Shopping on line can be easy, simple and save you lots of money. It can also take a lot of your time, frustrate you, and result in unwanted purchases. Now the same can be said for regular high street shopping, but with the vast opportunity presented by the Internet it will pay you to spend a few minutes reading this and understanding how to better optimize your Cost Of Living shopping experience:
1. Compare - without doubt the biggest advantage that the Cost Of Living offers shoppers today is the ability to compare thousands of Cost Of Living at a time. This is a great thing, but not necessarily all the time! Too much can be daunting at times so take advantage of the great comparison sites and where possible let them do the hard work for you.
2. Research - if it has been said it will be on the internet. Ignorance is no longer a justifiable reason for buying the wrong thing. Take the time to research in detail everything that you could possible want to know about
3. Testimonials - don't know anybody that has bought a Cost Of Living? Wrong! If the Cost Of Living is good the internet will let you know. Use the Internet as a friend and get testimonials before you buy.
4. Questions - Got a question about Cost Of Living then search the Forums, FAQ's, Blogs etc. Don't be afraid to ask .....
5. Reputation - Never heard of the company selling Cost Of Living? Don't worry, no reason why you should know every company in the world, but you know someone that does! Use the internet to find out what people are saying about Cost Of Living and build up a picture of their reputation for sales, returns, customer service, delivery etc.
6. Returns - still worried that even after all of the above your Cost Of Living wont be what you want? Check out the returns policy. There is so much competition now that someone, somewhere is bound to offer the terms that you are comfortable with.
7. Feedback - happy with your Cost Of Living then let people know, after all you are depending on others people input in your buying decision, so why not give a little back.
8. Security - check for the yellow padlock on the Cost Of Living site before you buy, and the s after http:/ /i.e. https:// = a secure site
9. Contact - got a question about Cost Of Living, or want to leave a comment then check out the sites contact page. Reputable companies have them and respond.
10. Payment - ready to pay for your Cost Of Living, then use your credit card or PayPal! Be aware of companies that don't accept them, there may be genuine reasons but given the huge amount of choice you have when buying online there is no reason at all not to buy via credit card or PayPal.
The
cost of living is the cost of maintaining a certain standard of living over time. A
cost-of-living index, such as the
United States Consumer Price Index is a
price index that conceptually measures relative cost of living. Such indexes are constructed to have a value of 100 in a given year (or period, or place), the
base. Other values of the Consumer Price Index are relative to the base year. An index value of 110 indicates that the cost of living is ten percent higher than in the base year. Thus, the index provides a unit-free measure of the change in the cost of living. Cost-of-living indexes are also available that allow for Substitute good as relative prices change.
Another kind of cost-of-living index compares the cost of living not across time but across locations, such as
metropolitan areas. A value of 100 for the index would indicate which areas had a cost of living above or below that level.
A Konüs index is a type of cost-of-living index that uses an expenditure function such as one used in assessing expected
compensating variation. The expected indirect utility is equated in both periods. This method can be used to introduce risk aversion into cost-of-living indexes.
A cost-of-living index is a useful way to consider welfare changes caused by changes in factors exogenous to the individual household, such as inflation, and the
Monetary policy,
Fiscal policy, and Trade policy of
governments. One drawback to simple price change measurement is a difficulty in measuring changes in the quality of goods.
Cost-of-living allowances (COLA)
Employment contracts, pension benefits, and government entitlements (such as Social Security) can be tied to a cost-of-living index, typically to the consumer price index (though such CPI increases may not meet the "indifference" objective if the increase is then reduced by income taxes). A
cost-of-living allowance (COLA) adjusts salaries based on changes in a cost-of-living index. Salaries are typically adjusted annually. They may also be tied to a cost-of-living index that varies by geographic location if the employee moves.
Annual escalation clauses in employment contracts can specify retroactive or future percentage increases in worker pay which are not tied to any index. These negotiated increases in pay are colloquially referred to as cost-of-living adjustments or cost-of-living increases because of their similarity to increases tied to externally-determined indexes. Most
economists and compensation analysts would consider the idea of predetermined future "cost of living increases" to be misleading for two reasons: (1) For most recent periods in the industrialized world, average wages have actually increased faster than most calculated cost-of-living indexes, reflecting the influence of rising
productivity and worker bargaining power rather than simply living costs, and (2) most cost-of-living indexes (see above) are not forward-looking, but instead compare current or historical data. Additionally, simple arithmetic requires that any increase subject to income tax will necessarily have to exceed the inflation rate to result in an inflation adjusted after-tax salary level. Thus for real purchasing power (or any after-tax income) to merely keep up with inflation, gross income must increase faster than cost-of-living indexes.
Consequently, where using CPI as a proxy for a Cost-of-Living index may fall short is in accounting for subsequent income taxes on COLA increases. As a means for adjusting gross wages/salaries/incomes CPI calculations may fail to gross-up for 'progressive rate marginal taxes'. Indexed increases are generally taxed at the highest marginal tax rate, whereas the consumer expenditure market basket corresponds to the consumer's generally lower average tax rate. The widely recognized problem known as bracket-creep can also occur in countries where the marginal tax brackets themselves are not indexed - COLA increases simply place more dollars into higher tax rate brackets. (Only under a flat-rate tax system would a percentage gain on gross income translate into a comparable inflation-offsetting gain at the after tax level.)
Cost-of-living allowance
Stipends or extra pay provided to employees who are being temporarily relocated may also be called
cost-of-living adjustments or
cost-of-living allowances. Such adjustments are intended to offset changes in welfare due to geographic differences in the cost of living. Such adjustments might more accurately be described as a per diem allowance or tied to a specific item, as with housing allowances. Employees who are being permanently relocated are less likely to receive such allowances, but may receive a base salary adjustment to reflect local market conditions.
A cost-of-living allowance is frequently given to members of the Military of the United States stationed at United States military bases. For example, United States Forces Japan receive a cost of living allowance of between $300 and $700 per month (depending on
pay grade), in addition to their base pay.
References
External links
- Cost-of-Living Calculator from American Institute for Economic Research (AIER)
Internationally recognised cost of living index by Mercer Human Resource Consulting: http://www.mercerhr.com/knowledgecenter/reportsummary.jhtml/dynamic/idContent/1128060
The
cost of living is the cost of maintaining a certain
standard of living over time. A
cost-of-living index, such as the United States Consumer Price Index is a price index that conceptually measures relative cost of living. Such indexes are constructed to have a value of 100 in a given year (or period, or place), the
base. Other values of the Consumer Price Index are relative to the base year. An index value of 110 indicates that the cost of living is ten percent higher than in the base year. Thus, the index provides a unit-free measure of the change in the cost of living. Cost-of-living indexes are also available that allow for Substitute good as relative prices change.
Another kind of cost-of-living index compares the cost of living not across time but across locations, such as metropolitan areas. A value of 100 for the index would indicate which areas had a cost of living above or below that level.
A Konüs index is a type of cost-of-living index that uses an expenditure function such as one used in assessing expected
compensating variation. The expected indirect utility is equated in both periods. This method can be used to introduce risk aversion into cost-of-living indexes.
A cost-of-living index is a useful way to consider welfare changes caused by changes in factors exogenous to the individual household, such as
inflation, and the Monetary policy, Fiscal policy, and
Trade policy of governments. One drawback to simple price change measurement is a difficulty in measuring changes in the quality of goods.
Cost-of-living allowances (COLA)
Employment contracts, pension benefits, and government entitlements (such as Social Security) can be tied to a cost-of-living index, typically to the consumer price index (though such CPI increases may not meet the "indifference" objective if the increase is then reduced by income taxes). A
cost-of-living allowance (COLA) adjusts salaries based on changes in a cost-of-living index. Salaries are typically adjusted annually. They may also be tied to a cost-of-living index that varies by geographic location if the employee moves.
Annual escalation clauses in employment contracts can specify retroactive or future percentage increases in worker pay which are not tied to any index. These negotiated increases in pay are colloquially referred to as cost-of-living adjustments or cost-of-living increases because of their similarity to increases tied to externally-determined indexes. Most
economists and compensation analysts would consider the idea of predetermined future "cost of living increases" to be misleading for two reasons: (1) For most recent periods in the industrialized world, average wages have actually increased faster than most calculated cost-of-living indexes, reflecting the influence of rising productivity and worker bargaining power rather than simply living costs, and (2) most cost-of-living indexes (see above) are not forward-looking, but instead compare current or historical data. Additionally, simple arithmetic requires that any increase subject to income tax will necessarily have to exceed the inflation rate to result in an inflation adjusted after-tax salary level. Thus for real purchasing power (or any after-tax income) to merely keep up with inflation, gross income must increase faster than cost-of-living indexes.
Consequently, where using CPI as a proxy for a Cost-of-Living index may fall short is in accounting for subsequent income taxes on COLA increases. As a means for adjusting gross wages/salaries/incomes CPI calculations may fail to gross-up for 'progressive rate marginal taxes'. Indexed increases are generally taxed at the highest marginal tax rate, whereas the consumer expenditure market basket corresponds to the consumer's generally lower average tax rate. The widely recognized problem known as bracket-creep can also occur in countries where the marginal tax brackets themselves are not indexed - COLA increases simply place more dollars into higher tax rate brackets. (Only under a flat-rate tax system would a percentage gain on gross income translate into a comparable inflation-offsetting gain at the after tax level.)
Cost-of-living allowance
Stipends or extra pay provided to employees who are being temporarily relocated may also be called
cost-of-living adjustments or
cost-of-living allowances. Such adjustments are intended to offset changes in welfare due to geographic differences in the cost of living. Such adjustments might more accurately be described as a per diem allowance or tied to a specific item, as with housing allowances. Employees who are being permanently relocated are less likely to receive such allowances, but may receive a base
salary adjustment to reflect local market conditions.
A cost-of-living allowance is frequently given to members of the
Military of the United States stationed at
United States military bases. For example, United States Forces Japan receive a cost of living allowance of between $300 and $700 per month (depending on
pay grade), in addition to their base pay.
References
External links
- Cost-of-Living Calculator from American Institute for Economic Research (AIER)
Internationally recognised cost of living index by Mercer Human Resource Consulting: http://www.mercerhr.com/knowledgecenter/reportsummary.jhtml/dynamic/idContent/1128060
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