Comparing a foreign salary with the cost of living: work out your real disposable income

Gross, net and bonuses: decoding the number you were quoted

Before any comparison, find out what kind of figure you are looking at. Is it annual or monthly, gross or net, paid in twelve instalments or more? Does it include a variable component, a thirteenth-month payment, performance bonuses or allowances tied to the position? Customs differ widely from one country to another, and the same number can describe very different realities.

Ask the employer to set out the pay structure in writing. Separate what is fixed, what depends on targets and what is a benefit in kind. Only the contractually guaranteed part should be used as the basis of your budget.

Check how often salaries are reviewed and under what conditions bonuses are paid: being on the payroll on a given date, hitting targets, a minimum length of service. A bonus mentioned in the offer but subject to such conditions has no place in a cautious calculation, even if it looks likely.

Never compare a foreign gross salary with your current take-home pay

This is the most common mistake: putting a gross salary quoted abroad next to the net pay you receive at home. Deductions, social contributions and taxes differ from country to country, and how they apply depends on your personal circumstances. Ask how the net figure is calculated and, if possible, request a sample payslip or a simulation from the employer.

If some contributions or taxes remain governed by French rules in your case, add them to the equation. When in doubt, ask the competent bodies rather than relying on an estimate picked up on a forum or an online comparison tool.

• The gross salary quoted and how often it is paid
• Contributions and taxes withheld at source
• Guaranteed bonuses and conditional bonuses
• Benefits provided and what they are really worth
• Obligations that still apply in your home country

Price out the cost of living where you will actually live

A national average hides huge gaps between a capital city, a mid-sized town and a rural area. Start from the neighbourhood, the type of housing and the way of getting around that you have in mind, then collect recent prices: rental listings, transport passes, grocery baskets from the shops you would really use.

Statistical indicators, such as the comparative price levels published by Eurostat for European countries, give a useful but general benchmark. They are no substitute for a real housing listing or an insurance quote, which show a cost you will actually pay.

The expenses that can tip a budget

Housing is nearly always the biggest item, but others come as a surprise: heating or air conditioning, supplementary health insurance, school fees, childcare, daily commuting, a car you cannot do without when public transport is thin. Any of them can swallow a large share of a salary that looks high on paper.

Also list what disappears when you leave: a lower rent, commuting costs paid by your employer, a company that used to fund your health top-up. An honest comparison covers the whole budget, not one flattering line.

Exchange rates: test an unfavourable movement

If you are paid in one currency while part of your spending stays in another, a shift in the exchange rate changes your real purchasing power. Use reference rates published by a recognised institution, such as the European Central Bank, and note the date of your calculation.

Redo your table with a rate less favourable than today’s. If the plan still works, it is robust; if it only holds at the current rate, it rests on a gamble. Also factor in transfer fees and delays, which reduce the amount you actually receive.

A short case study: two developer offers, two budgets

A developer compares two proposals. The first, in an expensive big city, shows a clearly higher salary; the second, in a mid-sized town, a more modest figure. Once he breaks down rent, transport, health insurance and electricity, he finds that the gap narrows sharply.

He also discovers that the mid-sized town’s offer includes a partial transport refund and more flexible hours. His disposable income ends up close in both cases, but the quality of life differs. His decision then rests on what he is really looking for, not on the biggest number.

He keeps his spreadsheet and updates it after three months on the job, comparing actual spending with his forecasts. That difference helps him negotiate a possible review, or adjust his lifestyle, using facts instead of impressions.

Allow for double spending during the transition

In the first months you often pay for two lives at once: housing abroad and commitments left behind at home, such as a rent you have not terminated, insurance policies or a loan. Add this overlap period to your comparison, because it cuts your disposable income exactly when your savings are thinnest.

Finally, think about what you could save. A higher salary only makes sense if it lets you put aside more than before, or reach a specific goal, such as funding a project or preparing a return.

Build a simple, dated comparison table

Create a table with two columns: your current situation and the one you are considering. Each row gives the amount, the source (a quote, a listing, an official page, an email from the employer) and the date. Add a third column for the level of certainty: confirmed, estimated or uncertain.

Go through it with a trusted person who knows the country or the industry, and update it whenever new information arrives. A dated, sourced table protects you from the excitement of an attractive offer and makes negotiating with the employer easier.