Most of us would love to be able not to worry about our monthly finances or the cost of living. Assuming for a moment that you’re not one of the super-rich, it’s probably a fair bet that you’ve researched the cost of living in your new home country or the country you’re thinking about moving to.
If you’ve not been in your new country for that long, then you may also have experienced the bafflement of checking your monthly outgoings and thinking “that can’t be right based on what I read back in the UK.”
In either situation, you’ve probably read a pile of statistics from numerous sources and had lots of conversations with other expats. All this told you that the cost of living in your new country should be massively cheaper than ‘back home’ and you’ll be able to get by on a pittance.
So, why is the reality so often different?Cost of Living Statistics
They key point to remember is that statistics can be manipulated many different ways to show many things depending upon the objective of the person producing them. The old joke about ‘lies and statistics’ is unfair, but even so there are some grains of truth in it and often the same basic figures can be manipulated to ‘prove’ two fundamentally different conclusions.
Relax! This is article is not going to try and give a lesson in basic statistics but instead just think for a moment about where statistics come from and why they can be deeply misleading for expats.
When you’re looking at cost of living statistics, before basing decisions on them you need to think about where they are coming from and who is producing them. The first source looked at by many expats undertaking pre-move research for comparative cost-of-living reasons are those statistics compiled by the EU, and there are millions of them to chose from!
These are obviously not much use if you’re considering going to Australia, but do they provide an objective and unbiased platform for comparing between EU member states? Surely if they show that the cost of living in say Spain is 40% lower than the UK then it must be so? Well…
In theory yes, but you need to look closely at where they get their figures from and most importantly what they include. Remember that if one or two items in one country are a LOT cheaper than another, these items could distort or ‘skew’ the statistics misleadingly.
The reason for this is that if those few items don’t apply to you, then you’re not going to be able to count those cheaper items as saving in your monthly budget.
A few good examples of this are things such as tobacco, alcohol, entertainment, mortgage costs and perhaps electronic goods.
If you are not a significant consumer of tobacco or alcohol products, you don’t constantly update your MP3 player, you really don’t go out dancing every night and to top it all you have no mortgage because you’ve purchased outright then the fact that all these things are cheaper in your new country is pretty meaningless for you. What you’re bothered about in terms of monthly survival are food, clothing, local taxes, health insurance, transport costs and utilities such as gas, fuel and water.
So in this simple example, one can see the danger of taking at face value the ‘bottom line’ of some cost-of-living comparisons. In theory the statisticians have techniques to smooth these distortions but have they always been applied? If not you could find upon arrival that your monthly outgoings haven’t reduced by anything like your expectations. Where did that 40% reduction go?
Many cost-of-living statistics have their origin in various forms of national government. Many governments have bureaux of national statistics etc and they are usually meant to be independent and totally objective.
They may well be, but let’s consider for a moment some conflicts of interests they’re operating under – and no this is not conspiracy theory!
Few if any countries in the world like to go around advertising their problems. For example, not too many foreign businesses are going to invest in your country if your national slogan is “Come to Ruritania – the world’s third most expensive country to live and work in”. As a slogan it lacks a certain ‘something’.
Governments also can’t ignore their domestic audience, if we exclude dictatorships. In a democracy no government is likely to go out of their way to publicise the fact their country now has the second highest cost of living in the EU or Asia-Pacific region etc. Rising costs of living are not usually considered good news for a government’s chances of re-election.
For all these reasons, one has some cause to be cautious about national statistics originating from a government body. There are ALWAYS reasons why a government will wish to put the most positive spin possible on such things even if they will normally avoid total lies.
Expats & Finding the Best Deals
There is one last general area to keep in mind when thinking about cost-of-living statistics and their affects on your monthly budgets.
When you’re reading some stats on the web that tell you in country ‘a’ the cost of living is such and such, do keep in mind that the figures are based upon national averages.
As such, the statistics will not be based upon chic city centre, tourist or property ‘hotspot’ prices, but rather on the prices paid by the average person in that country.
This can be deeply misleading for expats simply because by and large, expats do not live in ‘average’ areas.
Although it is somewhat of a crude generalisation and there are many exceptions, even so it is a fact that many expats when moving overseas tend to buy into more desirable locations, expat enclaves, tourist spots or rural locations. In these localities, prices may well be higher for many reasons.
Firstly in very rural and isolated areas, supply can be more expensive and shop prices higher. Secondly any location that is touristy or ‘expat enclave’ in nature is certainly going to be seen as a cash cow for local businesses and you can be fairly sure retail prices will be higher. Thirdly, even service costs for things such as maintenance, building works and repairs etc, will be higher in certain desirable areas – in general expats should not delude themselves that the cost of a local repairman will be the same for them as for a local person.
Additionally, even something as basic as food prices can vary depending upon your practices versus those of the locals. In many countries people will shop in local markets several times a week for their basics and will happily spend hours looking for the bargains and haggling if need be. If you’re happier driving once per week to the supermarket 25 kilometres away and ‘filling up’ with food then your average food costs will be higher.
So, for all these reasons and many others, the expat may find that their monthly outgoings seem to make no sense at all against the statistics they painfully researched before moving. If you’re living in a beauty spot, a glitzy beach resort, or 40 kilometres from a town of any size, your costs will never be the same as the national average. That national average may happen to be based upon that city centre hypermarket in the big industrial city 300 kilometres away where tourists and expats just don’t exist!
Getting the Truth
If you need accurate figures for the local cost of living, there is no substitute at all for renting and living locally for a few months. No, this is not a 2 week holiday where romance can sway judgement but an extended period!
You can also sometimes find segmented and regional statistics for the area you’re thinking of buying into by contacting the embassy of the country concerned via the Internet. Local tourist and local government offices in the area may also be able to help.
You can contact local estate and property agents some of whom do offer guides to local cost of living but do remember they are unlikely to be unbiased.