Use this calculator to determine the equivalent salary you would need to maintain your current standard of living if you moved to a new city.
NerdWallet’s Cost of Living Calculator
Cost of Living Adjustment Formula
The Cost of Living Adjustment (COLA) formula used to find an equivalent salary is straightforward and essential for financial planning when moving.
Formula Source: U.S. Bureau of Labor Statistics (BLS)
Variables Explained
- Current Annual Income: Your current gross salary before taxes. This is the baseline income to maintain.
- Current City Cost of Living Index: A number (usually benchmarked against 100 for the national average) representing the cost of goods and services in your current location.
- Target City Cost of Living Index: The corresponding index number for the city you plan to move to.
- Target Income: The resulting salary required in the new city to afford the same quality of life you currently enjoy.
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What is NerdWallet’s Cost of Living Calculator?
A Cost of Living Calculator, such as one popularized by NerdWallet, is a crucial financial tool for anyone considering relocation. Its primary function is to quantify the difference in purchasing power between two geographical locations. It uses cost of living indexes, which measure how much more (or less) expensive daily essentials—like housing, food, transportation, and healthcare—are in one city compared to another.
The output provides a clear, actionable salary figure. If the calculated Target Income is higher than your current salary, it indicates that the new city is more expensive, and you should negotiate for a raise to maintain your lifestyle. Conversely, if the required income is lower, the city is less expensive, and you may be able to save more or reduce your needed salary.
This analysis moves beyond simple housing prices, offering a holistic view of financial health post-move, making it an indispensable part of comprehensive financial planning.
How to Calculate Cost of Living Adjustment (Example)
- Identify Input Values: Assume Current Annual Income (CAI) is $60,000, Current Index (CCI) is 90, and Target Index (TCI) is 135.
- Calculate the Cost Ratio: Divide the Target Index by the Current Index. $$(135 / 90) = 1.50$$
- Apply the Ratio: Multiply your Current Income by the calculated ratio to find the Target Income. $$Target Income = 60,000 \times 1.50$$
- Determine the Equivalent Salary: The result is $90,000. You would need a $90,000 salary in the new city to match the $60,000 lifestyle in your current city.
Frequently Asked Questions (FAQ)
- Why is housing the biggest factor in COLA differences?
Housing costs, including rent and mortgage payments, typically represent the largest portion of a household’s budget. Because housing prices can fluctuate wildly between metropolitan areas, they often cause the largest variance in cost of living indexes.
- Are cost of living indexes always accurate?
No. Indexes are general averages based on baskets of goods and services. They may not perfectly reflect your specific spending habits (e.g., if you don’t own a car or eat out frequently). They are best used as a strong starting estimate.
- Does this calculator account for state and local taxes?
This basic calculation uses gross (pre-tax) income and generalized indices, which typically do not account for specific tax rates. For a final number, you must calculate the tax differential between the two states/cities separately.
- What is a good cost of living index value?
The national average index is generally set at 100. A city with an index of 120 is 20% more expensive than the national average, while one with 80 is 20% cheaper. “Good” is subjective and depends on your income and preference.