Understanding the true cost of living before relocating overseas

  • cout de la vie
Published on 2023-11-24 at 13:00 by Asaël Häzaq
You're in the midst of planning to move abroad, but how can you ensure that your budget will cover your expenses in the host country? What exactly does the cost of living entail, and how can you grasp its intricacies?

Cost of living and comparators

Numerous comparison services provide estimates for the cost of living in a specific country. You might have used one of these tools to compare the cost of living in your prospective expatriation destination. But are you coming out on top or falling short? While these services can offer a general idea, they often struggle to identify the nuanced price variations on a smaller scale, such as in different neighborhoods within a city. Even the most expensive cities can turn out to be more affordable if you choose the cheapest neighborhoods. For example, you can opt for local and seasonal produce or swap your car for a bicycle.

The cost of living is generally defined as all the expenses necessary to maintain your standard of living in a specific location. This encompasses rent, energy costs (electricity and gas), transportation, healthcare, food, leisure activities, and more. Changes in the cost of living, including price rises and drops, are quantified using an index that measures, during a specified period, the amount of money required to make a particular purchase. It's important to understand that the cost-of-living index is a valuable economic indicator for comparing the relative cost of living in various cities and regions worldwide, but they are not enough.

The nuances of the cost of living in the country of expatriation

Comparing the cost of living in two countries implies that only the "price" variable comes into play. However, it's important to recognize that other variables not covered by the indexes still contribute to your overall expenses. Some of these variables, like the climate, may not be easily measurable but can significantly influence your cost of living. Additionally, there are nuances to consider when comparing the types of products and goods. For instance, comparing the price of a kilo of rice in Finland, Australia, and South Africa is straightforward.

However, you may encounter some surprises when you compare two seemingly identical homes on paper—the same size, number of rooms, amenities, and location. Firstly, the significance of a home's location (city center, suburb, countryside) varies across countries and even within different regions of the same country. Secondly, price indices may not always specify whether the comparison involves new or old homes or those that meet the latest energy standards. Yet, we know that energy inefficiencies can significantly inflate bills, while "low-energy" housing can save costs.

We can apply the same logic to easily comparable products, like food items. Are the products being compared organic and/or locally sourced, or not? Are they excessively packaged? What's their carbon footprint? All these questions depend on your lifestyle. That's why indexes come in handy for measuring the relative cost of living abroad, but they don't provide the exact cost. To truly understand a country's cost of living before relocating—or at least to get as accurate an estimate as possible—you'll need to assess your current cost of living and define your consumption patterns.

Calculate your current cost of living 

Now that you've identified your major spending categories—housing, transport, food, healthcare—it's time to look into each category and calculate your current expenses as accurately as possible. Take energy, for instance: are you someone who uses a lot of energy, or do you actively minimize unnecessary energy consumption? In terms of screens (smartphone, tablet, computer, TV), are you a heavy user, or do you manage with just one or two devices? How sensibly do you consume, based on your definition of "sensible"? These questions are far from insignificant, especially considering the ongoing energy crisis threatening many countries.

Extend the same process to your other expenditures. Take food, for example. It's not always possible to consume local products exclusively. It's not necessarily about being fussy but dealing with food intolerances or allergies. If you're on a specific diet, ensure that the required food items are readily accessible abroad and at a reasonably "affordable" cost. Again, price comparison websites may not explicitly detail the range of products being compared. For example, the price of a liter of discounted milk may differ from a liter of milk purchased at a pharmacy.

Note down any subsidies you're currently receiving, and calculate your expenses both with and without these subsidies. This could include government-issued energy vouchers, housing assistance, and the like. Also, identify the costs you're determined to cut down on. Moving abroad presents an opportunity to adopt new habits. Are you considering swapping your car for a bicycle, scooter, or walking? You'll save money on your fuel bill (always overheated these days) but also introduce a healthy dose of physical activity into your routine.

Tips to understand the cost of living in a country before relocating

Consider the intangible costs and benefits: you might have found the most budget-friendly apartment in town, but it's situated next to a casino and a nightclub (which somewhat justifies its price). You save on rent, but you might sacrifice peace. Unless, of course, you're indifferent to the noise.

Similarly, consider the collective aspect, especially when tallying up your expenses: you may have found a home at an unbeatable price, but it's a two-hour train ride from your workplace (one way). Granted, many locals choose to commute, residing on the outskirts or in the countryside and traveling to the city for work. It all depends on the transportation services in your host city (like tickets and road conditions) and your personal preferences. Are you prepared for a four-hour commute just for work? What's your time limit? Once again, the savings on rent could be offset by lengthy commuting hours.

Avoid always comparing everything in your home country's currency. This mindset, often prevalent at the beginning of a new life abroad, naturally diminishes after a few months. And that's a good thing. Adopting a local perspective will help you make more accurate calculations.

Keep in mind that there are numerous variations within the same territory. For instance, in the United States, the cost of living differs between New York, Kansas, and California. Similarly, residing in different cities within the same state comes with varied costs. One final piece of advice: take note of the immeasurable expenses and benefits—such as the park near your home, local gyms, the cultural vibrancy of the neighborhood, and the presence of a social circle—all of which contribute to your well-being in the expatriate city.