How to Calculate the Real Cost of Living When Moving to a New Country
The Real Cost of Living - What to Consider
As an expat, moving to a new country can be a daunting process with numerous decisions to make. One of those might certainly be the financial aspects and whether it is a viable option to work overseas. There are a range of costs that must be factored in when forecasting the real cost of moving to and living in a new country. Some of these costs are more obvious than others and all combine to generate the real cost of living. Our guide will lead you through some of those financial elements to think about ahead of making a move.
This takes into account a number of expenses that may initially seem trivial but can gradually add up. For example, the cost of groceries in the area, the cost of water and electricity, the cost of heating your home and other bills will vary across different countries.
Furthermore, things such as the price of going for a meal or drink, clothes shopping and other leisure activities should also be taken into consideration as they add to the final cost of living and will vary enormously between locations around the world. Some might say that these costs are taken for granted and not fully considered as a ‘living cost’. However, depending on where you are located then these expenses can quickly add up, meaning that it is important to factor these into your financial planning. There a variety of websites and online resources that you can consult to estimate these costs for different locations.
Almost every country has its own education system and the majority will welcome foreign students into their free public schools that in general are funded by the taxpayer. However, many expats moving abroad prefer to send their children to International Schools, particularly if these children have experienced school in a different culture or if parents do not plan on staying in the country long term. These schools take away culture and language barriers for students, although this normally does come at a fairly substantial price as International schooling can be very expensive and will often depend on the level of demand or the school’s reputation. Some countries do not allow foreign children to attend state schools, although this is extremely rare and would mean private education as the only alternative.
The cost that will incur the largest expense is of course your rent or mortgage and these vary substantially between different International locations. Although this seems a standard aspect to consider and one that may not directly affect living costs, this outlay can have an effect on disposable income and consequently impact on your standard of living.
Cost of Transportation
Many expats, particularly those only staying for a short time tend to become reliant on public transport to get around. Again, these prices will vary from country to country and between the different methods of transport. Those working further away from their place of work or residence may have to pay more, which can add up to a hefty figure if you work the traditional 5-day week. Although many countries offer discounted travel cards and other cost-saving features, paying for transport is certainly an aspect to factor in.
Another facet to consider is Personal Income Tax rates, which vary considerably around the globe. This will of course have an obvious effect on your earnings and disposable income. Additionally, working in one country whilst also having financial commitments in another can lead to complicated tax implications which is undoubtedly something to be very aware of. It is highly recommended to look into the country you are moving to and find out if there are any double tax agreements in place with your home country, these will help prevent you being taxed twice across both countries. Moreover, some nations and regions may have tax provisions or penalties which can also add or take from any disposable income and funds.
The cost of different forms of insurance such as your home or car, can fluctuate between nations. Health insurance is vital and extremely necessary in most countries, particularly if they do not have a free public healthcare system. In some countries, these premiums can be high and should be factored into your living costs along with Private healthcare, which can also be expensive.
Resources to Help
There are many online calculators available to help give expats a rough comparison of living costs across nations. However, these should only be used as a vague guide as opposed to reliable tools, which are often unclear on their sourcing and how up to date they are. Perhaps one of the most reliable online sources for cost of living advice is Mercer’s ‘Cost of Living Rankings’. Though these rankings are primarily developed to help companies control compensation allowances for their expat workforce, they are also good for expats themselves to consult and obtain a brief idea of how the location will compare to others around the world. Country’s national webpages may also contain some useful and reliable information on living costs for those thinking of moving to the country.
Learn from Others
Perhaps a less formal yet equally as effective method is to consult people you know who live there already or who have lived there in the past to gain first-hand information on the real cost of living. If this is not possible, consulting expat forums represents a way of getting the view of other expats, which can often turn out to be the most reliable source of information regarding living
If you would like to speak to Kingpin International about International Tax Opportunities, please contact a member of the team who will be happy to help. Alternatively, please browse our current International Tax vacancies.