Making a move can be an exciting and challenging time, but you want to make sure that relocating is the best thing for you and your family. There are many financial impacts to consider before making final decisions.
First and most importantly, there’s the happiness factor. Making a big change can be very exciting, but there are things you’ll leave behind. It’s good to consider the life you have built, your family, friends and community. You want this move to be something that enhances your life and makes you happy.
Next, carefully review the financial impacts. You might have a great job opportunity, but relocating should also make overall financial sense. Many things will impact your income and expenses, so don’t let a shiny, new salary be the only thing to sway you on the financial scale.
Consider the actual costs of the move. Some companies cover relocation costs, while others give you a budget or say you are on your own. Determine if you want to have movers pack up your things or if you want to do it yourself. We often don’t place a value on our time outside of work, and packing up an entire household can be time consuming and stressful. Assign a value to your free time, and use that to calculate what packing would cost you. If your new company isn’t paying for you to relocate, get three or four quotes. Research each moving company’s reputation and insurance coverage for your goods, in addition to the total cost.
Compare current rental/mortgage rates in your area with those where you are looking to move. If you own your current home, seek advice from a real estate professional to help determine if you should sell your existing home, or rent it out. Unless you are already familiar with the new area, you’ll likely want to have temporary/rental housing while you look for a new home. Take time to get to know your new area. You don’t want to rush into buying a home, only to discover a year later that you wished you’d waited and bought elsewhere. You want to find a place that makes sense for you and your family.
If you’re not familiar with the new area, you might need temporary/rental housing while you look for a new home. A temporary housing situation could mean an additional move, or added cost of storage. If you prefer to rent, determine the cost of breaking a lease, if needed, and the cost of moving into a new home. You’ll likely need the first and last month’s rent, plus a sizeable deposit.
In addition to the move, consider your stuff. What will you bring with you and what will you discard or sell? What will you want and/or need to purchase for your new home and how much might it cost?
Also, think carefully about your commute. What does your current commute look like vs your future commute? Factor in any added fuel/car maintenance or public transportation costs. If the new commute is longer, consider the value of your free time. A lengthier commute could cost more, and take away your work/life balance. It could also be shorter and improve things.
A new area means opportunities to go out and explore more, which means you are likely to spend more on going out your first couple of months in a new location. Are the costs associated with going out to dinner, the movies and other fun things going to be more or less expensive than what you’re used to? Will these activities cost you more or less moving forward? Understand how the costs here could impact your overall budget in the short and long term as this could have an impact on longer term financial goals.
Get a good understanding of potential tax impacts. Look at the overall cost of goods and the tax rates of your new city and/or state. Compare your current city and state income and sales tax rates with that of your new location.
To help you assess all of these items, create a simple spreadsheet to tally the costs of the move. Then create an additional sheet with a side by side comparison of your current budget and what your future budget looks like. This gives you a clear picture of how much your move would cost and how your current budget compares with your future, to help you make a wise, financial decision.
As always, we are here to help review any of this for you and your family as needs arise.
Written by: Hannah Ahmed, CFP®, CDFA®