Are you fed up with rising prices and the high costs of living in your area? Even when you think things couldn’t get more expensive in bustling cities like New York and San Francisco, the sticker shock can still catch you by surprise.
Perhaps you find yourself frequently wishing you could take your existing income and move somewhere else that is much cheaper in order to grow your wealth faster. Or maybe you are eager to move to a more expensive city in order to have more career opportunities and build your pot of gold.
Although some people have the flexibility to take their jobs with them and work anywhere in the world, a lot of people don’t have that luxury. And just because some cities have low costs of living doesn’t mean the people who live there have a higher chance at getting rich.
Let’s take a look at some fun facts about the cost of living in different areas across the U.S.
Where Are The Most And Least Expensive Areas In The U.S.?
So just where are the cheapest and priciest areas located in the U.S.? Some of the locations might surprise you.
The Council for Community and Economic Research reported the top 10 most and least expensive urban areas in the US as seen below based on the cost of housing, utilities, food, transportation, healthcare, and other goods and services.
To help put the most and least expensive areas into perspective, the average cost of a home in Manhattan is approximately $1.36 million but only $178,000 in McAllen, TX.1 That’s close to a 664 percent difference! If you aren’t familiar with McAllen, it’s about a 3.5-hour drive south of San Antonio, right near the border of Mexico. Needless to say, the lifestyle and job opportunities in New York City and McAllen are vastly different.
How Much Are The Wealthy Earning?
Your next question might be where do people make the most money? The more income you make, the more options you may have to invest and grow your wealth. Perhaps moving to a new location could help you earn a higher salary and increase your chances at getting rich. Let’s take a look at the areas in the U.S. with the highest incomes.
The chart below highlights how much the top 5 percent richest households compare across many US cities.
It is interesting how San Francisco, which ranks fourth on COLI’s most expensive areas list, places much higher than New York in terms of the top household incomes: $423,171 versus $243,529 is quite a spread.
This may suggest that the cost of living in some areas doesn’t equally correspond to how much income you could earn there. However, the above chart offers clues to locations in the U.S. where people have been able to successfully earn a lot of money.
How Far Your Money Goes May Depend On Where You Live
These studies may make you wonder if people get more bang for their buck in some cities rather than others. In 2014, the Bureau of Economic Analysis released a comparison of 2012 prices in different metropolitan areas.
The results, called Regional Price Parities (RPPs) compares the prices of the same types of goods and services in a local area versus the average national price level. The national price level is represented as 100, so areas that score an RPP above 100 are more expensive and areas that score less than 100 are cheaper. Below are some of their findings, the first six of them among the highest and the bottom five among the lowest.2
New York, NY at 122.2
San Jose, CA at 122.0
Stamford, CT at 121.5
San Francisco, CA at 121.3
Washington, DC at 120.4
Danville, IL at 79.4
Jefferson City, MO at 80.8
Jackson, TN at 81.5
Jonesboro, AR at 81.7
Rome, GA at 82.2
What Median Incomes Actually Feel Like In Different Cities
Additional data sourced from the U.S. Bureau of Economic Analysis shows examples of median incomes of workers in cities across America, illustrating how far that money effectively goes based on the local cost of living.
What stands out is that Washington DC showed the highest median income of $44,452 on the left, but after adjusting for the cost of living, DC’s median income dropped down over 21 percent to $35,029.
Additionally, the highest adjusted median income was not DC but Rochester, MN, at $36,279. The low cost of living added 1.21 percent more spending power to median incomes. Rochester is approximately 1.5 hours southeast of Minneapolis by car.
What’s even more impressive is that median income earners in Danville, IL, who earned $30,079 basically felt like they made $35,947, or 19.5 percent more. If you’re unfamiliar with Danville, IL, it is located about an hour and forty minutes northwest of Indianapolis.
Think Twice Before Packing Your Bags
All of these data points might have your thoughts whirling about relocating to an area with a lower RPP, a higher adjusted median income, and a more affordable cost of living. While you might conclude you have a better chance at gaining wealth in a new city, relocating is not a decision to take too lightly. You’ll want to closely weigh the pros and cons.
Here are some things to consider before packing your bags and fleeing from an expensive area:
• Moving costs can be expensive and relocating is time consuming.
• Research the health of the real estate market in both your current and future area if you need to sell an existing home and/or purchase a new one. Timing is everything.
• Compare the unemployment rate and job offerings in your current area with where you want to relocate.
• If you have a specialized set of skills or work in a niche industry, it could be difficult to find work in another location.
• If your line of work involves relationships with local clients, having to start over in a new area could set you back financially while you build a new client base.
• Tax rates can vary a lot by city, county, and state. You could end up paying a lot more, about the same, or a lot less in taxes depending on where you go. Bear in mind, however, that seven states currently do not have income tax for residents: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.3
You Can Get Rich Anywhere With Smart Choices
There’s no question that some cities cost a lot more to live in than others. Higher prices can be accompanied with more job options, better facilities, extra resources, and more opportunities to grow your wealth.
Fortunately, the Internet is making it easier for more people to work remotely, track their expenses, plan for retirement, manage their money, and invest in new opportunities regardless of where they are located. Whether or not you get rich isn’t solely determined by where you live.
Your ability to grow your assets is impacted by how responsible you are with the money that you have now, how much you’re able to earn in the future, how much you save, and how you choose to invest.
Motif Investing offers a wide assortment of flexible investment products and services to help you invest for your future and build your wealth. Discover your Investing DNA and select motifs that you believe will suit your investment needs and time horizon no matter where you live.
1CBS, http://www.cbsnews.com/pictures/10-most-expensive-cities-in-america/2/; http://www.cbsnews.com/pictures/10-cheapest-places-to-live-in-the-us/3/
3Turbo Tax, https://ttlc.intuit.com/questions/1901267-states-without-an-income-tax