Save MORE by Having a High Income in a Mid to Low Cost City

Did you learn about the financial impact of where you live growing up? I did not. I did not learn about the cost of living index in school or how my income could 'be' the same in one city, but go further or shorter based on where I choose to live.

I have friends who often ask why I live in the city that I do and I always come back to the same answer—I can earn more and save more. When I share this information, I often receive a puzzled look complete with furrowed brows and narrowed eyes. I do my best to explain the financial impact of living in big cities, but I feel I am able to do my best through writing and visuals. With that said, I would like to discuss the ways in which your location impacts on your finances. The result can be pretty substantial.

Different Philosophies and Judgments Behind Living in a City

There are many different philosophies on why people live where they live. Here is a little of what I have heard over time:

• I live in my city because I grew up here. I have family here. I want to be here. Family matters most to this person. Distance appears to be important than saving. Sometimes it is because moving somewhere new is scary, which may hurt their ability to achieve significant savings over time.

• THIS CITY IS AWESOME! Always a person from the bay area of California. Always.

• I live in an inexpensive place and save a ton of money in expenses. These people know that living in Houston, Texas is much cheaper than living in Los Angeles, so they choose the former to keep costs as low as possible.

• I live in an expensive place because I can make more money here. These people assert (and there is data to back them up: see The Cities Where People Earn The Biggest and Smallest Paychecks) that more expensive cities command higher salaries and thus you should live there to make more.

By the way, I am only addressing the financial impact of living and earning in various cities. There are many non-financial reasons to live in a place, such as to be close to family, to be near certain recreational activities, medical facilities, to provide a certain lifestyle for your family, safety, inclusiveness, etc. I am not addressing those in this piece. Everyone has a different situation. I cannot and will not shame your personal decisions.

My Thoughts

Here is my take on the issue:

• It is not great to live in a low cost city and make a low salary. (Been there)

• It is not great to live in a high cost city and make more, but still be no better off. Whether you are better off or not is a subject of debate. Here is an argument for why it’s not better to live in an expensive city and here’s another (more recent and with research) that says it is. No matter the result, it does not change my opinion.

• Your best cash out comes from living in a low cost area and having a high salary. It is here you can make a fortune and save the most money.

Duh! Tell us something we don’t know, right? But that’s impossible! I assume that’s what you’re probably thinking right now. Why is this? Is it because there is an underlying assumption that you cannot earn a great salary in a lower cost of living area? This bias is even inherent in the philosophies above.

But that’s not the case.

How to Make This Happen

Here are the key steps to live in a low cost city with a high salary:

• You must be flexible on where you live.

• If you can choose from many different cities, there is a good chance you CAN find a great job in a low cost market. If you limit yourself to just a handful of cities, you will also limit your job prospects.

• The major key here is that you have to be open to new experiences, meeting new people, and you can’t be so subjective about where you choose to live. After college I moved to Helena, Arkansas. No, Helena did not have everything Los Angeles and the Bay Area had, but did have a lot to offer, including wonderful people, new friendships, new experiences and I treasured every moment. And, by the way, lots of those things LA and the Bay had to offer were not things I could do on a daily anyway (that’s just because I was broke, tbh).

• You need to develop your career in your industry/field. YOU ARE YOUR INVESTMENT. Give yourself the best chance for a good salary. Your next great opportunity may not be in your current city and that is fine—market and grow your career.

• You need to manage your career. You may have to start your career in a specific area or city and that may be a higher or lower cost-of-living location. For me, it was moving to a rural town to teach at a time (recession) when there were teaching shortages and mass layoffs in Los Angeles. I also had the foresight that allowed me to see that the current state of the country was not permanent. Ultimately, I managed my career and accomplishments in ways that would allow me to transition to more locations (yes, results matter). If you build your reputation and lead with results, you can create huge opportunity for yourself.

The Difference It Makes is HUGE!

This probably goes without saying but the savings difference between some cities is enormous.

For instance, let’s say you make $100,000 in Houston. If you move to Los Angeles, you need to make $142,084 to maintain that same quality of living.

Let us also look at it from the other angle, if you make $100k in Los Angeles, you can live the same lifestyle in Houston for $70,381. Imagine how your bank account would benefit from an extra $29,619 each year!

And it gets even better (or worse, depending on where you live) as you make more.

I live in Las Vegas. I won’t share my specific situation, but I have turned down multiple jobs in the past year because I work to ensure that every move I make nets a positive return on my investment. In this instance, I am my investment. I turn down opportunities in major cities when I find that I actually earn more in Las Vegas when comparing the cost of living differences. All that glitters ain’t gold, folks.

Do you see the advantages of a high income in a low cost-of-living city?

What I Did

I am not saying that I am the best example of how to do this. But, I am an example. And if I can do it, others certainly can — and probably do it better!

Here’s what I did with the tips above:

• I was flexible in where I allowed myself to live. My family was in the Los Angeles area of California and I was finishing school in the Bay Area. That said, I had access to a lot of opportunity and I spent my senior year creating job opportunities for myself. As I approached the end of my senior year in college, I had several offers on the table. This was available to me because I was open to living in almost any city in the U.S.

• There was one opportunity in particular that I was most passionate. It was in the field of education and the starting salary was low (30k range). I also knew enough about my field to know the future opportunities I could create for myself with hard work and a track record of results. I chose to begin my career in a rural town, filled with wonderful experiences and amazing people.

• I worked to grow in my career. As mentioned in my previous post, I struggled with the idea of being a college graduate that still asked her grandmother for money to fly home. I loved where I began, but being broke was not a prerequisite (or ending) to my story so I created opportunity for myself.

My Results

I started out with a modest salary. I left school with loans, but I was fortunate enough to have a career that offered to pay a substantial portion of my student loan debt. In the seven years since I have graduated, I have worked hard, performed well, and demonstrated a track record of results that have provided positive income changes over time.

As I manage my career and consider new opportunities, I always factor in the costs of a city when I receive a job offer. Of course, the cost of living index is not the only factor that leads me to take one job over another, but it is certainly a large factor in my decision.

Just so you can see how this played out and understand a little bit more of why I choose to make a move after college, below you will find the cities I have lived in and their cost of living index (100 = average US city cost):

• Los Angeles, Ca: 166.20

• Santa Cruz, Ca: 207.70

• Berkeley, Ca: 247.50

• Helena, Ar: 76.30

• Las Vegas, NV: 101.50

Most people do not live in a city because it is cheaper than another city. I get that. If that were the only important factor, I would not have moved to Las Vegas where I save less than living in Helena. There are usually way more important issues that dictate where people live and I consider those as well.

All I am suggesting is that where you live has a very BIG impact on your finances and your ability to save. That’s why you are reading my blog right? At the very least, you should consider a city’s cost-of-living index before you move there. And, if possible, take it a step further. Develop a high income while moving to a lower cost-of-living city. Doing so could save you hundreds of thousands of dollars over your working career. If you “have to” live in a higher cost city you need to be aware of it and take steps to minimize your costs.

Who knows, maybe this article will shift some of your thoughts about where you live and one day we will be neighbors? As always, reach out to me for any questions you may have.

-ET