If you live in a one-bedroom apartment in New York City, you might have fantasies of moving to a five-bedroom, three-bathroom house in Kentucky on four acres of land. Would a move like this actually bring you the quality of life improvement you're expecting? (For related reading, see The Most Affordable Cities To Live In.)

If you're weighing such a decision, here are the factors you need to look at to determine whether your move will pay off.

TUTORIAL: Budgeting Basics

Cost of Living
You probably have a general idea of which parts of the country are more expensive than others and why, but when you're seriously considering a move, you want to know the specifics. How does one city's cost of living compare to another's overall? Which expenses make that city more or less expensive?

Cost of living calculators make it easy to see how the overall expense of living in one city compares to another. They take into account the costs of housing, food, utilities, transportation and healthcare. Just input the city where you currently live and the city you want to move to.

For example, if you used Best Places' Cost of Living calculator, you would get results like these:
Austin, Texas is 17% more expensive than Houston, but housing is about 50% more expensive in Austin, Texas. Houston's cost of living is 88% of the national average, while Austin's is 102% of the national average.

Louisville, Ky. is 39% cheaper overall than San Diego, mainly because housing is 72% cheaper in the former. San Diego's cost of living is 139% of the national average, while Louisville's is 85%. (For additional reading, see What Will The Cost Of Living Be In 2012?)

Housing Costs
Since housing costs are usually a defining factor in a city's overall cost of living, you'll want to look at these separately from overall cost of living figures. One good source of this data is the National Association of Realtors' Metropolitan Median Price report. Published quarterly, this data is available for free online in the form of an easy-to-read chart. It shows the median sales price of existing single-family homes in 160 U.S. cities. The most recent report, from the third quarter of 2011, shows that Detroit has the least expensive homes in the country, at 66.5% of the national median, while Honolulu has the most expensive homes in the country, at a whopping 600% of the national median.

Income and Sales Taxes
Since states are free to set their own tax rates, moving will almost always affect your liability for income and sales taxes. Let's look at how your tax liability could change if you moved. (Check out, how to Cut Your Tax Bill.)

Income Tax
Some U.S. states with high costs of living saw below-average population increases in the most recent census, while five states with lower costs of living saw above-average increases. The following table shows that in most cases, the states that saw the biggest population increases have lower state income tax rates than the states that saw the smallest population increases. Unless taxpayers moved from Rhode Island or Massachusetts to Idaho, they would see a decrease in their personal income tax rates.

Highest Income Tax Bracket for 2011
Below-average population increase states

New York – 8.97%

California – 9.3%

New Jersey – 8.97%

Rhode Island – 5.99%

Massachusetts – 5.3% (flat rate)

Above-average population increase states

Nevada – no state income tax

Arizona – 4.54%

Texas – no state income tax

Utah – 5.0% (flat rate)

Idaho – 7.8%

Along with Nevada and Texas, seven other states also have no income tax. They are Alaska, Washington, Wyoming, South Dakota, Tennessee, Florida and New Hampshire.

Sales Tax
When it comes to sales tax rates, however, the differences between these two sets of states aren't meaningful. Sales tax rates in most states ranged from 4% to 7% in 2011. Only Alaska, Delaware, Montana, New Hampshire and Oregon have no sales tax. However, the impact of income tax on your finances will probably be much more significant than the impact of sales taxes on your income.

It doesn't matter if one place is less expensive to live than another if you can't get a job there. How do the small population increase states compare to the large population increase states on the job front? As of Nov. 2011, the five states with the lowest unemployment rates were North Dakota, Nebraska, South Dakota, New Hampshire and Vermont. Their unemployment rates ranged from 3.4% to 5.3%. The five states with the highest unemployment rates were North Carolina, Mississippi, Rhode Island, California and Nevada, with unemployment rates ranging from 10% to 13%. (To learn more, read The Unemployment Rate: Get Real.)

Of course, general unemployment rates don't tell you much about the prospects for your particular field. It's important to look beyond the broad figures to find out. For example, how plentiful are jobs in banking, construction or whatever your area of expertise is? You'll also want to consider whether you'll experience a wage or salary decrease as a result of moving to a lower-cost state, and whether this decrease is in proportion with the potential decrease in your living expenses. If your job pays $100,000 in New York City and $75,000 in Atlanta, but the cost of living in Atlanta is 50% of the cost of living in New York City, your income should go a lot further even though your paycheck will be smaller.

The Bottom Line
If you're considering a move to make yourself more financially comfortable, don't just assume that one area will be more affordable than where you live now. Do the research in advance to make sure your move will actually pay off and give you the boost in living standards that you're looking for. (For related reading, see Standard Of Living Vs. Quality Of Life.)

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