This app is useful for general comparisons between cities. It is not designed to give financial advice to individual users. Because of the limitations of such a general tool, it should be noted that there are no guarantees, waranties, or claims of accuracy that constitute legal or financial advice. In order to better understand how each section is calculated, and what exactly that means, read the explanation box to the right of each graph. Any users looking for financial advice should consult with a certified financial planner before making any financial or legal decisions.
A naive comparison normalizes both salaries to a median cost of living.
This comparison is weak because it assumes that all income is taken up
by the cost of living, which is often not the case.
Example: Assume the
cost of living in city A is $1.00 and the cost of living in city B is
$2.00. If you earn $5.00 in city A, naive COL assesment shows you need
to earn $10.00 in city B to have the same amount of disposable income.
Simple math shows otherwise: if you earn $5.00 in city A, you only need a pay increase of
$1.00 (20%) to live in city B with the same amount of disposable income ($4.00).
Purchasing parity for like goods will determine how far that disposable
income will go in each city.
Data sourced from expatistan.com, a crowd-sourced
cost of living index. These values were then normalized to median U.S. values using
data from Wolfram-Alpha.
After essentials shows the amount of income left over after taxes, food, housing, insurance, and transportation needs have been met. The values used are for a single adult household, and will not be accurate for two-person plus households. Part of this data uses MIT's living wage data, part uses average state/local tax burdens from Tax Foundation (a conservative tax policy think tank) and part uses average effective federal tax rate, supplied by the US Congressional Budget Office (CBO). MIT's living wage calculations includes taxes on the amount required for a living wage, so state/local taxes and federal taxes are calculated only on the income outside of that amount. In particular, the average tax burden percentage is determined from the raw income, but is only applied to income after the living wage has been deducted. Canadian tax burdens calculated using a best fit line from average tax rates from Ernst & Young (multinational professional services firm). Canadian living wage data obtained from Statistics Canada's Market Basket Measure (Admittedly, not the best measure of COL) and calculating pre tax earnings.
Savings are calculated based on data from the previous section. Namely, yearly contribution values are initially 25% of after essentials values. As well, the annual percentage rate is set to 7% initially. In depth analysis of savings/retirement plans are far beyond the scope of this tool, so take this with a boulder sized grain of salt, as every individual's situation is complex and nuanced. Interest in this graph compounds yearly, contributions are made at the end of the year, and the principle amount is $0.
In the first column is the median price of a house for each city. The following columns are the yearly payments required to service a loan of shown duration. The initial interest rate is 3.5%, 3.75%, and 4.0% fixed for the 10, 15, and 30 year loans respectively. House price data sourced from the National Association of Realtors, the Canadian Real Estate Association, Zillow (for Anchorage, Detroit, and Pittsburg). Average rate data sourced from Bankrate.