Relocating for a Lower Cost of Living? Make Sure Your Move Saves You Money

Bid farewell to hidden expenses. Here's how to plan ahead and make sure your cost of living comparison is accurate.

It's true that most major cities have the highest concentration of jobs, but they also have ever-skyrocketing rent. But with remote work becoming normalized, moving somewhere more affordable has become easier and can come with serious savings.

I recently relocated from Seattle to Montreal for my relationship, but after experiencing the much lower cost of living (COL) in Canada, I found myself wondering, why didn't I do this sooner? This is a trend we'll likely continue to see across the U.S. and world. That said, relocating because of cost of living comparison is not all sunshine and roses; you'll want to keep in mind a few things during your choice to relocate to ensure it maximizes both your financial savings and your emotional well-being.

Research taxes

Tax differences across state lines (and international borders) can easily be overlooked during a move, but shouldn't be—since they can seriously affect your bank account.

Income Tax

Did you know some states don't have a state income tax? (However, these states do not exempt you from the federal tax.) Eight states are state-tax-free, and New Hampshire does not tax earned wages. For those with a state income tax, rates vary.

Some states, such as these nine, have a flat rate, while others have brackets. However, this doesn't necessarily mean that moving to a no-income tax or "flat rate" state is the best move financially. Often, if there isn't an income tax, there are other taxes to make up for that, which can affect your bottom line.

Timing is also important when it comes to filing your taxes; you may end up needing to pay in two states for the first year you move. If you decamped to Vermont, but are keeping your New York-based job, you'll likely still pay income tax in the latter. Multiple factors determine where you are responsible for paying taxes; make sure to discuss it with an accountant if you're still not sure.

Sales tax

In my home state of Washington, there isn't a state income tax, but there is a sales tax near 9 percent in the most populous counties. Whereas just south in Oregon, there is no sales tax, but there is a state income tax (which varies based on your income). If you already know where you'll be moving, research the tax policies. If you're considering a few states or places within states, it's worth researching their taxes on the state, county, and city levels to help you understand what it means for your wallet.

Additional taxes

Often referred to as "excise taxes," these are when counties and cities impose additional taxes for funding specific needs. For example, Portland requires you to pay an additional income tax for public transport. Many cities and counties (such as Seattle and King County in Washington) add additional sales tax.

Taxes outside the U.S.

If you're considering an international move, keep in mind that if you spend a certain amount of time outside the U.S., you likely qualify to file as "a U.S. citizen abroad." This affects how much you pay and often gives you an automatic extension. Check with an accountant familiar with expat taxes to be absolutely sure.

Remember: Even if rent is dirt cheap, other things might be more expensive

I've been very impressed with rent prices in Montreal—especially for such a large, internationally renowned city. Sure, there are some expensive places (as anywhere), but it doesn't seem to suck all your budget like many major cities in the United States do (like New York, Los Angeles, Chicago, and San Francisco, for instance).

However, rent is not the only thing you should consider when looking for a lower cost of living. Other bills and amenities can vary greatly by state/province/county/city. Google the average price for each and your chosen location(s) for what to expect. And make sure to consider your lifestyle: Do you have a hobby or exercise routine you can't live without? Will you need childcare, specific medical care, or vegan-friendly restaurants?

Consider purchasing a vehicle

If you've spent most of your professional life in urban areas with good public transportation options, you probably haven't needed a car. In fact, in many cities (New York is the obvious example), having a car is often more pain—and more money—than it's worth.

However, in other, smaller cities (or ones without easily accessible public transport, such as Los Angeles or Nashville), a car can feel like a necessity. And buying or leasing a car will, of course, have an effect on your overall cost of living. Beyond just acquiring the vehicle, you'll want to factor in the costs of insurance, gas, parking, and maintenance.

Internationally, the need for transportation also varies; major cities from London to Mexico City or Tokyo are much like New York in that a car can be a hindrance. Most of Canada, however, is similar to the States in that a car is usually nice to have. We've gotten by in Montreal without one so far; however, leaving the city for outdoor activities often requires car rental, so we may look into buying one eventually.

Consider where you're moving and your lifestyle when deciding whether to acquire a vehicle: Do you want to be in nature every weekend like I do? You can try the first month or so without, but if you quickly realize a car would be a huge help, it's best to have already researched the cost so you aren't slapped in the face by it post-move.

Factor in the cost of travel home

When relocating, it's easy to focus on the positives like lower cost of living, but if you're originally from the higher-COL area you're fleeing, then chances are you've got family there as well and will want to budget for holiday trips home.

Depending on how far away you're moving, this could cost you a mere tank of gas—or a hefty sum for multiple plane tickets. Of course, you'll also need to factor in things such as accommodation when returning home (unless you plan to stay with friends or family) and a car rental or other transportation. You may need to adjust just how frequently you plan to travel home.

If you envisioned visits home every other month, you may realize twice a year is more practical. Either way, it's best to plan and be emotionally and financially prepared. You can also adjust plans to make your travels home more budget-friendly. Consider traveling outside of major holidays and school breaks if possible, and maybe consider Amtrak instead of a flight, or opt for less frequent but longer visits.

Evaluate the emotional cost

Ah yes, the downside of not being able to travel home as frequently as you—or your family—would like. You might feel guilty for moving so far from home. You may even feel sheepish that you can now afford a house while those back home are paying the same in rent for a studio. But don't let it consume you.

If your family tries to guilt-trip you into moving back, remind yourself why you moved in the first place—not just for a lower cost of living, but also for a higher quality of life. Articulate this to loved ones you are close with, and if you're comfortable with it, assure them they can visit (now that you can afford that extra space). And remind them that you didn't come to this decision lightly.

Then again, it's worth keeping in mind that you can always move back if relocating doesn't work out. Either way, there's never been a better time to try moving for an improved cost of living—and it may very well save you a very nice chunk of change.

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