Yep, you may hate it, but it's good advice: you can save a ton of money by moving from an expensive area of the country to an inexpensive one. How much? Millions. Don't believe me? Check out what an ex-New Yorker has found when she moved from the city to the country:
New York City dwellers like to quip that everyone pays a $20 "sidewalk tax" to live there -- because it feels like you spend $20 the second you step out your front door. As my husband and I discovered, it's not a joke.
Even though we live in a small town and can walk to a couple of shops and restaurants, the ratio of commercial outlets to disposable income has plunged. The result: a dramatic drop in impulse buys of all sorts, from bagels to books to "let's meet for lunch" and "don't I need that sweater?"
That's significant. According to a 2006 telephone survey of 2,000 adults by the Pew Research Center, it's not necessarily the big-ticket items that sink your budget. It's the steady onslaught of little ones.
In addition, she's also seeing an INCREASE in income -- something totally unexpected:
Another unexpected financial twist: Although we had expected to lose about $1,500 a month when my husband quit his job to become a stay-at-home dad, we hoped he'd find part-time work and thus we'd keep some of his income.
Instead, with my husband working full time on the domestic front -- not only taking care of our son but running the house and being Mr. Fix-It -- I have been able to work more, bumping my monthly income to about $6,000 gross.
Then she hits the savings jack-pot:
The real surprise in moving out of the spend-o-sphere of city life isn't just that you spend less but that so many things cost less.
Is this really a surprise? It shouldn't be. Obviously, she's not reading my posts. ;-)
Here are some of the savings she notes:
- A typical diner breakfast in the city will set you back about $20 for two people. Here we pay about $11.
- Going out for drinks in the city easily starts at $20. Now, on the rare occasions we hit the town watering hole (a family-friendly place), beers start at $1.50. No, I did not make that up.
- We were equally stunned, in a good way, by the cost of child care. Our son is joining a small family-style day-care group for two afternoons a week so my husband can do some extra work toward graduate school. Cost: $4 an hour.
- Even my CT scan was only $500 (before insurance), as compared with a city procedure, which could run over $2,000.
She then goes on to detail other savings they have realized. The bottom line: savings alone (not adding in the extra income) will net them over $1,200 extra each month. That's over $14,000 a year. Invest that $14,000 a year savings for 20 years at 8% and you have $640,000. At 10% it's $800,000. Not bad at all.
The opposite can be true as well though. It's worth looking into it in detail on a case-by-case basis.
As an example, moving to Silicon Valley has proven to be a huge financial gain for me and my fiancee. I instantly got a 25% raise, my fiancee got one as well.
The costs of living from Boston to Silicon Valley are surprising the same as long as you rent. Actually the costs of living are much cheaper as we save quite a bit on heat in the winter. Plus there's the savings of a gym (the outside is a year-round gym here, that's not the case of Boston in Feb). If you plan on owning a home, it's so much more that there aren't much savings in the move.
What about a third place? I'm not sure what the growth prospects for a software engineer (like me) are in the middle of Kansas. I'm sure you could probably find a couple of companies, but I wonder if you'd have the option of moving to a new company every two years for a 20% raise (not an uncommon practice). There's also a happiness factor to consider. The type of person that is happy in NYC is not likely to be as happy in the country. If it's not your lifestyle, it's just not your lifestyle. So perhaps, to compensate for that lack of happiness, you start up that latte habit that you had quit in NYC. Perhaps, you are sad that you moved away from all your friends and family (I know I am) and need to start seeing a psychiatrist for depression. Perhaps because everything seems like a bargain ($11 breakfasts!) you go out twice as much destroying your savings.
Each person should look hard at their lifestyle and decide what's right for them. Don't get caught into believing that moving is going to help. It might, and it might not.
Posted by: Lazy Man and Money | April 03, 2007 at 03:03 PM
Here's the thing, if you read her article MP Dunleavy, they were spending out of control on ridiculous things before. They had their home in the country and rented an apartment in the city for more than her DH made or something like that. It was ridiculous.
So their savings were not on the same stuff, it was from dumping an apartment in the city. Whammo they immediately saved a bundle.
Lattes don't matter if you can't pay all your bills. It's the big items like cars and homes. If they take up 75% of your income before taxes then taxes, and everything else on CC, it's forgone that you bought too much house or car.
Posted by: LivingAlmostLarge | April 03, 2007 at 05:30 PM
FMF and Lazy Man and Money are both right. I'm sure that in almost any circumstances, there are at least two choices for places to live that will support the lifestyle that will make you happy, and one will be cheaper than the other. And those places and lifestyle might change at different points in your life.
For example if you just want a beach lifestyle, Florida is probably cheaper than California. This doesn't work so well in the UK cos there is intrisically less choice in a smaller country, but even so, for the surfer life, the Gower Peninsula is cheaper than North Cornwall.
Posted by: plonkee | April 04, 2007 at 04:03 AM
My wife and I are considering a move from California to Ohio; from one of the most expensive states to one of the least expensive states. Needless to say, I am looking forward to saving/investing a bundle!
Posted by: Zachary | April 06, 2007 at 02:16 AM