How to compare two countries without fooling yourself

At some point most people run this comparison seriously: a job offer abroad, a move, a retirement, a decision about where a remote salary goes furthest.

And most people run it badly, not through carelessness but because the obvious method is wrong in a way that is hard to see. This is the method that is not.

Start by throwing away the index

Cost-of-living indices are the natural starting point and the worst one. They compress a country into a single number, and the compression is done using weights that describe an average household which is almost certainly not you.

A typical index assigns a large share to housing, a large share to food, and smaller shares to transport, healthcare, education and everything else. If your circumstances differ from that profile in any significant way, and nearly everyone's do, the single number is describing a household you are not part of.

Someone with school-age children in a country with expensive private schooling is in a completely different economy from a single person in the same city. So is someone who owns their home outright compared with someone renting. A single index number cannot represent both, and it does not try to.

The six mistakes

In rough order of how much damage each one does.

1. 1.Converting at the market exchange rate. It prices your salary as though you were spending it on imported goods. Most spending is local. Use a purchasing-power comparison for anything spent locally and the market rate only for money that crosses a border.
2. 2.Comparing capital cities to countries. Nearly all price anecdotes come from the most expensive city in each country, and national averages come from everywhere. Compare like with like or the answer is noise.
3. 3.Forgetting what a salary already includes. In one country a wage is take-home after healthcare, pension and childcare have been handled through taxes. In another the same nominal wage has to buy all three privately. These are not comparable numbers and no exchange rate will make them so.
4. 4.Ignoring what you would stop buying. A car is a large monthly cost that vanishes in a city with usable transport. Air conditioning is a large bill in one climate and nothing in another. Moves change the basket, not just its price.
5. 5.Pricing the visit rather than the life. Tourist prices are a different economy: hotel districts, restaurant meals, taxis. Residents shop in a country that visitors mostly never see.
6. 6.Using one year's exchange rate as though it were permanent. If your income and your costs are in different currencies, you have taken on currency risk; a comparison run at today's rate is a snapshot of a number that moves.

A method that works

Five steps, in order. It takes an evening and it beats every index.

One: write down your actual month. Not a budget you aspire to. Pull three months of statements and list what left the account, by category, with the amounts. Most people are surprised twice: once by a category they thought was small, and once by a category they had forgotten entirely.

Two: split the list into local and portable. Rent, groceries, transport, services and utilities are local and will be repriced by the move. Subscriptions, debt payments, savings and anything denominated in a foreign currency are portable and will not.

Three: price the local half in both places. Use rental listings for the specific area you would live in, supermarket prices for the things you actually eat, and local transport fares. Reference tables like the ones on this site are useful for a sanity check on a handful of comparable items; they are not a substitute for pricing your own list.

Four: compare net income, not gross. Run both salaries through both tax systems, including social contributions, and account for what those contributions buy. A higher gross salary in a country where you must privately fund healthcare and retirement can be a lower real one.

Five: add the things that are not money. Commute length, holiday entitlement, sick leave, notice periods, healthcare access, how far you would be from people you care about, and what happens to your position if the job ends. These do not convert into currency and they routinely dominate the decision anyway.

What the work-time column is for

There is one comparison that is unusually robust, and it is the reason every country page here shows it.

Take a price in local currency and divide it by a local wage. The result is how long someone has to work to buy the thing, and it has a property no dollar figure has: the exchange rate cancels out. It cannot be distorted by a currency swing, a conversion date or a bad rate at an airport.

It is not a complete answer, because wage averages hide enormous dispersion and the average worker is a statistical construct. But as a way of asking whether a price is high *for the people who live there*, it beats every conversion, and it is frequently the column that reverses the ranking a dollar table gave you.

The honest limits of this site

Worth saying plainly, since this is a page about not fooling yourself.

The figures here are national averages of a small basket of everyday items, compiled from public sources and refreshed when those sources publish. They are good for building intuition, for noticing that a country you assumed was expensive is not, and for the specific question of how a handful of ordinary goods compare across borders.

They are not a relocation calculator. They contain no housing costs, which will be the largest line in almost anyone's budget, no healthcare, no schooling and no tax modelling. Anyone making a real decision needs all four, and needs them for the specific city and circumstances rather than for a country.

Use this to calibrate your intuition. Use your own statements, real rental listings and a tax calculator to make the decision.