Thinking about moving abroad and figuring out how much you'll need to earn? Don't just guess your ideal salary. Calculate it using a reliable and 100% personalized method.
Enter the bottom-up technique.
The bottom-up salary calculation starts by totaling your essential living costs—from rent and utilities to healthcare and groceries—then adding savings, lifestyle expenses, and more. This method gives you a clear, accurate picture of what you should aim to earn in your new destination if you want to live comfortably.
In the next 7 minutes, you'll find out exactly how to apply the bottom-up technique to calculate your ideal salary abroad, ensuring you can live in another country comfortably and stress-free. RELATED:
How to Calculate an Ideal Salary When Moving Abroad?
When you're thinking about moving to a new country, planning your finances is one of the 7 things you must do before moving abroad. And figuring out your ideal salary is the cornerstone. It ensures you can maintain your lifestyle and meet your financial goals. To do this effectively, you need to assess your current financial needs and research the cost of living in your destination.
There are two main ways you can calculate your ideal salary: top-down or bottom-up.
Option A. Top-Down Salary Calculation Technique
This is how most people approach salary calculation.
You start by looking at what companies typically offer for your target jobs and work from there. For instance, if companies in your new city generally pay between $50,000 and $60,000 for your position, that’s your starting point.
You then check if this range aligns with your financial needs. If it doesn't, you might need to either adjust your expectations, consider a different location, or target higher-paying roles.
This method is great because it’s straightforward and gives you a realistic picture of the job market in your new city. However, it might not always reflect what you need to sustain your lifestyle or reach your financial goals, so you'll need to compare it against your actual expenses and savings targets and potentially tighten up your budget.
Option B. Bottom-Up Salary Calculation Technique
This approach flips the process around. Instead of looking at market rates first, you begin by calculating your personal financial needs.
Start by adding up all your living expenses, like rent, groceries, and utilities, and then include any savings goals or debt repayments. Once you have your total, this becomes the baseline salary you need to maintain your lifestyle comfortably.
This method is beneficial because it’s personalized to your situation. It helps ensure you don’t overlook essential costs or shortchange your savings goals.
If the bottom-up calculation shows you need more than what the top-down salary estimates suggest, you can consider negotiating for a higher salary, exploring different roles, or adjusting your lifestyle to fit the new location.
These two methods give you a clear picture of the financial landscape as you consider moving abroad. Whether you choose the top-down or bottom-up approach, the key is to make sure your salary will cover your expenses and help you meet your financial objectives.
Now, let's dive into the latter technique.
Research the Cost of Living
Once you've assessed your financial needs, it's time to research the cost of living in your new country. Understanding the local economy and living costs is crucial for setting a realistic salary target. Here’s how to tackle this:
Housing costs: Start by looking at rent prices in various neighborhoods. Compare these with your current rent to see if they’re higher or lower.
Utilities: Check average utility costs in your new location. This could include heating, cooling, electricity, and internet.
Healthcare: Research the healthcare system. Is it public, private, or a mix? What will insurance cost you?
Food and groceries: Look at the prices of common grocery items. Are they more expensive or cheaper than what you pay now?
Transportation: How will you get around your new location? Don't forget to factor in public transit, gas for a car, and any other car expenses.
Savings and Investments: Investigate the best local banks and investment opportunities. Do they offer good interest rates or returns?
Lifestyle: Consider entertainment options, dining out, and cultural activities. How much do locals spend on these?
Other costs: Don’t forget clothing, beauty treatments, hairdressers, and any other specific needs you might have.
By comparing these living costs to your current expenses, you can adjust your ideal salary target. This way, you ensure that you’re not shortchanging yourself or aiming too high, which is crucial for successfully negotiating a salary in another country.
Remember, the goal is to build up from your basic life expenses to the total salary you need. This bottom-up approach helps you set realistic financial expectations and plan for a smooth transition to your new home.
Bottom-Up Salary Calculation Technique
When you think about moving abroad, one of the biggest questions is how much money you need to live comfortably. This is where the bottom-up salary calculation technique comes into play.
This method helps you calculate your ideal salary abroad by starting from your basic expenses and building up to a total amount. Let's break it down.
Starting from the Ground Up
The first step in calculating your ideal salary abroad is to start from the ground up. List your specific expenses and financial goals.
Rent: Find out the average rent cost in your new city. Consider the size of the home and the neighborhood.
Utilities: Estimate costs for electricity, water, heating, and internet.
Healthcare: Look at health insurance premiums and out-of-pocket costs.
Food and groceries: Calculate how much you spend on food each month.
Transportation: Factor in all costs connected with public transport or car maintenance.
Savings and investments: Decide how much you want to save or invest each month.
Lifestyle: Consider costs for entertainment, commuting, and hobbies.
Other expenses: Include any additional costs like education, travel, or unexpected expenses.
Done? Great! Let's briefly cover the beloved taxes.
Considering Taxes and Deductions
Next, you'll need to take into consideration taxes and any other deductions.
Since each country has different tax laws, understanding them can make a big difference in your final salary calculation. So, for clarification, this technique helps you calculate your net salary, which is what you'll actually take home.
In case you want to determine the gross salary amount, you'll need to take two more steps:
Research local tax laws: Know the income tax rates and how they're applied.
Factor in mandatory deductions: Consider social security, healthcare contributions, and any other mandatory deductions.
For example, if you're moving to Germany, you need to know that taxes can be pretty high, but they also cover many social benefits. Local salary calculators will help you figure it out. Just make sure to adjust the calculator settings to "from net to gross" and not the other way around.
Follow these steps to get a clear picture of the ideal/minimum salary you need to live comfortably abroad. This method ensures that you don't miss out on anything important and helps you plan your new life more effectively.
Bottom-Up Salary Calculation Formula
Okay, back to our bottom-up salary calculation.
The formula is simple. Just sum up all your expenses.
(Minimum) Ideal Salary Abroad = Rent + Utilities + Healthcare + Food and groceries + Transportation + Savings and investments + Lifestyle + Other costs
Important: This gives you the MINIMUM net salary you need for your ideal lifestyle. (If you can get more, that's even better!)
Bottom-Up Salary Calculation Example
Let's break it down with an example.
Imagine you're a single person working in finance who is planning to move to London. You're used to having a healthy lifestyle with lots of sports activities and social outings with your coworkers and expat friends. Plus, you save and invest every month. Ideally, you'd like to maintain the same lifestyle in London.
Here's how you can calculate your ideal salary abroad using the bottom-up technique:
Rent: £2,000 per month for a one-bedroom apartment in West London.
Utilities: £400 per month covering electricity, water, heating, internet, and council tax.
Healthcare: £100 per month for health insurance.
Food and groceries: £400 per month on groceries and dining out.
Transportation: £100 per month on tube and train.
Savings and investments: £500 per month to save and invest.
Lifestyle: £200 per month on sports, entertainment and hobbies.
Other costs: €150 per month for miscellaneous expenses or any emergencies.
Now, add them all up:
Total Monthly Expenses: £3,850
To get your yearly expenses, multiply by 12:
Total Yearly Expenses: £3,850 * 12 = £46,200
These amounts show you your ideal NET salary per month and year. (Net salaries = take-home pay. It's what you get after all taxes are deducted. This is super important to know, as most employers communicate GROSS salaries, not net.) Now you know what is the minimum amount you should ask for when negotiating your salary for a job abroad.
Where to Find All the Information You Need to Calculate Your Ideal Salary
When you're planning to move abroad, figuring out how much money you need can feel overwhelming. But don't worry! You can get a clear picture by finding the right information.
Here's how and where to gather the details you need to calculate your ideal salary abroad using the bottom-up technique.
Official government websites: Government websites are a treasure trove of reliable data. They offer up-to-date information on living costs, tax rates, and even average salaries.
Check out the official sites of your destination country, including embassy websites and local municipal websites.
Online cost of living calculators: Online tools can simplify your research. These calculators allow you to input your current expenses and compare them to the estimated costs in your new location. Some popular options include Numbeo and Expatistan.
Expat forums and communities: Nobody knows a place better than the people already living there. Expat forums and social media groups are gold mines for firsthand information. Look for Reddit, especially subreddits like r/expat and r/[DestinationCountry], and Facebook groups dedicated to expats in your destination.
Real estate websites: Real estate websites are invaluable for getting a sense of how much you'll spend on housing. These sites list current rental and purchase prices, giving you a more accurate figure for your budget. Check Zillow for the US and some international locations, Rightmove for the UK market, and other local real estate agencies.
Grocery store websites: Understanding your future grocery bill is easier than you think. Most large supermarkets and local stores have websites where you can check prices on staple items like milk, bread, and vegetables.
You can also visit their online stores and add all the items you typically buy per week to the cart. The total amount will tell you how much you can expect to spend on groceries per week more accurately than any cost of living calculator.
(This might seem silly, but this is literally how my husband and I knew exactly how much we'd spend on groceries in Sweden... three months before we moved there.)
Armed with all this information, you'll be well-prepared to calculate your ideal salary abroad using the bottom-up technique.
This approach ensures you won’t miss any critical expenses and can set realistic financial goals. Plus, using this method, you ensure every aspect of your life is covered. It takes the stress out of worrying about unexpected costs, letting you enjoy your new life abroad.
TL;DR: How to Calculate Salary for a Job Abroad
Calculate your ideal salary abroad using the bottom-up technique to ensure you cover all bases. Starting with rent and moving up through utilities, healthcare, food, groceries, and other essentials guarantees a realistic and achievable salary target.
Armed with this knowledge, take action and make informed decisions about your international move. Think about your future expenses, plan accordingly, and take the leap.
Matilda & Ana
Hi there! We're Matilda and Ana — the founders of MoreThanCareers, expats, international corporate recruiters, and HR professionals with 18+ years of combined HR experience. Since 2018, our career-building techniques, tools, and resources have helped over 500 coaching clients and 10,000 professionals worldwide land new, more fulfilling, higher-paying, and career-changing jobs.
Now it's your turn. And MoreThanCareers is here to help!