"Sacrifice" vs. "forgo": which is better in this sentence?

Sacrifice and forgo both seem like perfectly good choices.

Trade-off (or tradeoff) would be a good possibility, but the dictionaries I've checked define it only as a noun. See http://www.merriam-webster.com/dictionary/trade-off, http://www.thefreedictionary.com/tradeoff, http://www.dictionary.com/browse/tradeoff?s=t>, http://www.oxforddictionaries.com/us/definition/american_english/trade-off?q=tradeoff. Given that, you could use trade off as two separate words:

I don't know if I should trade off the higher salary for living in a nicer city.

I don't know if I should trade off living in a nicer city for the higher salary.

You could also use compromise or exchange:

I don't know if I should compromise the higher salary for living in a nicer city.

I don't know if I should exchange the higher salary for living in a nicer city.

Of these options, I would go with trade off (which is a slight twist on the suggestion of @KristinaLopez -- noun versus verb issue).

Sacrifice often has the connotation of giving up something you already had:

To surrender or give up (something) for the attainment of some higher advantage or dearer object.

If I had a well-paying job in a crummy city, and I was offered a worse-paying job in a preferable city, I might consider sacrificing my high salary for the better living conditions.

Forgo, on the other hand, has the connotation of not partaking in something that you do not yet have:

To abstain from, go without, deny to oneself; to let go or pass, omit to take or use; to give up, part with, relinquish, renounce, resign.

I think that "forgo" is a better choice here, since you do not yet have either job. That said, both options would be perfectly understandable.

(Both definitions are from the OED.)

I agree with Michael Seifert on this one.

You are comparing the pros and cons of these two job opportunities. And you can't really sacrifice something you don't have. So your sentence could look something like:

"I have received two offers. The first one is of a good salary, but I did not like the city, while regarding the 2nd offer, it is of a lower salary but the city is awesome. I do not know whether or not if I should [settle for a lower salary, so I can live] in a nice city."

I say settle, because when you settle for something, you are accepting or agreeing to something that is less than satisfactory.