Cost of Living And Your First Job
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Money in the 20s is a blog about personal finance, investing, the economy and business school. |
Today, more than half of all new college graduates – 54 percent, to be exact – are either unemployed or underemployed; it’s a far different world these new grads are entering as they pursue their first job than I did, even though only a few years separate their journey from my own. When I got my master’s degree in journalism, I didn’t care where I landed my first job – just the fact that I got a job was enough for me. So I sent applications to TV stations across the country, hoping to land whatever I could wherever I could. That meant I sent job applications to far flung places like Eugene, Oregon, El Paso, Texas, and Fort Myers, Florida.
I still firmly believe that as a new jobseeker, you’ve got to be willing to take risks and make moves in order to land that first job. Being rooted to one city or state severely limits the number of job opportunities available to you. For example, right now they need to hire literally hundreds of engineers to help efforts to mine for shale gas; yet, they can’t seem to attract enough qualified candidates for these high-paying, high-skill jobs.
I think what scares a lot of people about moving to a far-flung location for their first job is the unknown – particularly, the economic unknown. I witnessed that firsthand, when I spent a few days in our nation’s capital last month, and saw just how different the cost of living is there.
Cost of Living Index
Want to know how your town compares to the rest of America when it comes to cost of living? Look no further than the Census Bureau’s cost of living index. The most recent numbers (from 2010) show the story. The index is a composite of different factors, like housing, groceries, and utilities. Each factor is based on 100%, representing the national average. Any location with a cost of living index over 100% has a higher cost of living compared to the national average; locations with an index under 100% have lower cost of livings. For example, here are five locations with a high cost of living:
- Boston, MA – composite index of 132%
- Fairbanks, AK – composite index of 137%
- Honolulu, HI – composite index of 165%
- Los Angeles, CA – composite index of 136%
- New York City, NY – composite index of 216%
Of course, there are plenty of American cities that have a cost of living composite index below the national average:
- Harlingen, TX – composite index of 82%
- Indianapolis, IN – composite index of 87%
- Louisville, KY – composite index of 87%
- Muskogee, OK – composite index of 86%
- Pueblo, CO – composite index of 85%
Wondering how that would affect your bottom line? Say you made $50,000 working in Harlingen, Texas – the American city with the lowest cost of living on this list. You’d have to make almost $132,000 to get the same bang for your buck living in New York City, which has the highest cost of living in the United States.
Head-to-Head Comparison
After college, I moved to the south, while one of my best friends headed to Washington, DC. It wasn’t until I visited her adopted hometown for her recent wedding that I realized how much more expensive absolutely everything was there compared to where I currently live. For example:
Gas –> In DC, it cost me $3.75 a gallon to fill my tank; by comparison, the prices back home that same weekend were almost a quarter cheaper per gallon
Hotel –> Staying at one of the poshest hotels in my hometown would cost me maybe $150 a night; in DC, I paid $199 a night – and that was at the discounted “wedding party” block rate
Starbucks –> Even my morning latte cost more in DC. I paid $5.29 (plus tax) for my venti chai tea latte in our nation’s capital; the same drink only costs me $4.39 (plus tax) back home
Of course, I shouldn’t be surprised at the cost of living differences. Washington, DC, has a composite cost of living index of 140%; by comparison, the southern city I currently call home has a composite index of 89%. Of the six individual elements that make up the composite number, my area only had a higher cost of living than DC when it came to health care – and then only nominally so.
What This Means For Your First Job
It’s important to understand cost of living differences when applying for your first job (and really, any job that requires a major move). Say I currently make $40,000 a year, but got an offer in DC for a job that paid $50,000. Is that a good deal for me?
On the surface, it looks like a great career move. After all, I’d be making $10,000 more a year – think of all the things you could do with an extra ten grand? Get out of debt, add to your emergency fund, invest in your retirement accounts. But if you did the math, you’d actually see that I’d have to be paid nearly $63,000 annually in DC for those dollars to stretch as far as a mere $40,000 did in my current city.
Of course, there are a lot of factors that go in to applying for and accepting a job. My point here is to illustrate that just because a job offer in a big city may have an impressive salary compared to offers from smaller cities doesn’t make it the better option. And since our current economic climate is going to make moving for work more common than in the past, understanding how cities compare when it comes to cost of living is crucial to understanding what your money’s really worth.
Reader, what’s the cost of living like where you live?
