Relocating can be an exciting part of life, but it can also be quite an ordeal. From packing and changing your address to setting up new accounts with your utility companies and settling in, it requires intensive planning. Before you relocate to your new house, there are plenty of logistical considerations and financial implications to address.
In the days leading up to the big move, most people wonder if they’re ready. Having a financial plan can ensure you’re financially ready. Here are seven tips to help you create a financial plan for a smooth transition.
1. Pay Down Your Debts
Before relocating, you can work on getting your debts paid off or at least paid down to a manageable amount. Doing this can minimize your monthly expenses.
If some quick small wins help you stay committed, the debt snowball method may be suitable for you. However, if you’re more into delayed gratification, paying off the debt with the highest interest rate first is more appropriate. Debt consolidation is suitable if you have a lot of debt.
2. Determine the Cost of Relocating
It’s essential to understand how relocation costs can add up before you start packing. You need to have an accurate idea of how the cost of living in your new city compares to that of the area you currently live in.
You can do this by dividing costs into two broad categories: the costs associated with moving and the costs of living in your new house. Furthermore, you need to consider the following expenses while planning to relocate:
- Packers and movers charges
- Loading and unloading charges
- Costs associated with renting/buying the house
- Essential shopping
- House cleaning
- Storage costs
- Miscellaneous costs (damages, claims, broker’s fees, etc.)
These are the expenses either you or your employer will cover, depending on whether your job offers that helpful relocation assistance.
3. Make a Budget and Save
Although relocating can be expensive, budgeting can help you keep the moving expenses under control. It is advisable first to determine where you’re moving to. On average, a local move can range from $300 to $1500, depending on the size of the move. Long-distance moves can cost $2,500 to $5,000, depending on the distance.
Creating an inventory of the items you want to move to your new house is an essential part of this process. Professional movers will need your inventory to provide estimates. The estimates are often based on what’s being moved and where it’s being moved to. Here’s what to expect:
- Base moving fee
- Specialty item fee
- Moving insurance
A moving budget template can be created by adding a column for estimated costs from the previous list of expenses. This template can help you figure out your total costs. You can total all the line items up and then add 5%, giving you a contingency buffer. As you do this, consider the different ways you can strategize to save and organize your finances by:
- Keeping track of your everyday expenses
- Finding ways to cut costs and save money to fund your expenses
- Beefing up your emergency fund
4. Review Your Tax Needs
A location change can have a huge impact on your tax liabilities. When a higher tax rate applies to your new place of residence, your take-home pay may decrease. Ensure you investigate the state and local tax situation to prevent unpleasant financial surprises at tax time. In particular, pay close attention to property and sales taxes, which tend to be higher in states that don’t tax income.
5. Determine if You Need a New Financial Institution
If your current bank doesn’t have locations in your new area, you may need to pick a new one. First, you can decide what kind of financial institution best suits your needs – whether it is a bank with multiple branches, an online bank, or a credit union. While bank convenience is important, it is key to consider costs as well.
Ideally, you can look for a bank that won’t charge fees for basic services (i.e. checking/Savings accounts, direct deposits, ATM withdrawals, etc.). It is prudent to maintain your old bank account until any automatic payments you make through your financial institution are switched to your new account.
6. Organize Your Investments
During relocation, your investment strategy may also need some fine-tuning. It is crucial to find out how your existing investments will be affected by your move. If you own municipal bonds that are tax-exempt from your original state, they may not be in your new state.
Additionally, certain states exempt a portion of your capital gains from income tax. If you want to invest at your new location, you can subscribe to some of the best stock newsletters you can find. If necessary, you can consult with a CPA to understand investment taxes, to adjust your portfolio holdings. Don’t forget about estate planning, which is also an integral part of this process.
7. Update Your Mailing Address
Since some bills are still delivered via mail, failure to update your mailing address may mean you forget to pay some of your bills. This could in turn lead to more debt, which is a headache you don’t need. To avoid defaulting on bills, you can update your creditors and financial institutions with your new mailing address upon moving.
Relocating can be stressful and expensive in equal parts. Being in control of your finances can help reduce some of the stress. Follow these tips to ensure you’re financially ready for the big move.
As a result of reading this essay, you should have obtained new knowledge. On this page, you’ll find more suggestions: Top 8 Budget Friendly Home Moving Tips for 2021