The Miser’s 3 Things:
- Before negotiating a salary in a new city, use a cost of living calculator to find out what you’ll need.
- Use that number in your negotiations, and explain why.
- If your new salary is higher, guard against lifestyle inflation once you start work.
“Wow, these apartments are expensive!”
That’s what The Miser thought to himself as he surveyed the apartment listings in Minneapolis and other cities where he was job hunting.
$1,500. $1,800. Even $2,000 a month.
Those were eye-popping numbers, coming from a city where $1,200 got you a lot.
I knew if the rents were this high, other costs would likely be higher than what I was used to. This, of course, meant my salary would need to be significantly higher in each of these places to make up the difference.
Cost of living calculators
Before I was offered or accepted any new job, some homework was in order.
I needed to see a cost of living comparison between where I was moving from and any potential new city. The “cost of living” is exactly what it sounds like: factoring in everything from rent to groceries to insurance and your other expenses, how much does it actually cost to live in a certain area?
Luckily, there are some online comparison tools that make this pretty easy to figure out.
Bankrate’s website showed me the cost of living would be about 7 percent higher in Minneapolis.
Think that’s significant? Try Washington, D.C.: 46 percent higher.
(You can also try NerdWallet, CNN Money, or any number of other calculators.)
What these calculations told me was simple: I needed a salary in Minneapolis at least 7 percent higher in order to maintain the same standard of living and savings rate.
I didn’t want to compromise on either one of those things. Think about that: it’s counterproductive to cut your 401(k) contribution rate just so you can finance your day-to-day life after taking a new job. The new job is supposed to improve your standing in life!
Now, before moving on to what you should do with your calculations, here’s a caveat: There are a lot of reasons to take a new job, and a larger salary is only one of them.
Maybe you need to get out of a bad situation with your current employer. Maybe a new job will set you up for future career moves. Maybe you’re making a career change.
If you’re changing jobs because of that last reason, your income might not be as high at first. Think about it: you might be considered “entry level” in your new career, if your work experience doesn’t translate perfectly. If that’s the case, especially if you’re reasonably certain that your salary will increase again, it’s OK to temporarily take a bump down the salary ladder.
Choosing a job
Say you get a job offer in a city with a very high cost of living. If the offer isn’t anywhere close to making up the cost of living difference, it’s probably a no-go.
If an offer is just below the amount you’re looking for, don’t be afraid to negotiate.
“I’ve done the calculations,” you might say, briefly explaining the situation. “I really want to work for you, but I do need to maintain my current standard of living.”
For many employers, that’s a reasonable request – especially when you point out you’re not asking for some outlandish figure.
Some will even think highly of you (hey, they already think highly of you, since they’ve made a job offer!), because it’s clear you’ve done your homework and didn’t just pick a number out of thin air.
Guarding against lifestyle inflation
So, you got the job with the salary you negotiated. Congratulations! But now’s not the time to get complacent.
It would be easy to say, my salary is 10 percent higher. I could take a vacation or afford a sweet apartment!
Not to be a downer, but you’re also living in a more expensive city with higher rent, a bigger grocery bill, and higher transportation costs like car insurance or public transit. Your additional salary will cover all those things so you can live as comfortably as before, but not lavishly.
For The Miser, that meant finding an apartment that fit the budget, not one of the many available for $2,000 a month.
This is not to say those apartments weren’t tempting. They were. But if I lived there, the name of this blog would have to change.