Following the onset of COVID-19, it’s no surprise that remote work has remained a popular option for employees. Around 12.7% of full-time employees across the country work from home, which is expected to rise to about 22% in 2025. (1) If you can work fully remotely, moving to another part of the country may have crossed your mind. Perhaps you want to get out of the city, move to a warmer climate, or relocate somewhere with better job opportunities for your spouse.
Whatever your reasoning, there are a few financial questions to ask yourself before packing up and hitting the road. Relocating to a new city or state will impact your financial situation, so it’s important to consider potential changes and prepare to avoid unwanted surprises.
Question #1: Have You Taken Stock of Your Current Finances?
Before shaking up your living situation, take some time to evaluate your current financial standings and budget. Can you afford to move somewhere new? How will it impact your savings?
Consider your current salary and other income sources, as well as your savings and emergency fund. Moving (whether one town over or across the country) is expensive, and you want to be sure these additional expenses won’t drain your savings.
If you aren’t in a hurry to relocate, consider budgeting extra monthly savings to help cover your future moving expenses and pad your emergency savings.
Question #2: How Will Your Expenses Change in a New City?
The cost of living varies significantly across the country. According to the Council for Community & Economic Research (C2ER) Composite Cost of Living Index, the most expensive states to live in are Hawaii, California, Massachusetts, New York, and Washington D.C. By comparison, the least expensive include Mississippi, Oklahoma, Alabama, Kansas, and West Virginia. (2)
The average home value in Hawaii (the state with the highest cost of living) is $840,928 (3). Meanwhile, the average home value in Mississippi (the state with the lowest cost of living) is $177,536 — that’s a $663,392 difference. (4) Depending on where you want to move, prepare for the possibility of paying significantly more (or less) per month on living expenses.
The cost of housing aside, look into other average costs that will impact your monthly budget, such as:
- Transportation (gas, parking fees, and public transportation options)
- Utilities (water, sewer, electricity, internet, gas, etc.)
- Food and groceries
- Health insurance premiums and copays
- Childcare costs (if applicable)
Question #3: Does Moving Impact Your Compensation or Benefits?
Check with your company’s human resources department before relocating to a new area. Certain benefits (like wellness stipends, equipment, coworking space access, or health insurance) may be limited to a particular state or area.
As remote work has increased in popularity, some employers have considered location a factor in employee compensation. A recent survey found that 10% of employers will base their decision regarding a pay increase on an employee’s location. (5)
Question #4: What Will Be the Tax Implications?
If you move to another state, you may be obligated to pay taxes in your state and where your employer operates. Say your company is based in Maryland, and you move to Pennsylvania, for example. In this scenario, you may be liable for paying state or local taxes in both Maryland and Pennsylvania. Talk to your employer and accountant before moving across state lines to see if this may apply to your situation.
Your federal income tax isn’t impacted if you move to a new area. It is possible, however, that if you meet specific criteria for working remotely, you could deduct home office expenses. Keep in mind that in most cases, these deductions only apply to contract workers or self-employed individuals. But it’s worth asking your tax professional if you can deduct work-related expenses from your taxable income.
Question #5: How Are You Keeping Your Long-Term Goals a Priority?
Moving to a new area is incredibly exciting, but don’t let this life transition impact your long-term goals. Make sure you’re still contributing to your retirement savings and brokerage accounts. If you’re moving to an area with a lower cost of living, this could be an excellent opportunity to redirect more of your income toward your long-term goals. On the other hand, if you’re moving somewhere that costs more, ensure you’re not sacrificing your savings to make ends meet.
If advancing at your company is your goal, talk to your direct supervisor or HR department before moving. Your team may prefer to promote people who work in a hybrid or in-person position, in which case moving away could hurt your opportunities for career advancements.
Question #6: What Sort of Financial Safety Net Do You Have?
We mentioned earlier the importance of maintaining your emergency fund, but remember, there are other ways to protect your financial well-being.
Review your insurance coverage (health, life, disability, auto, and home), and note what must be changed if/when you move to a new area. If you change zip codes, for example, you may qualify for a particular enrollment period for your health insurance plan, allowing you to pick a new one. (6) Depending on where you move, your original health insurance plan may not work in your new location.
Question #7: Who Is On Your Financial Team?
Before making any significant life changes (like working remotely in a new area), consult the members of your financial team — accountant, financial advisor, real estate agent, lawyer, etc. Being well-informed of your options and how your financial situation will likely change is vital to making this a smooth and enjoyable transition.
We here at Brightview encourage you to embrace remote work opportunities responsibly. When done right, remote work empowers employees to pursue the life they want while advancing their careers in a fulfilling way. If you have questions about remote work and its impact on your financial life, don’t hesitate to contact me and schedule a time to talk.
Sources:
1Remote Work Statistics And Trends In 2023