Have you just been offered a new job or promotion that involves relocating? Congratulations! Depending on your employer, position and salary level, you may be offered a relocation package to help cover costs associated with moving – in the form of a lump sum or a more defined benefits package. Some relocation packages are minimal, covering only one aspect (such as a moving truck) or a small percentage of your overall moving costs. Others are comprehensive, paying for everything from a full-service moving company to childcare assistance, a settling-in allowance, and a relocation mortgage or help with the down payment on your new house.

Regardless of what is considered the “standard” relocation package at a company, you may be able to negotiate for better terms that fit your situation and needs. While there are many factors to address – such as the distance of the move, how many family members will be joining you and whether you’ll need assistance selling your existing house – it’s also important to consider the cost of living in your new area before accepting the salary and relocation package. Before you say "yes," research the new location carefully, especially if you currently live in a less pricey region.

Cost of Living

Cost of living is the amount of money it takes to sustain a certain level of living, including basic expenses for goods and services such as housing, transportation, food, clothing and household goods. Cost of living is frequently used to compare how expensive it is to live in one city versus another. According to Mercer’s 2014 Cost of Living City Rankings, a list that compares the cost of living in 211 cities worldwide, New York is the most expensive city in the U.S.(#16 in the world) – followed by Los Angeles; San Francisco; White Plains, N.Y.; Chicago; Washington, D.C.; Honolulu; Miami; and Boston (the five most expensive cities in the world are Luanda, Angola; N’Djamena, Chad; Hong Kong; Singapore; and Zurich, Switzerland).

Using online cost-of-living calculators can help you see how far your salary will go in another city. Assume you live in Cleveland, Ohio, and you’ve been offered a job in Manhattan, New York City. Using CNN's calculator: If you currently make $75,000 a year in Cleveland, you would need a salary of $165,049 to keep up with the cost of living in Manhattan, where you would pay more for groceries (37%), housing (373%), utilities (40%), transportation (24%) and healthcare (5%). If your new job was in Los Angeles, you would need a salary of $97,817 to compensate for increases in housing (109%), utilities (13%), transportation (8%) and healthcare (7%). Groceries would cost the same. If you search the Internet for “cost of living calculators” you'll find that the numbers change depending on which calculator you use. You may want to try more than one.

While cost-of-living calculators can help you compare basic costs, don't forget to consider other factors that might apply to your situation, such as school fees (e.g., do you plan private school for your children), day care, taxes, leisure and entertainment, and the employment outlook for your spouse if he or she will be working outside the home.

Use your calculations to determine whether you can at least match your current standard of living with your new salary – and what sort of relocation benefits can help beyond the initial cost of the move.

Cost-of-Living Stipend

Some relocation packages include a cost-of-living stipend (or cost-of-living adjustment) to help cover increased expenses. Your company may offer a one-time lump-sum relocation bonus or pay an allowance for a specific period of time (after which, theoretically, your salary will have increased to accommodate the new location). For example, if you are a Clevelander and you take the job in Los Angeles, your employer might offer a monthly stipend of $1,500 for three years to help offset the increased cost of living.

Higher Salary

While some companies provide a cost-of-living stipend, others may offer a higher salary to compensate for increased living expenses. If you accept the job in Los Angeles, for example, you may be able to negotiate for a higher salary based on the cost-of-living increase. In our example, it would take a salary that is closer to $97,817 just to match your current salary; a raise would require more. In addition to (or in place of) a pay increase, your employer may offer a more comprehensive benefits package that could include more vacation days, better health coverage, stock options, education reimbursement, performance bonuses and a signing bonus.

The Bottom Line

Moving is expensive no matter where you go. The number to watch even more carefully is what costs look like after you relocate. A smaller salary may be sufficient – or even lavish – if you're going to an area with a lower cost of living. If your move takes you to an expensive city, however, you’re probably going to need a better benefits and salary package. Your employer may sweeten a relocation package with a cost-of-living stipend or offer a larger salary to compensate for a higher cost of living.

In some cases, the benefits and/or salary package you are offered may not adequately cover the higher housing, transportation, food, healthcare and other costs in a new area. In this situation, you may have to weigh the longer-term benefits of making the move, asking yourself questions such as:

  • Can I/my family get by financially until I am promoted or make more money?

  • What type of job growth can I expect from this new position? Is the career benefit later worth the sacrifice now?

  • Can my spouse find a job that will help compensate for the higher cost of living?

  • Will my quality of life improve enough for me/us to be happy with a lower standard of living and less buying power?

The more a company needs your particular skill set, the better position you are in to negotiate. If you were recruited, have your recruiter take the lead. If you need to negotiate on your own, focus on what you can bring to the company. Instead of declaring, “I should get more money," try saying, “This salary/benefits package will allow me to work longer hours and be more productive.” To learn more, read 5 Things To Consider Before Relocating For Work.

Related Articles
  1. Personal Finance

    How Inflation Affects Your Cost of Living

    How will your wallet be impacted by inflation?
  2. Personal Finance

    5 Things To Consider Before Relocating For Work

    Upfront planning and analysis can help keep you from jumping into a situation that can hurt your wallet or your future career track.
  3. Home & Auto

    How Moving Can Affect Your Finances

    Here are the factors you need to look at to determine whether moving to a new area will leave you with more money on a regular basis.
  4. Taxes

    How To Write Off Moving Expenses

    Moving can be challenging, but the good thing is many things are tax-deductible when you move, including travel-related and household costs.
  5. Budgeting

    Is Living in Europe Cheaper than in America?

    Learn how living in Europe has financial advantages over living in the United States. Discover the benefits to take advantage of when it makes financial sense.
  6. Budgeting

    Lost Your Job? 6 Things to Do Immediately

    If you’ve lost your job, shoring up your finances as best you can will make it easier to get back on your feet again when that next position rolls around.
  7. Professionals

    Is A Stockbroker Career For You?

    Becoming a stockbroker requires a broad skill set and the willingness to put in long hours. But the rewards can be enormous.
  8. Professionals

    Broker Or Trader: Which Career Is Right For You?

    Both brokers and traders buy and sell securities, but there are some subtle differences between the two careers.
  9. Entrepreneurship

    10 Characteristics Of Successful Entrepreneurs

    Do you have the qualities of a successful entrepreneur? Those who do tend to share these 10 traits.
  10. Personal Finance

    Don't Sign That Non-Compete Without Reading This

    Non-compete contracts aren't just for high-level execs these days. How to protect yourself if your employer – or prospective employer – insists you sign one.
  1. How does a cost-of-living adjustment (COLA) affect my salary?

    Some companies build salary adjustments into their compensation structures to offset the effects of inflation on their employees. ... Read Full Answer >>
  2. Is Social Security inflation-protected?

    Social Security benefits are inflation-protected. Social Security was created in 1935, and taxes were collected for the first ... Read Full Answer >>
  3. Why isn't the cost-of-living adjustment mandatory?

    A cost-of-living adjustment, or COLA, is a purchasing power protection mechanism provided to all monthly Social Security ... Read Full Answer >>
  4. Does a financial advisor need an MBA?

    Obtaining a license as a financial adviser does not require an Master's of Business Administration (MBA) degree. The Certified ... Read Full Answer >>
  5. Are Social Security benefits adjusted for inflation?

    Social Security benefits are adjusted for inflation. This adjustment is known as the cost of living adjustment (COLA). For ... Read Full Answer >>
  6. How can an investment banker switch to a career in corporate finance?

    It's pretty easy for an investment banker to switch to a career in corporate finance. The career skills are easily transferable, ... Read Full Answer >>
Trading Center