Not Really Another Post about How You Should Move to Save Money

I know many of you hate my on-going posts about how cost-of-living in one area versus another makes a huge impact on your finances (in fact, it's my most-hated piece of money-saving advice.) Well, this is NOT another post about that subject. At least exactly. It's kind of related -- but this time, it only deals with me.

In my last post on the dreaded subject noted above, one commenter made this pitch:

FMF - Wow, I never realized you lived in such a populated area. You should really consider moving to a more rural area. It'll probably mean taking the $70K job instead of the $100K city job, but someone making $70K with a family doesn't hardly owe taxes, so in the end is much better off than the $100K job in your area, especially when factoring in the price of housing.

Sure you have all those minor league ball teams, botanical gardens, local/regional museums, traveling shows, but how often do you really use those things? Here what we do have in rural america: nice affordable roomy 50 acre lots with solid built, beautifully designed unique huge 100 year old victorian homes for under $100K. Sure living in a county with under 40K people isn't everyones cup of tea, but it beats living like a goat caged in on 2 acres. And trust me, with your $70K salary you are one of the richest people in the county.

Its your money and if you want to live in a built up area, thats a good enough reason, but as someone who says they are trying to live a financially fit life, consider what that overly populated place is costing you. Sure I guess some people like the coziness of being able to see their neighbors from their yard, but you'll always be fighting against the grain when it comes to accumulating wealth. And remember, just because rural life is different, it doesn't mean it isn't better.

Sorry for the preaching ;)

Very nice, indeed. ;-)

I responded that he (she?) was right and that I was immediately looking for a place in Wyoming. I'm sure it's very cheap to live there!

Then I ran into this piece from Lifehacker that lists the 10 most and least affordable cities in the US. The 10 least affordable are no surprise if you've been reading FMF for any time now, but for the record they are:

1. New York-White Plains-Wayne, NY-NJ
2. San Francisco-San mateo-Redwood City, CA
3. Nassau-Suffolk, NY
4. Los Angeles-Long Beach-Glendale, CA
5. Miami-Miami Beach-Kendall, FL
6. Santa Ana-Anaheim-Irvine, CA
7. El Paso, TX
8. Newark-Union, NJ-PA
9. Honolulu, HI
10. Seattle-Bellevue-Everett, WA

And the most affordable:

1. Indianapolis-Carmel, IN
2. Warren-Troy-Farmington Hills, MI
3. Youngstown-Warren-Boardman, OH-PA
4. Detroit-Livonia-Dearborn, MI
5. Grand Rapids-Wyoming, MI
6. Syracuse, NY
7. Dayton, OH
8. Akron, OH
9. Cleveland-Elyria-Mentor, OH
10. Scranton-Wilkes-Barre, PA

Look at that! My city is #5 on the most affordable list. How did that happen? And how did Detroit get above it (BTW, "Detroit" is at both #2 and #4)? Oh yeah, they're selling homes for $1 there. Very affordable indeed!

Notice what else it says next to Grand Rapids? Wyoming! I knew it was cheap there!!!!! ;-) (For those of you who don't know, Wyoming is a major suburb of GR. We go there frequently since many of our friends live in the area and our church is there as well.)

Also interesting on the list is #1 -- Indy! I lived there once. Nice town. Go Colts! (FYI, we also lived in Pittsburgh once, so this year it was "Go Steelers!")

Anyway, I'm not so sure that Wyoming (the state, not the GR suburb) still isn't cheaper. If I can get a 50-acre lost with a home for under $100k, maybe I should consider moving. That said, it's good to know that my present location is among the best deals in the country. ;-)

Comments

[SUSAN FROM LI]

Yup - Long Island (Nassau/Suffolk) is #3 on the least affordable. That 'splains why we all struggle the way we do. But we'll do plenty of other things before we ever decide to move away from all our family and friends. That's our choice.

[MrAtoZ]

I would just add that the list of most affordable is basically identical with the most depressed. Certainly that's true for most of Michigan, Ohio and the other Rust Belt cities listed - in fact they're all in the Rust Belt.

[spivey]

The lists are of cities, not places. I doubt that Carmel, IN is more affordable than a small town in a very rural area.

I think the commenter's point is that your cost of living would be lower in a very rural area than it would be in almost any city in the US.

[Kelli]

I live in Noblesville the city next to Carmel and north of Indy. I would say that as far as Indy goes, Carmel is the most expensive part of the city. That is too funny and makes me think my house on the "other side of the road from Carmel" is that much better. One thing the whole north side of Indy has is great public schools which helps when you are picking a neighborhood. And as a state Indiana is suffering but Indianapolis is not hurting as bad as some other cities.

[Paul]

Actually, I am surprised to see El Paso in the most expensive catagory. How did that happen?

[MJ]

Seriously? I agree with MrAtoZ. Those cities are depressed and depressing. Syracuse, NY is a post-industrial wasteland a large part of which was literally built on toxic waste. I would pay quite a bit for the privilege of not living there.

[Stephen]

I grew up in Grand Rapids and my family currently lives there, went to college in rural Indiana, lived in Carmel for a year after college, lived in Los Angeles for a year after that, and in Santa Cruz, CA for a year, and have lived in Chicago for the last 2 years.

There's no way, ever, that I would move back to Grand Rapids, rural Indiana, or Indianapolis/suburbs. Regardless of how much "cheaper" cities they are, there's a lack of proper public transportation and culture (both city culture as well as a cultured/unique population) compared to the larger cities. And to boot, I make 50% *more* money in Chicago than I did in Indianapolis and Grand Rapids, doing the same work. Plus my future earning potential is much higher in Chicago. With the frugal lifestyle I already live, there's no way housing (which is the main money-saving point of this article) is more expensive than the 50% increased income I make over GR & Indy.

[Memily]

Did anyone remember to factor in gas costs living in these small towns? When the nearest grocery store is an hour away, that has to factor in some way right? I live in a DC suburb, my home cost $140, I have no land to take care of, I live 10 minutes from work, and live far below my income. I can walk to a costo, sams, traider joes, grovery store, mall, and parks, and schools. I would take my area over a rural area with no people and too much land :-)

[Andy]

I'm sure Indy still doesn't compare to LA or Chicago or other large metros when it comes to public transportation, but it is improving. I find the bus system meets my daily commuting needs. (I love the park-by-phone bike lockers combined with racks on the buses.) They now have routes to and from Carmel with limited stops in between.
This is the largest city I've lived in so I don't have anything to compare to, but I wouldn't have considered the area more "depressed" than average. At least in terms of home prices, Indy seems more stable than the East and West Coast areas where some of my family lives. I only have anecdotal evidence to give, but I also didn't have any trouble finding work here.

[MonkeyMonk]

I think the reason these posts are so "hated" by many is that for the most part I don't think you should be making living decisions purely for financial reasons. Although the cost of living has to be figured into one's finances there are offsets to the pluses of living in a big city (cultural, friends, entertainment, etc.) that I wouldn't trade for any amount of money.

I can't imagine anything more depressing than to hit middle age and realize I frittered my life away by living in a few of those inexpensive cities when I could have been living in a place like NY or San Francisco. Sure, I'd have more money for retirement but, in my personal opinion, wasted a big portion of my life away. Not a trade off I'm willing to give up. I earn and save money to live my life the way I want to live it.

[Jim]

To each their own.

If FMF likes living in rural areas then thats great for him. Many people prefer urban areas. WE all make choices to spend money on what is important to us. Theres no right or wrong choice here.

But the only choice here isn't going from one extreme to another. Theres more options to save on location tham moving from top 10 most expensive to the 10 least expensive.

Try this: Think about what you value. Climate, culture, sports, diversity, etc. Then look around the country and see if there are any cities that match what you consider important. Then compare the cost of living in those cities.

[Kimberly]

Hmmm... that's a list of HOUSING affordability. I wouldn't consider a city as a whole to be affordable unless it also came with a decent job market.

[Ben Northway]

If it means anything, city-data.com reports Des Moines, IA with a cost of living at 80% of national average. Indianapolis is 84%. Des Moines is a nice place -- not too big, not too small. It includes bonuses like Steve Deace on WHO radio and a good market for tech jobs -- we are the third largest insurance capital of the world.

[Olivia]

Yay Indy! I was born and raised there. I have to agree with spivey, though. Carmel is probably the most expensive part of the city. I lived on the south side and it was definitely cheaper there.

[LC]

I agree that many things are cheaper in a rural area but other things are more expensive or nonexistent. Housing is definitely cheaper but gasoline is more expensive, combined with the fact that you either pay extremely high prices in the one grocery store in town or drive 30 miles to the nearest Wal Mart, not to mention any kind of decent paying job (I mean other than owning a small business or being a farmer). You often can't get a TV signal or cable so if you want to watch anything you need to get a dish, or else spend money on DVD sets. My husband grew up in the country and I would say that the cost of living there is the same as it is where we live now, in a small town of roughly 200,000. Even when I did live in a bigger city (Pittsburgh), the cost of living was pretty much the same as it is for us now. So while country vs. city does have a small effect, there are definitely regions where the cost of living is way out of line with the salary options.

[SJ@6bubbles]

I hate indiana lol.
But syracuse is interesting. It's near a lot of "outdoorsy" stuff which is nice. (I will admit I didn't find much to do city wise, but I didn't try too hard while I was there lol)

[indi500fan]

Here is how the calculation is done - it takes into account home price and income:

The Housing Opportunity Index (HOI) for a given area is defined as the share of homes sold in that area that would have been affordable to a family earning the local median income based on standard mortgage underwriting criteria. Therefore, there are really two major components -- income and housing cost.

For income, NAHB uses the annual median family income estimates for metropolitan areas published by the Department of Housing and Urban Development. NAHB assumes that a family can afford to spend 28 percent of its gross income on housing; this is a conventional assumption in the lending industry. That share of median income is then divided by twelve to arrive at a monthly figure.

On the cost side, NAHB receives every month a CD of sales transaction records from First American Real Estate Solutions (formerly, TRW). The data include information on state, county, date of sale, and sales price of homes sold. The monthly principal and interest that an owner would pay is based on the assumption of a 30 year fixed rate mortgage, with a loan for 90 percent of the sales price (i.e., 10 percent downpayment). The interest rate is a weighted average of fixed and adjustable rates during that quarter, as reported by the Federal Housing Finance Board. In addition to principal and interest, cost also includes estimated property taxes and property insurance for that home. This is based on metropolitan estimates of tax and insurance rates from the 2000 Decennial Census, as estimated by NAHB from the Census Bureau's Public Use Microdata Sample (PUMS). Mortgage insurance is not currently a component of the HOI.

[Emma]

I know you enjoy the fact that people argue with these posts, but there are lots of great points above. And beyond what moving away from culture/ambience/whatever may do to your quality of life, if you move miles away from your family and friends, how much extra are you going to spend flying to visit them, mailing gifts to them, on long distance cellphone plans to call them and in time off work and entertainment budgets when the come stay with you?

[Mike Hunt]

I lived in South Bend, IN for 3 years in the late 90's. I'd rather run a barefoot marathon on broken glass than live anywhere near that area again.

The weather is terrible, and the people were pretty provincial / closed minded. I think it would be a nice place if you wanted to stay at home and raise children, though. Some parts were safe - others were quite dangerous. It seemed like people never left the town and people didn't travel much.

I guess it just wasn't for me. I live in Bangkok now and earn the equivalent of a very good US salary out here. It's very affordable and you can find great value for money for most things. Only challenges are the year round heat and terrible traffic!

-Mike

[Ada]

I don't think the "pick somewhere cheap to live" advice applies if you can live in a big city well beneath your means on a high salary. I make several hundred thousand dollars a year as a lawyer in NYC. (And this is only a few years out of law school.) On average, I save around half of my take-home salary a month, and all of my yearly bonus. Living relatively frugally on my big city income means that, at a young age, I'll have enough assets to retire (elsewhere) if I feel like it. I would never have this freedom and flexibility if I had chosen to practice in my mid-sized Midwestern hometown. I could literally move there now and buy a nice house in cash. Maybe I will some day, when I get sick of NY lawyer hours!

My point is this: There are some kinds of high-income jobs (some high tech jobs, top-flight finance jobs -- to the extent those still exist -- elite corporate law jobs) that are extremely difficult, if not impossible, to get in small cities. If you're qualified for such a job, spending at least some length of time in a high cost of living area might make an enormous amount of sense. The very best case scenario might be living where you can maximize your income, saving aggressively, then downsizing to a less expensive city (which, from the perspective of someone in New York, Silicon Valley, etc. would be about anywhere). I don't doubt that your general advice applies to most career paths -- you're not going to get very far ahead as a schoolteacher, for example, in a place like New York -- but here's some food for thought, anyway.

[Mike Hunt]

Ada,

You've got it! Nice planning and good luck. Just keep your money in "safe" assets, whatever that means these days...

-Mike

[Plex]

Ada,

I appreciate your input, since I will be going into another area of law (other than corporate) that only exists in the more populated areas. It is good to confirm my own thoughts on what I will need to do when law school finishes (which is to apply to firms outside my state, there are only a handful in the whole state that even do the type of law I am interested in, since it is in the midwest).

-Plex

[Corporate Barbarian]

Wow, Long Island is only number 3? I'll have to tell my wife that it's cheaper to live in Hawaii. I'm glad my parents moved out here from Brooklyn before I was born. I'm way too hyper to move to the "real" country. The suburbs are just about the right speed for me.

[CentsInTheCity]

I live in New York City and while I make a modes salary for the area, it's not too high in comparison to the rest of the country. I am still able to save and live a comfortable life. I don't need to own a car or property and am slowly building my net worth. I'm still in my 20's, so I have many years of work ahead of me to save. While I'm not sure if I'll always stay in this area, I love it and can't imagine leaving any time soon. You can't buy the energy and excitement NYC has in any other part of the country. For that, I'm willing to spend the extra money. When I retire I should have plenty saved to move more cost effective city or even enough to stay up here if that's what I choose.

[Torrent]

Seriously? I agree with MrAtoZ. Those cities are depressed and depressing. Syracuse, NY is a post-industrial wasteland a large part of which was literally built on toxic waste. I would pay quite a bit for the privilege of not living there.

[Torrent]

Actually, I am surprised to see El Paso in the most expensive catagory. How did that happen?