to your projected annual budget, based on the cost of living calculation you made. If the costs will be lower, consider adding more to your savings line, or make an additional student loan payment. If your costs will be higher, then you may have to cut back on clothing or entertainment, or seek a higher salary offer.

Keep in mind that an employer's salary offer has nothing to do with your budget and expenses. Their offer will be based on the potential they see in you and how much they have budgeted for the position. If the fair market value for the position is far below your estimated expenses, salary negotiation may be a challenge. You may need to seek a position or company that pays more for a comparable job title.