1. Do you know the cost of living in your new destination?
Regardless of where you are moving, it’s important to be realistic about the cost of living there. Your biggest expense will probably be rent, and some suggest that rent should be no more than 25% of your budget. Others follow the ‘golden rule’ of the housing industry, that claims that 28% of income should go towards all housing-related expenses (rent, insurance, utilities, etc.) . According to the federal government, any individual or household that spends more than 30% of their income on housing is considered cost-burdened and may struggle to afford other necessities like food, clothing, transport, and medical care.
Needless to say, when I started planning my move, knowing my financial needs for a safe, clean, and motivating living space was a first priority. I started off looking at the average rental rates through Apartment List, which allowed me to compare my new site to the national average. Given that I wanted my rent to be 25% of my total expenses, I gained a rough estimate of my total monthly expenses by multiplying my rent by 4. I also loved using this comparison tool to estimate other expenses like dining out, internet, and transportation (shout-out to Chicago— with an average of $300/mo. for parking, I won’t be bringing my car).
These resources helpful estimates, but by no means are they prescriptive of how you will make ends meet. There are many ways to approach strategic budgeting depending on your priorities and what’s happening in your life at the time. As a Financial Coach, I would love to help you navigate this process should you want more guidance and advice.
2. Are you moving to a destination where you have a job?
At first glance, it may seem silly to ask this question. But in reality, many factors inspire young professionals and ‘real adults’ everywhere to make a location change, including moving closer to family and loved ones, needing a change of pace, or aspiring to enter a new industry. TL;DR— you don’t necessarily need to have a job lined-up to qualify a move as long as you have a game-plan. From my perspective, your move can be justified if it is central to your ability to grow professionally and personally, and it is financially responsible.
If you already have a job lined up, congrats!! Try to use the resources above to ensure that you are living within your means (and remember our 50/30/20 budgeting rule from last week). Also, check in with your employer to see if they offer relocation benefits or assistance.
If you don’t have a job yet, or are waiting on a late start date to move to your new city, take a thoughtful look at what it might take to make your transition. Working backwards, letting your financial needs guide your job choice, can be a great way to make your move happen. But what does this mean, and what does it look like?
For example, lets say I want to move to the Washington, D.C. area (my hometown!). If I can sublet a studio apartment for about $1,000, and I want this to be about 30% of my budget, I need to take home $3,333/mo. This is a lot more than I expected, but if I split that up into an hourly rate (divide by 4 for the number of weeks in a month, divide by 5 for the number of work days in a week, and divide by 8 for the number of hours in a day), I know I need to make $21/hr.
Once you calculate what you need, start looking for jobs to hold you over while you make your next career move. You could find a traditional job, or you could freelance your skills — people are always looking for photographers, strategists, editors, and others to do small jobs, and you can make a lot more than you think.
3. Do you have a network or connections in this area?
Job or no job, try to find out if you have a network that you can utilize to cut down on costs, and make your transition smoother. This network could come from anywhere, so check out alumni databases and LinkedIn connections— family, school, organizations, and friends all want to see you succeed, so don’t be afraid to ask for help. Utilizing your network could mean crashing on someone’s couch, exchanging services for services (ex. borrowing a friend’s car, and returning the favor by helping them around the house), or even looking for roommates to save on rent. Branch out to see if you can cook/baby-sit/house-sit for anyone you may know, adding value to them while you ask for a favor in your new location.
4. Do you have the financial confidence to make the move?
Of course, regardless of the amount of planning and research you conduct, moving to a new place requires money. Think transport there, down-payments for housing, and travel costs for visiting loved ones back home.
The financial confidence to move includes many factors such as the amount of savings you have (and are willing to use to move), your current streams of income, and your existing debt and debt tolerance. In other words, the money to move will either come from what you’ve saved, what you’re currently making, or what you’re willing to borrow.
Evaluating your financial confidence to move is highly individualized, so if you are considering this move, don’t hesitate to reach out for advice or help finding the right resources.
These years will probably be the most rapid periods of change in my personal life. In my move to Chicago, I am very aware that I am jumping into newness on all levels, and there isn’t a pre-orientation program or academic advisor assigned to me to make sure I don’t fall through the cracks. But the moment I start to be overwhelmed, I am reminded that everything I am doing is an investment in my future, my family’s future, and my ability to contribute to the world. There hasn’t been a situation that I haven’t survived through yet, and that’s a testament to the personal strength that got all of us to the point of waking up this morning, and opening this email. So, I am empowering myself with knowledge and resources, and hoping to add value to you through the process.
When it comes to managing your money, how do you avoid the noise, and bad advice, to actually get peace of mind?
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