Friday, December 16, 2005

The Hidden Cost of Living

Before moving to the US, almost everyone we met told us how much we'd be financially better off because everything in America is cheaper. Now that we are here, we realise that although some things are cheaper here in the US, many things are more expensive than they are in the UK.

Everyday Living

In England, higher end food shopping is done at Waitrose or M&S; middle range are Tesco, Sainsburys, Asda; and the low end is Kwik Save, Lidl and Aldi.

When we first moved to the US, we went shopping for basic supplies in the first supermaket we found. The prices were in orbit and we were surprised that the fruit and veg. were not all gold plated or studded with diamonds. This place was Harris Teeter and we have since found out that there are cheaper places to shop (Kroger, Food Lion, Walmart, Target). In addition, prices are greatly reduced with the use of loyalty cards (these provide on-the-spot reductions rather than points for spending later).

However, even in these "cheaper" places, the prices are, at best, the same as UK prices and are often more expensive. For example, the cheapest loaf of bread we've managed to find was $1.50 + tax; the cheapest 2 quarts of milk (I think that this equates to about 2 pints, but I'm not really sure) was about $2.30 + tax.

Utilities (landline phones, mobile phones, gas, electricity, water, TV, internet) are all more expensive here than they are in the UK. Clothes can be cheaper if bought from a lower-end shop like Walmart. However, bought from a Mall (unless in a sale), they are about the same or more expensive.

"But, some things must be cheaper, otherwise how is this myth propagated?" I hear you ask.

You're quite right. Some things are cheaper. Electrical items and petrol are a lot cheaper here than they are in the UK. Staying in hotels and eating out are also a lot cheaper. Houses are also cheaper in that one gets a lot more for one's money. For a similar price as our ex-council house in Birmingham, we've got a 0.46 acre plot with a fairly large house. However, it must be said that many houses in Britain have stood the test of time better than any I have yet seen in the US (some that were built back in the 15th century are still functional). The values of houses, at least in this part of America, depreciate with age. Buying a house here is not the investment that it is in the current UK climate.

I think that the myth propagates because visitors to the US stay in hotels, eat in restaurants and see the big US houses; and go home thinking that everything in America is cheaper. Conversely, US visitors to the UK stay in and eat at the more expensive Brisish hotels and restaurants; and they visit British people in their small British homes. Then they carry home with them the report that the UK is expensive.


The other thing to consider is that in the UK the VAT is 17.5%. Generally speaking, in the UK, the price you're quoted is the price you pay.

Here the taxes added onto purchases add up to only 7% (this varies from state to state). What still takes me off guard is that all the prices quoted are without tax, so when you go into McDonalds and order an item from the dollar menu, it costs $1.07.

A good example of hidden costs was our Time Warner Cable bill. We expected the advertised cost to be the cost we'd pay, but when our first bill arrived it had added expenses for equipment hire (normally included at no extra cost in the UK) and 7% tax (normally included in the quoted cost in the UK). We have since found several services that are cheaper than Time Warner Cable, but the hidden costs still exist.


I have already talked a little about tipping in the US. This can be considered another hidden cost.

So, what's the moral of this story?

If you're planning to make the big leap across the big pond, you can probably expect the standard of living to be higher than you've been used to (after all, you're probably moving because you've been offered more money than you're currently on), but don't expect the overall cost of living to be lower.

The other thing is that if you're selling your UK home and buying a house in the US, you might want to keep some money aside to facilitate your re-entry onto the UK property ladder if/when you need it.

(By the way, you might like to read Michael's blog entry about exchange rates.)

March 28, 2006

It seems that according to ECA International, the US had a higher cost of living than the UK. At least they did six years ago. Here's the article:

UK Continues to Hold Its Own As One of the World's Most Costly Locations


Tanie said...

Good info and comment but are you enjoying it?

Viola said...

I am enjoying it -- and more so as we settle in and get more of the obstacles out of the way.

By the way, I like your website and blog. I think you're very brave, but I agree, if you can do it, do it.

Stephen C. Carlson said...

the cheapest 2 quarts of milk (I think that this equates to about 2 pints, but I'm not really sure) was about $2.30 + tax

I had to look this up, but here it goes: There are 16 fluid ounces in the American quart, and 20 fluid ounces in the imperial quart. However, the size of the American fluid ounce is larger than the British fluid ounce, so instead of being 25% bigger, the imperial quart is only 20% larger than the American. So if 2 American quarts of milk costs $2.30 + tax, then 2 imperial quarts would run $2.76 + tax.

It is my understanding that the price of sugar in the U.S. is artificially high. Have you noticed any difference there?

Viola said...

It's all very complicated. There's 32 fluid ounces in the American quart (ie 2 pints). This means that my 2 quarts of milk is 4 American pints (1.89L).

I decided to check how much milk is in the UK (Sainsburys). 4 imperial pints of milk (2.27L) costs £1.11.

Sugar is currently £0.73/kg. We've only bought sugar once since we've been here (one packet lasts a long time because we don't tend to use much) and I can't remember how much it cost us, but I think it was more expensive.

In case anyone is hankering after some useful information, here's a few links:
Diana's Desserts
Paul and Bernice Noll's Website

And for currency conversion:
Universal Currency Converter

Anonymous said...

Paul Dryden writes:
Goodness me, the fluid ounce is the fluid ounce! ie: It is the volume that is represented by one ounce of water at whatever is the legally determining temperature. The US pint is 16 fl/oz, or a fluid pound. The UK or Imperial pint is 20 fl/oz, or a much better size for a drink. The quart is two pints, of whichever system you are using. Therefore, as a quart is a quarter of a gallon, the US Gallon is only 4/5 the size of the Imperial Gallon. This is the only difference between the Imperial system and US weights and measures (and THREE CHEERS to the USA for telling the metrication people to shove their ghastly eighteenth-century rationalistic and inhuman system up their largely Francophile fundaments! (There was an amusing cock-up with the determination of Metric measures, meaning that 1 cubic centimetre is not 1 millilitre, as the temperature was wrong when the determination was made.))