There’s usually a very good reason why many people struggle to make ends meet, despite cutting expenses to the bone.
The other day I was fueling up my car at the local gas station. While I was waiting for the tank to fill, I thought it would be a good idea to get rid of the remains of a ridiculously large bug that was splattered on the windshield.
Unfortunately, the only squeegee I could find was at another pump island that was occupied by a big ol’ cowboy who was filling up his pick-up truck. (Yes, there are still a few cowboys in my neck of the woods.) So I walked over to him.
“Do you mind if I use the squeegee?” I said. (I almost ended the question with “partner,” but I figured that would be overdoing it.)
The rancher squinted and then, for a couple of uncomfortable seconds he just stared at me with his steely eyes. Uh oh, I thought. It suddenly crossed my mind that if this guy was in a bad mood and looking for a fight, it wouldn’t be long before that dang bug wasn’t the only thing plastered on my car windshield.
Thankfully, and much to my relief, the wrangler broke into a wry smile. “It’s a free country,” he said.
Well … He’s right about that. It is a free country.
Let the Excuses Begin
Of course, that freedom extends to how we manage our personal finances too — which is why it almost always surprises me whenever I hear people making excuses for why they can’t make ends meet.
I don’t care how much money you’re earning; unless you’ve been struck by a catastrophic medical condition, are stuck in an extended period of unemployment, or blindsided by another unforeseeable event such as a gold-digging spouse who skips town with your life savings, there’s no reason why you shouldn’t be able to balance the bills every month.
Let’s face it, folks. The reason most people get into financial trouble is because they make lousy choices, and one of the biggest choices we all make that affects our standard of living is where we choose to live.
Before inflation got out of control and reared its ugly head, I used to explain why people who couldn’t survive on an income of $40,000 per year had nobody to blame but themselves. That number is significantly higher today; but my point still stands. One of the biggest reasons why people struggle despite earning close to the median income is because, well … it’s a free country.
Think about it; most of us have the freedom to live wherever we want — especially in the early stages of our adult life. And yet, there are countless numbers of people who insist on living in high-cost-of-living areas even though they lack the means to afford it. Why?
Where You Live Matters
The truth is, when it comes to your personal finances, where you live is often more important than how you live.
Data from the United States Census Bureau reveals just how much disparity exists in the standard of living for the 325 largest metropolitan areas in America. The index measures relative price levels for consumer goods and services such as groceries, housing, utilities, transportation, and healthcare.
Here is a list of American metropolitan areas with the ten lowest and highest costs of living:
The nationwide average equals 100 and each score represents a percentage of the national average, so areas with lower scores are more affordable than those with higher scores.
As you can see, all things being equal, it’s approximately 2.6 times more expensive to live in Manhattan, New York, than Harlingen, Texas. That’s a significant differential — and it’s especially important to keep in mind if you’re, say, a twentysomething or somebody who is still trying to figure out where to put down your roots.
Yes, for many people, living in San Francisco (affordability index: 164.0), Lake Tahoe (146.4), Honolulu (165.7) or the Big Apple is a romantic notion — but it’s not the smartest idea if your household income can’t cover the bills. It’s just not.
The Bottom Line
When it comes to keeping your financial head above water, remember: where you live matters. It really does, folks.
The good news is, it’s a free country. So choose wisely.
Photo Credit: Phillip Taylor PT
Not surprising to see New York, California and Hawaii on the most expensive list. Also not surprising to see Texas pop up on the most affordable list. By the way, wouldn’t Manhattan be 2.16 times more expensive rather than 2.6?
True, but three of TX’s affordable cities are border towns, four hours from any of its bigger cities. Not that they wouldn’t be awesome places to live in, but if you think you’re going to be spending your weekends in Dallas, that’s not the case.
“Wouldnt Manhattan be 2.16 times more expensive rather than 2.6?”
I don’t think so, FMM. By my calculations it’s 2.61 times.
I may be mistaken but I believe the residents of Harlingen, TX also hold the distinction of the lowest average credit score in the country. Interesting how that can be accomplished given the apparent low cost of living.
That would be McAllen. McAllen also showed up on national financial radars in recent years for being one of the most expensive cities when it comes to medical care.
Interesting. According to the Census data, McAllen’s affordability index for healthcare is 97.9, which is slightly below the national average.
“The reason most people get into financial trouble is because they make lousy choices.” I couldn’t agree more.
Interesting considerations with regard to where exactly we stand in a pseudo laissez-faire economy, as well. Totally agreed.
My brother lives in San Jose. He doesn’t like it because the cost of living is so high, but that’s where the engineering jobs are.
Our area is pretty expensive too, but it’s way cheaper than California.
Speaking of California engineering jobs, Joe …
When I graduated from college many years ago I had competing engineering job offers; one from an integrated circuit manufacturer in the Bay Area and the other from an aerospace company in Southern California. There was very little difference between the two offers, so initially it was a real toss-up for me. However, the cost of living was significantly less expensive (relatively speaking) in SoCal.
Guess which job offer I accepted.
Having lived in both cheap and expensive areas, I can tell you right now that the COL indexes are like “chained” CPI–they take into account all the compromises you make when moving from one location to another. So in Texas, you have a 4 bedroom, 2.5 bathroom house that costs $375k. You are 6 minutes from work. Then you move to Boston, and you get a 3 bedroom, 2 bath townhouse in the suburbs for $800k. You are 25 minutes from work. Sure, you’re making 150% of what you were, but you’re really way worse off, even though the COL index shows only a 45% difference between the areas.
As part of my research for this article, I did a little price shopping in Harlingen, TX.
For example, I found out that you can get a 3-bedroom 2-bath apartment (1213 sq ft) there for $1200 month. And gasoline is currently just $2.86/gallon. (It’s more than $4 at my local station right now.)
I can’t believe Orange County is number 2 on the list. I would have thought San Jose, New York and Hawaii would be more expensive. I must live on the wrong side of the tracks. 🙂
The OC is not #2, Bret — it’s #9. Manhattan (at the bottom of the chart) is the most expensive place to live in the US.
Your lifestyle in these high cost areas will be very different. You will buy or rent a very small place comparatively and your housing expense swill be similar to other parts of the country. In a high cost area, the wages are generally higher too. Housing will represent the same percentage for a lot less.
Yep. The thing is, the impact becomes more severe as household income decreases — so professionals earning good wages can temper the effects and get by.
It’s the people earning minimum wages who are the one’s who are more sensitive to standard-of-living impacts. The good news is, low-wage jobs can, for the most part, be found everywhere — so, in theory, there is less risk involved in picking up roots and moving to a lower-cost-of-living locale.
I grew up in Nassau County and I’m not surprised to see it in the top 10 (and my parents still live there). Living there skews your perception of what’s expensive and what’s affordable. For instance, my parents will come visit me (I live in Delaware) and while we think $3.42/gallon is expensive, my parents marvel at how cheap it is (the reverse is true, too, when I visit them).
I think when you live in a high cost of living area, you just become used to paying a premium for everything just for the perceived privilege of living there. I think that’s a little sad.
You didn’t mention the housing prices and real estate taxes in Nassau County. A very average 3 bedroom/2 bath house will cost about $900,000, with taxes of $25,000 a year.
Good point, Len, although choices may not be always straight forward. In many cases places where life is expensive are also the ones where there are jobs.
But then there are folks who can but won’t leave their towns.
A few years ago, we went to see family friends on the Appalachian trail between Virginia and West Virginia. The head of the household was my college buddy. He drives down to work – an hour and a half one way. He is very well educated, has a Ph.D. in environmental sciences, a good job. Up the mountain where he lives, they don’t have running water. The “bathroom” is a couple of hundred yards from their home.
When I asked them why they don’t move out to a better place, their answer was because they were born there. It’s their home. Their great grandfather moved there.
The family said they’re happy. When we were leaving, the guy said to my kids in whispering sound like a Dracula movie, “We are called mountain people.”
The whole family is just great, very hospitable, very soft spoken and very humorous.
Great story! Thanks for sharing that, DF.
“But then there are folks who can but wont leave their towns.”
That’s true. It’s a free country!
Cost of living played a big factor in me moving out of the DC metro area. I couldn’t see myself staying there forever with their insane prices.
The taxes and the affordability in my area are very high. It would be best to move either south or west to save some dollars, but I am tied to my area for famiy reasons. Maybe in 10 years I can make a move towards greater affordability.
I think a big part of finding a place to live is to also remember other indirect costs. Texas is a state without state income tax and as a result, has high property taxes. But in areas where there isn’t a lot of expensive properties filling the government coffers with property tax income, those areas end up with cash strapped public services. Public schools in smaller border towns in Texas are some of the most cash strapped. Jobs aren’t great to come by either–for some in these small towns, Border Patrol is the only major job outside of the service industry.
Life is a series of engineering trade-offs–any where you choose to live is going to have a benefit to loss ratio. The important thing in choosing where you live is to find the place that has the least amount of losses that hurt you the most (and hopefully allow you to get a decent job and save some money)
That cowboy sounds like a real peach! 🙂 I agree that often times (OK fine most of the time) it’s because we make lousy choices. Believe me I’ve been that person from time to time. I think the cost of living thing is too much of a generalization though. If you are in the industry I’m in (film/TV) then yes the cost of living is high in LA, but the opportunities are greater. It’s sort of a balance and give and take thing. I also wouldn’t completely give up quality of life just to live in the cheapest place in America either. But that being said I also have to accept that I have to make sacrifices then, like not eating out with friends, traveling as much, or spending as much on entertainment. But I also get awesome resources like great weather, good quality of life, etc. That being said, I’m working my side jobs as much as possible to not rely on video editing work so I can feel “location independent” someday and try to find a balance between a good quality of life AND affordable living. BTW nice to meet you Len!
This isn’t too hard to figure out but it is only half of the equation. Unfortunately if someone wants a decent job with a salary that will put them on apath with a future it won’t likely be in one of those bottom 10 locations.
I disagree, Greg. I have a relative who was living from paycheck to paycheck in California and incapable of making ends meet. He then moved to Mississippi and, thanks to its lower cost of living, is thriving there.
I’d be curious to know what your definition of “a path with a future” is.
Just because it happened for your cousin, does not make it the norm. The hiring trends seem to agree with Greg.
Sometimes you have to make your own path. Living in a small southern state, I have done very well. I buy rental property in a large, nearby, gated retirement community while working a full time job. Taxes are low. COL is low. Renting to older retired people is, literally, a gold mine. The key is to save and pay cash for everything.
You get it, Ed.
I have lived my entire life only in those high-cost places: Mnahattan, Brooklyn, SF Bay Area.
One thing I can say is once I became determined to act responsibly about money, living in these places had its advantages. Yes, many things are expensive, but if I am cautious with my income I can use it to my advantage.
I can have enough money to live (and save and invest) because I dont dont spend it all. Since salaries are higher, there is more cash flow. Yes I need to spend more for necessities, but I also am able to divert some of that cash for my own use.
I live below my means and I pay myself first.
Makes a lot of sense to me. I would warrant for your London (UK) based readers that they struggle far more than those living in the north of england.
In general I agree with this but one of a few effects we don’t take into account is that life in really “cheap” areas also happen to be more rural, inaccessible, and have less and less easy access to choices when it comes to basic needs. Food isn’t as cheap if you only have one store supplying it and that one store only has access to one supplier, internet may be next to non-existent so that way of making a living “from anywhere” isn’t available to you, utilities are limited, etc. And if you’re not able-bodied enough to travel the 50-100 miles to the nearest major town every day to work a regular job, than your income is going to be more precarious. I have friends living in those cheap rural places in part because that’s what they can afford but it’s also a serious limitation on their earning and living ability too.
I stuck it out in the cheaper area of SoCal for as long as I could but the only jobs in my area of expertise were SF and NYC, and at the time remote work wasn’t nearly as available. Then I married PiC whose area of work is only available in SF, a horrible desert area in CA, and Boston, so we’re pretty much staying here. Our salaries most definitely don’t go nearly so far as they would have if we could work these same jobs and earn the same salary down south but I’m well-trained in the art of making our money stretch so I do my best to make the most of what we have here. We’re doing alright for ourselves.
What if your “home town” is the expensive place? My nephew was doing fine starting out in life until his girlfriend bailed about one month after they signed an apt lease. Now, there is nothing available that is affordable and he is falling behind. My wife and I have been doing an email transfer to him every month…will be two years this Christmas, then we will stop. We gave him 2 years to get it together. But here is the rub. I live in a rural area, the kind of place outsiders think is “parochial”, to be kind….full of dummies often said….. with ‘no professionals’. The kids that stay or return to live here are looked down upon as having no horizons. But what I have found is that the kids in the city with all the action and amenities are very much the same way. They live where their friends are, where they grew up, where they feel comfortable. They are on their phone texting all the time, anyway….listen to the same music, do similar things. It is just busier, and more expensive….waay more expensive.
I told my wife we are just subsidising his employer with our monthly cash. He has to move on and build up a stake like everyone else, or learn to enjoy being broke, forever. If his employer doesn’t want to lose him he will have to pony up a raise.
Starting out you go where the work is and take the best opportunity available. In most careers the job will dictate where that is, but choosing to stay in a high cost area is a luxury that most cannot afford.
If you live in the right area beyond urban areas, your cost of living will be lower than even the lowest-cost urban areas.
https://lenpenzo.com/blog/id22017-how-i-live-on-less-than-40000-annually-ralph-from-west-virginia.html
We retired to New Hampshire and although it is in New England and high COL. it is so much more affordable than Hudson Valley NY where we used to live.
No income tax, sales tax, insurances so much lower. Property taxes are high, but we downsized so they are half of what we paid in NY.
It’s a beautiful state. Green, mountains, glacial lakes. Love the seasons. Convenient to other areas in New England.
I could never live in the places listed.
Actually, how we live is more important than where. Why we live and how we live the way we do are the most pertinent questions to ask. We’ve literally bought and been sold an idea: The American Dream. A dream from which many of us are waking up to realize is actually an American nightmare. Most of us that have been working age for some time attended a K-12 box +/- a collegiate one all to end up working in another box (cubicle, office) to pay for a cheaply-constructed, toxically composed, inefficient box (apartment, condo, house) all while willingly going into astronomical debt to afford. These things- degrees, careers, conventional dwellings- that we view as milestone accomplishments are actually traps to keep us tied to wage-earning/the rat race. The biggest expenses people have are food shelter and transport. How could you live if you not only cut these expenses but lived in a way where you almost eliminate them completely? The Creator created the original man to essentially be a farmer. The majority of us, especially those of us in Western/industrialized nations have moved far away from that. We follow the man-made model set before us. It, along with the trap of modern convenience, has been our downfall. If you grew your own food, what grocery bill would you have to pay? If you produced your own energy and sourced and purified your own water, what utility service provider could cut you off if you couldn’t foot the bill? What vulnerable grid/shoddy infrastructure would you have to be concerned about faltering? Speaking of Texas, is anyone’s memory long enough to remember the Snowmaggedon they experienced not too long ago? If you bought a parcel (even one acre) of land on which to build a homestead/farmette that was zoned as such as to pay modest taxes, what real estate market would you be at the mercy of? I once read about a couple who were retired homesteaders. They reported their expenses being a little <$5000 a year. We live in a society that likes to boast and highlight hefty yearly earnings. Six-figure earners, tops of the Forbes list, new billionaires. I find that couple's stats far more impressive.
For anyone reading this I encourage the search of the following terms:
'Exit & Build'
Food forest abundance
Geo-arbitrage
Geothermal energy
Permies
S.K.I.P ( Skills to Inherit Property)
I'm not trying to promote anything. I'm just trying to aid in freeing as many Americans from this deception before it's too late and, by the looks of things, it almost is.
Godspeed to all.
Len, keep a box of unscented dryer sheets in your vehicle. Wet one, squeeze out the water, and use it to take off bugs. It works like magic.
Okay … But take off bugs from what, Bill?