Growing up, I remember moving hundreds of miles with my family a couple of times due to my parents’ jobs. Then my biggest move came, after 5 years of college (far from home), I flew from Beijing to New York City, in pursuit of higher education.
Moving to a new city, a new state, or even a new country, can be exciting. But it can also be an expensive life event, especially when a whole family is involved. Without a solid plan, the costs can quickly spiral, turning your dream move into a stressful experience.
Whether you are moving for a new job, to be closer to family, or a better quality of life, proper financial planning can help you to start your new chapter on the right foot. Here are some tips for consideration –
- Research the New Location – even before the financial factors are considered, an important question is “why are you moving?” Would you enjoy the life, work, school, and social activities at the new location? I strongly encourage to take a trip (or several trips) there, if at all possible, and experience life there in person. Talk to people there, and/or have lived there, ask what they liked and disliked about the place, and consider if those points apply to you as well.
- Financial Considerations - Don’t assume your current budget will work in a new location. Use online cost-of-living calculators to compare expenses:
- Housing: research average rent or home prices in specific neighborhoods you are considering. Test it out by renting for a while, even if you plan to purchase there. In addition to property prices, also check expenses such as property tax, HOA, insurance, update and repair expenses, etc.
- Utilities: Check utility expenses. Especially in extreme weathers, can quickly unravel your budget, if not planned ahead.
- Transportation: most of us need a car(s) – gas price and car insurance can vary depend on location, and repair cost, e.g., from salt used to melt snows on the road, can add up quickly as well.
- Education: for many families, education is an important financial consideration. Private schools, tutors, and college can all put considerable strain on one’s finance.
- Other living expenses: food, insurance premium and coverage (medical, auto, housing, etc.) are also important factors to be evaluated.
- Taxes: state/local income taxes are sometimes, a big factor for some to consider relocation, especially for retirement. Together with sales tax, these tax issues can certainly make a difference in your budget and cash flow, but they shouldn’t be the sole factor either.
- Create a Realistic Moving Budget – once you are committed to the move, it helps to know exactly how much the move itself will cost, unless someone else, like an employer, will pay that bill.
- Moving Costs: Get multiple quotes from professional movers to compare prices and service levels.
- Upfront Housing Costs: Factor in security deposits, first month’s rent, and utility setup fees, etc.
- Travel Expenses: Include flights, gas, hotels, and meals during the journey.
- Having a Dedicated Relocation Emergency Fund can really help with this transition as well.
- Optimize Relocation Assistance - if you are moving for work, understand your relocation package completely if that’s offered.
- Tax Implications: Is your relocation bonus or reimbursement considered taxable income? Is that additional tax amount covered?
- Lump Sum vs. Reimbursement: Will you receive cash upfront? Or do you need to pay and get reimbursed later?
- Tackle Hidden Costs – don’t underestimate the "hidden" expenses of moving, including:
- Decluttering: Sell or donate items you don’t need. Less weight means lower moving fees.
- New Essentials: Budget for new furniture and supplies for the new place.
- If you are selling a home, would you have tax obligations for the potential gain in that property?
- Update Your Financial Infrastructure - Once you move, update your information immediately to avoid legal or financial issues:
- Address Change: Update your address with the USPS, bank, employer, previous retirement, health savings accounts, and insurance companies.
- Residency & Taxes: Update your driver’s license and register to vote in the new state to establish residency for tax purposes.
- Retirement & Estate: If moving across state lines, or internationally, consider how your retirement plans will be treated by local tax laws.
Relocation often causes temporary cash flow issues. It is important to set aside a significant financial buffer, to cover moving expenses as well as 3–6 months of living expenses. Especially if you are moving without a job lined up. Keep this money in an easily accessible, high-yield savings account is better than leaving it invested in a potentially volatile market for this duration.
By planning ahead, we hope you can manage the financial hurdles of the relocation, and focus on enjoying your new home and new life so much more.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Li Tian is an LPL Registered Representative with and securities offered through LPL Financial, Member FINRA/SIPC.
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