Salary vs. Standard of Living

Americans are fixated on how much they make. People use their salary as a report card of sorts to compare their success to others. The problem is that income is often a poor measurement of success since it is decoupled from a person’s standard of living. It is not how much money you make, but what you can buy with that money that affects your standard of living.

Last year this point was hammered home for me when one of my boys moved from Colorado Springs, Colorado to Bentonville, Arkansas. The composite Consumer Price Index (CPI) in Bentonville is roughly two-thirds of the CPI in Colorado Springs. Therefore, my son can earn one-third less in salary while maintaining the same standard of living. Income does not translate directly to a person’s standard of living.

The same elements that go into CPI also affect a business. Real estate, utilities, healthcare, and wages are all impacted by the location of the business. A manufacturing client of mine is considering moving her business from Colorado Springs, Colorado to Pueblo, Colorado. A short forty mile move will allow her to take advantage of a twenty-five percent reduction in CPI. Does your business need to be located where it is currently, or can you improve your profit margins by moving your business to a nearby city with a lower CPI?

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