Understanding Relocation and Cost of Living

Today I spoke to a friend who returned home from an expat assignment, it was his choice to return to his home country and is now battling to adjust to the new standard of living that he finds himself in.

I asked him the fundamental question, did you calculate what you would need to earn on your return?  He said that he had done some basic internet research and got a basic idea but admitted that his calculations were based on on free cost of living websites, his trips back home while on his assignment, his previous costs while living in his home country and what he expected to earn on his return.  He had not considered the extra costs that had arisen during his time away.

It is so important when considering a relocation whether as an expat or moving within your own country, to know that the cost of living will differ from place to place.   The salary you are going to earn is the most important part of the move and how much the change in costs will affect you on a monthly basis.

Use this table to help fill in some of the typical expenses you will experience and include your own list:

Expenditure
Household Expeniditure
Rent / Bond
Utilities (Power, Water, Garbage & Local Tax)
Groceries
Alcohol and Tobacco
Insurance
Security
Communication
Home phone rental
Internet rental
Mobile phones
Transport
Car Repayments
Petrol / Diesel
Insurance
Car Tracking devices
Public Transport Costs
Maintenance for car
Healthcare
Medical Costs
Education
School Costs
Entertainment / Holidays
Monthly entertainment Costs
Holiday savings
Gym Membership
Personal Care
Toiletries
Haircare
Make-up
Miscellaneous Basket
Domesitc / Other Household Help
Newspapers
Dry Cleaning

The figures will vary from person to person for each of these budgeted amounts.  Whether you can stay within your budget and save, or if you exceed these costs depends on the salary offered and the standard of living you select to pursue, which are made through personal purchase choices.  However, what is important to remember is that you will want to maintain the standard of living that you are used to, so the correct calculation for the above budget outline will be of vital importance.

Contrary to common belief, the cheapest places do not always promise the cheapest living costs.

If you compare your salary with the basic cost of living then you could fall into the trap of believing that you will be compensated adequately to cover your budget and still have enough to save. What is cheap and affordable for one person may not be for another. It is for this reason that you need to ensure that you budget correctly and make the right financial decisions before you become an expat or return to your home location.

My friend is still battling to cover his monthly budget and has had to resort to finding extra income.

Xpatulator.com provides four calculators, find the right one for you:
1. Cost of Living Allowance Calculator (COLA): The COLA report calculates how much additional allowance (over and above your current salary) you need to earn in another location to compensate for a higher cost of living, hardship and the exchange rate, in order to have the same relative spending power and as a result have a similar standard of living as you have in your current location.

2. Cost of Living Index Calculator (COLI): The COLI report calculates cost of living indexes for the locations you select using the home location you specify. You can select between 1 and all host locations. You can choose from any one of the 13 baskets or you can choose the overall cost of living index for each location.

3. International Assignment Management Calculator (IAM): The IAM report sets out clear guidelines to make an international assignee/expatriate’s transfer fair and financially viable, taking cognisance of the reward structure and market dynamics of the home and host country. The calculations use the build-up / balance sheet / home based approach and include hypothetical tax, cost of living index, hardship premium, exchange rate, expatriation premium, benchmark housing allowance and benchmark transport allowance. The objective is to ensure consistent equitable treatment and benefits for all expatriate assignees and have a user friendly reward structure to provide seamless coverage for different family scenarios. Recommended for the calculation of the remuneration and benefits for a typical expatriate assignment of a 6 month up to a 5 year duration using your choice of home and host location.

4. Salary Purchasing Power Parity Calculator (SPPP): The SPPP report calculates how much you need to earn in another location to compensate for a higher cost of living, hardship, and the exchange rate, in order to have the same relative spending power and as a result have a similar standard of living as you have in your current location.

Global Mobility Costs -- Do You Need The Answers?

The days are gone when people remain in one job their entire lives, let alone the same city, people want to move where the work will take them and moving from one country to another is now more common than ever.  These expats are also readily taking up positions in places known for being medium to high hardship locations.

What exactly is Hardship? This is the relative difference an expatriate and their family are likely to experience and the relative impact on their lifestyle when moving between different locations. Measuring the relative quality of living in each location, and assessing the level of difficulty that will be experienced in adapting to each location.
These can include: Economic, Political, Religious, Public Service, Environment/Climate, Personal Safety, Health, Education and Transportation Factors.

The latest Xpatulator.com cost of living survey results out for 2014 show that the countries that are the  cheapest on the global markets are not actually cheap for expats. 

With more and more companies looking at emerging markets, relocation is becoming more prevalent in most multinational firms and more projects are being set up across harsher environments or not so comfortable socio-political zones. There is also the appeal of cities such as LA, New York or Switzerland which will always attract people, no matter how high the cost of living.  Salaries and compensation differ between companies and from one region to another.

If a company wants to retain its talent and curb attrition rates in these trying times, then it has to ensure ongoing career opportunities and growth as well as the right employment benefits. It is the responsibility of the HR department to keep itself updated on changes in the locations under their purview, offer appropriate salaries and benefits that will make for a comfortable expat transition. 

Some of the key benefits include –

• Attractive salary packages
• Medical and other insurance coverage
• Guidance on family, education and social life
• Information on the socio-political and economic situation of the location
• Growth opportunities within the region and company

The Internet and advances in technology have opened up opportunities and markets to global competition. Therefore, it has become even more imperative for companies to attract and retain the best talent in their fields. In order to do so, they need to offer competitive packages to their employees who are the face of the company across the globe.

Luanda in Angola is the most expensive expat destination internationally and although it shows a fall in its currency and an apparent low cost of living, in reality rising inflation and the high cost of imported goods have ensured that it is the most expensive expat destination worldwide. Caracas in Venezuela, is the fourth most expensive for expats due mainly to the massive increase in the inflation rate (between 30 and 40%) in 2013 and severe shortages of imported goods. 

The cities of Zurich and Geneva are still within the top five most expensive expat destinations,  this is mainly due to the high living expenses for expats with a strong and stable currency and lower rentals than last year. 

Asian markets are booming and attracting talent however places such as Tokyo and Singapore still rank high due to their high rental costs.

Companies have to ensure that they offer good compensation for these cities and maintain a healthy bottom line at all times. This means, ideally every zone should work as a profit center for them.
and salary packages that are offered should not compromise their financial stability or their employees’ ability to maintain their standard of living in their new location.

The cost of living variances can be determined by using the correct mobility calculator -- Salary Purchasing Power Parity, Cost of Living Index, Cost of Living Allowance or International Assignment Management.

To know more about the cost of living calculators visit http://www.xpatulator.com/calculators

and to obtain a comprehensive review for each city visit http://www.xpatulator.com/cost-of-living-reviews.

Steven McManus is a Remuneration and Benefits Consultant and founder of  http://www.xpatulator.com where employers and employees can calculate how much they need to earn in another location to have a similar spending power.

Calculators include Salary Purchasing Power Parity (recommended if you are an organization planning to relocate an employee to an international location, or an individual with a job offer in another country), 

International Assignment Management (recommended for the calculation of the compensation and benefits for a typical expatriate assignment of six months up to five years duration using your choice of home and host location), 

Cost of Living Allowance (recommended for calculating a cost of living allowance for short-term assignments and a detailed cost of living comparison basket by basket) and 

Cost of Living Index (recommended for the calculation of 3 or more host location cost of living indexes using your choice of home base city).

Africa City Top of Costliest List

Highlights:
Africa the dark Continent, where an array of expats can be found. When you are moving to a city within this continent, do you know what type of costs to expect, just how expensive the city is that you will reside in?
Luanda in Angola is the most expensive city to work and live, as an expat in Africa.

N'Djamena was the biggest mover up the rankings from 185th position to 23rd in the world. The Nigerian cities of Abuja, Lagos, Kano and Ibadan are among the Top Ten most expensive in Africa.

Comparison of Africa to the rest of the world

Africa Top Ten City Rankings		Global Top Ten City Rankings
1. Luanda		1. Luanda
2. N'Djamena		2. Zurich
3. Abuja		3. Geneva
4. Lagos		4. Caracas
5. Kano		5. Hong Kong
6. Ibadan		6. Oslo
7. Maputo		7. Monaco
8. Bangui		8. Tokyo
9. Bissau		9. Singapore
10. Conakry		10. Moscow

For the full report for Africa go here

2014 Expatriate Cost of Living City Rankings

Luanda, Angola Tops

Xpatulator's 

Expatriate Cost of Living 

City Rankings

2013 Goals Delivered

Mali in the Maldives

This is the time of year where, while we are rushing to finish that final goal that has been set for the department or business or just for oursleves, we are also contemplating the last few days of 2013. Whether our year has resulted in our expectations of our thoughts in 2012, whether we have achieved our goals, whether our lives are on the route we planned or if there are more exciting prospects on the horizon.  2013 is almost over....

This has been an exciting year for Xpatulator.com with the introduction of the long awaited upgrade to the website, a new subscription purchasing option and more importantly the new International Assignment Management calculator.

The Xpatulator team has worked hard towards these objectives and are looking forward to a much earned and needed break during December. We would like to thank everyone who was involved in achieving these goals from the development team at Fusion Reactor, our Analysts, and data providers from all over the world, who provide the much needed information for us to do what we do.

Xpatulator.com wishes all our clients a restful end-of-the-year period, and if you are going on holiday enjoy the break and travel safely.  To those that celebrate the Christian Holiday, Merry Christmas and a very prosperous 2014 to you all.

And remember if you are moving to a new destination, we are always just a click away to you finding the right mobility salary.