Work Remotely? Why It May Not Be Worth It to Move to a Cheaper State

You may not have as much flexibility as you thought.

In the wake of the pandemic, many people are now doing their jobs remotely -- either on a partial or full-time basis. If you're in the latter camp, then you might especially be reaping some cost savings.

Working remotely on a full-time basis means not having to spend a dime on commuting. And not only might that arrangement help you save money on things like gas and parking, but it could also lead to lower auto insurance premiums (insurers commonly give discounts for cars that don't get a lot of use).

Working remotely could also be a source of savings. If you're able to take a big city salary and move to a random suburb, that money will go a lot further.

Or will it? While it's easy to argue that you'll get a lot more out of your salary if you relocate somewhere with a lower cost of living, you may not get the option to bring your full salary with you. So before you make plans to move, you'll need to see what your company's policy on remote employment is.

Moving might cost you part of your salary

Companies tend to give out salaries based on local living costs. If a company has offices in New York City, Chicago, and Boise, the wages it pays workers in the first two cities may far outpace the wages its Boise employees are privy to. And that makes sense. But that's something you'll need to keep in mind if you're working remotely and are looking to move.

The salary you're entitled to as a remote worker might hinge on you living in a certain metro area. And if you leave that metro area, your employer may have the right to adjust your salary to account for the lower living costs you'll be able to enjoy.

Now usually, a company will have to make this policy clear, or state somewhere that your remote salary is based on your specific location. But, let's say you live in San Francisco and earn $120,000 a year. If you decide to relocate to a small city in Michigan where housing costs one-third of what you might pay for a San Francisco apartment, then your company might reduce your wages accordingly. And as such, you may not actually come out ahead financially by making that move.

Of course, there are reasons to move from one part of the country to another that aren't just financial. Maybe you forced yourself to stay in San Francisco because that's where jobs in your industry are concentrated, and you needed to be there before remote work was something companies got on board with. If moving to Michigan puts you closer to friends and family, then it may be worth it even if it results in a salary reduction.

The point, however, is to know what your company's policy entails before making a move. That way, you don't uproot yourself for the express purpose of saving money only to not end up really saving any.

What if your salary stays the same no matter where you go?

It may be the case that your company pays you $80,000 a year whether you live in a large metro area or the suburbs of Kansas. If that's the case, you may be tempted to relocate for a few years to get more out of your paycheck and boost your savings.

But remember, moving to a new part of the country can be daunting (and, in some cases, expensive). So before you force yourself to move for the sole purpose of saving money, you may want to think about the different ways you can stretch your income while staying put. Moving to a less expensive apartment and maintaining a more frugal lifestyle in general could make it so you're able to stay in a city you love, even if it happens to be a more expensive one.