Where you live plays a big role in how easy or difficult it is to save money. Taxes, real estate prices, employment opportunities are just a few of the things that can be different by location and impact your savings.
I live in Dallas, Texas which makes saving pretty darn easy for me. Here’s why:
No State Income Tax
I used to live in Missouri where the state income tax was 6% for every dollar earned over $9,000. As a frame of reference, I contribute 6% to my 401k every year. In Texas, 6% gets you a nice contribution to your retirement savings. In Missouri, it gets you all the same public services that are already available in Texas without an income tax.
Texas wins.
Employment Opportunities
The unemployment rate for Texas is currently sitting at 7.1%, which is 20th best in the nation. Missouri is 7.4%. I already have a job so this doesn’t directly affect me at the moment, but could in the future. However, the 7.4% rate seems to be a bit misleading where I live. There are lots of new buildings and companies all the time in my area and skilled workers should have no problem finding a job.
If you want a job, just move to North Dakota where the unemployment rate is 3.1% due to newly discovered oil that is providing so many jobs that workers can’t even find places to live. If you can’t find a job in Nevada, you aren’t alone: they have the highest unemployment rate at 12.3%.
Real Estate Prices
Dallas real estate is cheap. I have a work colleague who moved from Dallas, TX to St. Louis, MO and was PISSED when he found out how much housing was in St. Louis. He had to pay a heck of a lot more for a home in St. Louis than he would have paid in Dallas (although the St. Louis homes do have basements).
Real estate prices also vary dramatically within states and even cities. My theory is that I’m willing to pay for safety and proximity to work, so I’ll spend a little more to get an apartment or house where I’m safe and don’t have an hour long commute.
Transportation
It’s expensive to get around in Dallas. I’m thinking about going without a car when my lease is up, but that’s going to be very hard because the infrastructure in the city was built for people with personal vehicles. If I lived in a place like New York City or Boston I could manage without a car, but I almost need one here which costs me about $500 a month.
Psychology
One of the biggest ways I save money is Texas is the psychology of the city of Dallas in general. I compare my social lifestyle here to that of my friend who lives in New York City and there is really no comparison. The young people I know in Manhattan spend money on going out many nights every week, expensive clothing, shows, and more.
Of course people spend money in Dallas as well, but not to the degree of New Yorkers (at least in my personal experience). It’s not that someone CAN’T save money in New York; it just seems like it’s a lot harder to do it there.
TeacHer Finance just did an article about how applicable financial advice is to people in different locations. She believes personal finance advice is better the more localized it is.
@kevin_is_money write about how where you live influences your PF situation
— TeacHer Finance (@TeacHerFinance) April 18, 2012
Readers: Do you think location plays a big role in how well someone is able to save money? If so, do you think taxes and real estate are more or less important than the collective psychology of the location?
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
“Of course people spend money in Dallas as well, but not to the degree of New Yorkers (at least in my personal experience). ”
Guess you don’t spend much time in Uptown. 😉
I do – I think it makes a huge difference… but I’m not sure what conclusions we should draw. If someone is in California (like yours truly) and is living below their means, should we remind them that it’s tough to save money in California, or celebrate them pulling it off?
Interesting stuff! For the record, my job brought me here, haha!
Absolutely. Location and the way your friends spend. I lived in DC for a few years, which is heavy on the “let’s all meet up for xyz spending opportunity” and now I live in Portland which is heavy on the “let’s go for a walk and then go to someone’s house for dinner” so really I’m saving like $40 every time I see a friend here.
The problem is, it’s hard to make bank in Dallas and Missouri.
Maybe retire there to avoid paying extra state taxes, but hard to build the fortune there.
It may be more difficult (for instance- not as many high paying tech jobs as California), but not as hard as you may think. It really depends on HOW you earn your money here.
DFW has a lot of high income opportunities in certain areas (Frisco & Plano are just a couple) & a much lower cost of living.
There are many variables that come into account to figure out the cost of living in a certain place. I live in Connecticut, which happens to have the highest taxes in the nation and housing prices are also through the roof (no pun intended). However, I can manage just fine because of a frugal mentality: I live in CT for my family and because I love it here. I am willing to sacrifice expensive social outings and vacations to afford living where I do.
“Readers: Do you think location plays a big role in how well someone is able to save money?”
Possibly. I live on Long Island, 50 miles east of New York City. We have high state and county taxes, high gas, the works. On the other hand, salaries may be commensurately higher in this area, and I’m fairly frugal, so it may work out in the end. I bought a co-op apartment 15 minutes from work that suits me just fine and was under $100K 20 years ago. While others are busting their guts to make $3K mortgage payments each month, I pay less than 1/3 of that including co-op maintenance fees.
“If so, do you think taxes and real estate are more or less important than the collective psychology of the location?”
I’m a born-and-bred New Yorker. Have lived in this area all my life, and couldn’t willingly live without proximity to the great museums and theater of the city.