The personal cost of living is a number that many people do not think much about. It’s too bad more people don’t calculate their personal cost of living though, as this number can have a huge impact on every aspect of life. The cost of living is not simply decided by the city or state you live in, although that does have quite an effect on it, but also on the style of life you live and how you spend the money you make.
To figure out cost of living, there are several “calculators” and formulas on the internet that can help, some of which are more specific to cost of living per city. Others will compare the city you are moving from to the city you are moving to, and tell you if you can afford the city you are moving to and how your lifestyle will change if the cost of living is higher.
In order to get an estimate of your personal cost of living, there are several steps to follow. First, collect all receipts for your expenses over the last six months and sort them on a month-by-month basis. This includes rent/mortgage, utilities, healthcare, dental, entertainment (movies, concerts, magazine subscriptions), restaurant receipts, child/pet care, car payments, new clothes and shoes, etc. Next, average the six months, and then add 5%. The 5% will cover any unforeseen hardships, travel, holidays, etc. This is now your estimated monthly cost. Now, subtract this number from the amount you receive in income in a one-month period. Hopefully, you are left with a number that is at least $500. If you have a deficit, you are living beyond your means and need to change your spending habits. While this is just a rough estimate of your personal cost of living, using this equation can help you to better budget and plan for future long-term financial goals.
Tags
financial