Steven Coleman

Calculating an Expatriate Cost Of Living Index



Posted: Saturday, March 29, 2008

by
Xpatulator.com

Cost of living is the cost of maintaining a specified standard of living, similar to a typical household budget. A Cost of living index is a numerical way of comparing cost of living, either over time, or by comparing different geographical locations.

When you relocate to another geographic location, the cost of everything you spend your salary on will either cost more or less. Some of the costs may be higher in the new location and some of the costs may be lower. The difference in cost of living is typically reported as a "cost of living index.

By selecting the appropriate costs that you will have to pay from your salary, you can use a tools to calculate the cost of living difference between 2 locations. Xpatulator uses 13 basket groups, the result of extensive research of actual spending habits, to reflect a reality-based international expenditure pattern. The basket groups are weighted according to Expatriate expenditure norms.

When comparing the cost of living between 2 locations the difference in the aggregate cost of all the selected basket groups are examined in each location using the average reported price in each location for the same quantity of each item. Cost of living is the relative differential in the local cost of the basket groups and the ruling exchange rate between the 2 selected locations. When comparing the cost of living between different locations the objective is to calculate the difference in the cost of living expressed as an index (e.g. dividing the cost of living in Location A by the cost of living in Location B may result in an index of 140).

The cost of living index indicates the difference in the cost of living between the 2 locations. In the above example the index of 140 means that Location A is 40% more expensive than Location B. This would mean that a person who moves from Location B to Location A would need to earn 40% more, to have the same standard of living in Location A as they have currently.

Steven Coleman runs the most comprehensive international relocation calculator available, an internet service that is used primarily to calculate expatriate salary levels for international assignments, which can be found at http://www.xpatulator.com
Steven McManus runs the Xpatulator.com website that provides cost of living information for 276 global cities including cost of living index, hardship index, cost of living calculator used when moving to a foreign city or relocating on an international assignment to a global destination. The calculator uses a customisable cost of living index, hardship index, exchange rate and assignment salary to calculate an equivalent expat PPP salary.

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Top-level comments on this article: (3 total)
» left by Jane Brown
from Cape Town 3 years 292 days ago.
Good article
» left by Nenita Wells
from Providence, RI 2 years 266 days ago.
Steven
 
My friend is planning to retire to the Philippines. This is the article that he has been looking for. Thank you.
 
Best regards,
 
Nenita
» left by Steven from Seattle 2 years 266 days ago.
Glad to help. It is always good if you can retire in a low cost of living country with a pension from a high cost of living country.
Regards
Steven
» left by Nenita Wells from Providence, RI 2 years 266 days ago.
Yes, you got that right.  Thanks again for a very informative article.
Best regards,
Nenita
» left by Denise
from Qatar 2 years 228 days ago.
Great article, as we are looking at moving and allows one to determine what your cost of living will be in the new location.
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