When evaluating job offers, there are so many factors that determine whether or not you’ll accept. Just think about it. Culture. Benefits. Work-life balance. Salary. Salary. Did I mention salary? While it might sound like I’m repeating myself, I find that most people are hyper focused on a number without looking at the full picture. If you think about it, salary is all relative to where you live.
A $50,000 offer for a job in Manhattan is not the same as a $50,000 offer in Richmond, VA. Once you factor in expenses such as rent/mortgage payments, taxes, food, student loans, health insurance, and transportation (to name a few), your take-home pay can look a lot different. But how much different does it look? As you read along, you’ll see some different expenses that I’ve uncovered that you may not have thought about.
Housing is arguably your biggest expense, no matter where you live. Experts suggest that you should spend no more than one third of your salary on rent. Unless staying in your house or apartment is your sole form of entertainment. If you’re looking at a mortgage, the ratio is about the same.
Let’s look at rent in a two bedroom/one bathroom apartment in a few notable markets:
- New York City - $4,088/month
- San Francisco, CA - $3,519/month
- Washington, DC - $2,111/month
- Durham, NC - $848/month
- Charlottesville, VA - $1,132/month
While looking at these rents, please note that they’re an average (here’s my source). So, some places could be more expensive, some could be less. Everything will depend on location - but looking at that $50,000 salary we started with, would any of these even work with a budget?
Home ownership is a goal that many folks strive to attain. In fact, I bought my first house this year and understand both the struggle and expectation changes when you see what your actual budget is, and how you’re going to achieve that goal with a home.
Let’s look at the same markets and the average cost of owning a home:
- New York City - $1.6 million
- San Francisco, CA - $1 million
- Washington, DC - $786k
- Durham, NC - $220k
- Charlottesville, VA - $350k
Once again, these are averages - and all of them are within the city limits. If, alternatively, you choose to work in the city and commute, that is also going to be a toll on your time.
Transportation is important, whether you own a car, take the bus or train, or walk. Each of these are associated with costs to consider, whether it is a car payment, insurance, car maintenance, gas, and tolls; a metro/subway card; or bus fare. However there is a hidden expense: the time it takes you to get to and from work.
The hidden time expense impacts people in many different ways. First of all, there’s the work/life balance. According to a study by folks at the University of Waterloo, the longer someone commutes, the less happy they are with their lives. (Here’s a link to an article about this study.) If you’re in the car two hours a day every day, and if you think of it as your hourly rate ($50,000 - about $24/hr), that equates to about $240 worth of your time each week.
Here’s a look at average commute times:
- New York City - 36.3 minutes
- San Francisco, CA - 30.5 minutes
- Washington, DC - 48.8 minutes
- Durham, NC - 24 minutes
- Charlottesville, VA - 24 minutes
Please note this does not include any traffic accidents or road work, which can have massive impacts on your commute. If you’re looking into this and have an idea of where you’d like to live, I recommend looking at your favorite GPS app a few days in a row during rush hour to get a better idea of what your commute would be.
Cost of Activities
The cost of activities, dining, and entertainment is going to vary from restaurant to restaurant or activity to activity, but also based on your location. Will you have to travel to go to concerts, hiking, or anything else that interests you? There are not many hard numbers on activities, but a good recommendation is to look at some restaurants, activities, etc, and price them out. Also to think realistically about how often you’ll be doing fun activities within your budget. In addition to entertainment, dining, and activities, you’ll need to also think about costs of haircuts, babysitters, pet sitters, dog walkers, dry cleaners, and so much more. While these aren’t the “fun” things to look at, they would be included in your budget for these activities.
Another hidden cost, especially for those who are recent graduates, is insurance. Benefits will vary company to company and state to state, more than anything. My advice is to truly vet what the benefits are or to ask for more information once you’ve received an offer.
Outside of your health insurance, you also need to look into car and home/renters insurance. One thing I’ve learned from moving from one end of town to another, underwriters don’t just take you into consideration, but also where you live. Car insurance includes your driving record, as well as other drivers near where you live. You can’t control bad drivers, but you can control where you’re living. You can get a free quote from different insurance companies and can compare from city to city or even in different zip codes.
Groceries and food are typically fairly consistent across the board, unless you live somewhere without a car. In areas you can drive to grocery stores, you can choose where you’d like to get groceries from, especially if one store has a sale one week. Typically in larger cities like New York or San Francisco, people go to grocery stores right near where they live. Or, they order food delivery services for groceries that typically are very pricey per item.
Taxes are often overlooked when looking at a salary. Calculating take home pay is actually pretty imperative, so when you look at income tax on the state level, there are a couple of questions to ask:
- What type of income tax is there? Progressive? Flat?
- If a progressive tax, what are the levels?
Below are income tax rates per state that we’ve looked at so far. There will be ranges for states with progressive taxes. Your income taxes will be taken from where you work, not where you live. So, if you’re commuting from New Jersey to New York City, you’d still have NYC taxes.
- New York City - 4% - 8.82% progressive state tax PLUS 2.907% - 3.876% progressive city tax
- San Francisco, CA - 1% - 13.3% progressive tax
- Washington, DC - 4% - 8.95% progressive tax
- Durham, NC - 5.75% flat tax
- Charlottesville, VA - 2% - 5.75% progressive tax
If you’d like to check out tax brackets, I’d check out smartasset.com, where you’ll find income tax calculators and brackets. That’s also where I got all of this information. A higher salary in a higher-cost city puts you into a new tax bracket, which means your take home pay will be immediately lower. Checking out the taxes above, you can see where you’d fall into that spectrum, and how that will truly affect your take home pay.
There are so many other taxes I could go into, such as property, sales tax, and so much more. However, I think that would be great to research, specifically if you’re between two different locations. While some states may look better because of the lack of income or sales tax, those taxes are always made up one way or another.
Overall Cost of Living
Now that we’ve looked at the average cost of living, let’s take the original number of $50,000 and set it as a salary in Charlottesville, VA. We can also see what you would have to make in each of the other cities to get the same quality of life you would have in Charlottesville. Here’s where I found these numbers.
- New York City - $108,245
- San Francisco, CA - $83,719
- Washington, DC - $69,942
- Durham, NC - $43,097
- Charlottesville, VA - $50,000
Where you choose to live is completely up to you, but thinking everything all through is going to be the most important. Ask your recruiter where people typically live as a starting point, and use your resources at the company you could be working for.