Wednesday, February 17, 2010

How much does it cost to live?

Last week a friend and I had a spirited discussion on how much money we need to live comfortably (without any extravagance). Our back of the envelop calculation on cost to living in any decent neighborhoods in the world for a family of four is shared here. 
Rent or Mortgage = $1500 to $2500
Rent or mortgage in any decent neighborhoods in the world cost at least grand or more for a three to four bedroom apartment or house. The rents are considerably cheaper in some parts of developing world but the neighborhood may not be desirable. Similarly, a rural location in the United States maybe cheap but may lack certain amenities or employment opportunities.

Health = $600 to $1200 for 4 people ($150 to $300 per person)
If you are lucky to be born as a citizen of a country that provides you with a free decent health care, congratulations! However, a lot of places, such as the united States need you to buy a health insurance. Some places, there may not be have a good alternative but to save up for rainy sick days.

Education = $2000 to 3000 for two kids ($1000 to $ 1500 per kid)
Some places such as the United States have a free education till the high school. However, you are partially paying for it through a local tax. Everyone needs to save up for collosal future college bills. Even if college education is free in your country may not influence your kid who wants to study in a private American or other world-class foreign student. Beside that, education generally also include cost for extra lessons, supplies and more,

Food = $600 to $1000 
Food cost somewhat depends on what kind of meal you eat. The cost may get considerably high if you eat high quality local/organic ingredients or eat out regularly.  

Transportation = $600 to $1000 ($300 to $500 per adult)
Driving a car (car payment, insurance, maintenance, gas) or take train, bus or cab (fare) for family adds up.

Household & miscellaneous = $500 to $ 1000
All household and miscellaneous needs such as furniture (upgrades and maintenance), household maintenance, gadgets, gifts, unexpected fees and items, movies, entertainment are bundled up here.

Pocket change = $400 to $ $800 ($100 to $200 per person)
Everyone needs a couple of dollars of pocket change every day.

Vacation = $400 to $800 
A week worth of vacation every year for a family of four will at least cost $4000 to $5000 with airfare, car, hotel, restaurant, activities etc. If you do it twice, then double the cost. 

Lower estimate = $ 5, 600 per month or 67,200 per year*
Upper estimate = $11,300 per month or 135,600 per year*

*Sadly, these incomes needed are after tax income, which means it needs to be 30% or more than what’s given here.

Indeed as someone said, “balancing the act between the cost of living and the cost of earning - is the art of surviving!”

1 comment:

  1. Hi Have you checked out the UK new Budget? Fuel, cigs, alcohol all going up again! What do you think?