No matter where youâve moved to, behind it there has always been a convincing decision to do so. It could be from lower housing costs to a better job or closer to your parents. Whatever it may be, it is different for everyone and no one can make that decision for you except for your finances.
Our lives are controlled by money whether we like it or not. Everything we do, hang out with, work, live, eat, wear, be with, etc. involves money in some realm so when it comes to making the biggest financial decision of your life, purchasing a place to live in, it is most important to weigh what your money can do for you.
According to Harrradines.com, the top 10 reasons people move is:
-Need more space
-Upgrade
-New Job
-Empty nest
-Relationships
-Visit family more often
-Better schools, environment
-Change of scenery/lifestyle
So letâs unpack this a bit. Right off the bat, more space means that we are buying more stuff and as a result, need more space. Whether itâs a guest bedroom or backyard, the average size of a new home in the US has increased now to 2,623 square feet. Keeping Up with the Jones is real here and Americans favor big homes known as McMansions as population growth has increased and of course due to the pandemic, weâve only seen more competition for flocking to the suburbs due to the low-interest-rate environment which also entails home prices skyrocket.
Next on our list involves the job. Without a job, your house, relationships, education, happiness etc. would be compromised without a stable income. But for 85%+ of us who report we hate our jobs, we feel like slaves beholden to our jobs becuase we just need that gross income to provide for our families and livelihood. Itâs disappointing to hear that we would ruin our lives just for the paycheck. But in reality, nothing can be perfect anyway.
Iâve never met a single student who really loves school. We just get that diploma to get a leg up in the world. What school has taught me is how to deal with tedious tasks and people, preparing us for the real world. School is a signal that we can expect this to happen for the rest of our lives unless there is a way to change it.
Mindset.
You can hate your job and can call it to work or be excited to serve the community, work with teammates, and better your family and career at the same time. I believe a work-life balance shouldnât exist because then you associate your job strictly with work and life with fun and family.
Why canât they blend?
Who says work canât be fun?
All my readers are of a variety of ages and professions and or study different curriculum at school but since we are here to dive into the most financially savvy places to live, might as well first start off with the top cities for a career in finance.
Best Locations for Finance
Now when one thinks of finance, the first things that usually come to mind are quantitative, statistics-heavy math-oriented individuals that want to be analysts or stock traders. Thatâs what I thought until I actually went into finance.
Finance is one of the most diverse, the other type of diverse, industries because it incorporates a variety of coverage groups, roles, sectors, industries. Through my writing, I specifically dive into personal finance, an area where financial advisors/brokers help clients achieve their financial goals. Everything ranging from planning for retirement to helping prepare for a short term vacation. It is very hands-on and is the best opportunity to showcase your soft skills, along with the technicals of Excel, programming, and budgeting.
If you are more quant heavy but still want a nice balance, working in IB, commercial banking, TMT, Industrials, Sponsors, and a variety of other coverage groups would be the best fit. Stay away from sales and trading if youâve had bad memories with car dealers in the past and donât like yelling.
Believe it or not, although New York is home to Wall Street and the NYSE (New York Stock Exchange), the greatest demand at the moment for finance professionals is in Europe. The United Kingdom, Germany, Canada, Hong Kong, and Japan are the top-ranking cities. Although these are popular at the moment, letâs not discard the Big Apple, Boston, Chicago, or San Francisco.
What also comes to mind with finance, is a lucrative salary. There is this misconception that if you are dealing with money you must be making a lot. Although I want to stay away from this topic becuase the amount of money you make is solely based on what you need and your preferences and varies greatly dependant on what city you live in, it is important to note that everything takes patience. An analyst at a reputable bankâs average salary is $90k. Taking into consideration taxes, pension, living expenses, health-care, commute, it adds up quick. The more you make, the more you have to pay to be rewarded that much. As I always say, itâs not about how much you make, itâs how much you keep in the bank.
Solo Cost
Now since weâve covered what a career in finance can provide you and the best places to go for them, now is time to evaluate the best places to live to get your moneyâs worth.
In 2019, there were more than 9.6 million self-employed people in the US and by 2026, it is projected to increase to 10.3 million. This accelerated growth of 7.9% is a direct effect on how convenient and flexible it is to work at your own pace, schedule, and from anywhere, something those who have been able to are grateful for during this pandemic.
But as with everything there are pros and cons to self-employment:
Pros:
-No boss
-Flexible work schedule
-More time to spend on your own
-No commuting
-Saves money
-Happier in control
Cons:
-Minimal to no interaction, especially when first starting as an influencer or entrepreneur
-No direction
-Limited team
-Work harder not necessarily smarter
-Burnout
-Stressful if havenât established a reoccurring gross income
To evaluate if a city can help or hurt a personâs ability to save, you first must evaluate a variety of metrics:
-Percent of median income to median home mortgage
-State income tax burden
-Average cost of gas and commuting
-Median income to cost of groceries/additional expenses
-Median income to cost of rent or any outstanding debt
Best Places to Save
Whether you are a solo-entrepreneur or are working for a bank or a nurse, there are places, if you are able to relocate that will help you save thousands per year.
It is important to note just becuase you have a job doesnât mean you will be wealthy. A combination of saving and strategic tax-smart investing pooling your money into a ROTH IRA or Index Funds will allow you to take advantage of compound interest, additional interest on top of interest already made on your money.
So just because you are living in these places or plan on doing so after I list them, doesnât mean you will become wealthier. You might save more and things will be cheaper, but that doesnât mean you donât have to put that money to work.
According to Bankrate.com, if you calculate the total monthly cost-of-living expenses (including mortgage payments, groceries, bills, insurance, taxes, credit card payments, and more) for a typical family of four in each metro area, then multiplied that figure by six to get the amount needed for an emergency fund, enough to cover six months of expenses, are the reasons why these cities are listed in this order.
A staggering 63% of Americans donât have emergency savings and across the 50 states, these metro areas have the highest amount of residents that prioritize this:
Kansas City, Missouri
Cincinnati, Ohio
Memphis, Tennessee
Columbus, Ohio
St. Louis, Missouri
Baltimore, Maryland
Pittsburgh, Pennsylvania
Indianapolis, Indiana
What do these states have in common? They arenât metro areas! The average median take-home pay is lower at around $50k and as a result, the annual savings potential is $10k which can easily be allocated into emergency-fund savings and the percent funded after one year of savings is roughly 50%.
Compared to places such as San Franciso or New York, the most expensive cities in the US, although the salaries would be double, taking savings, sales, property, income taxes into account and all of the additional expenses, the savings is not equated to 2 years worth of living expenses (the ideal amount for an emergency fund) and as a result, most people are too ambitious thinking that with more pay they will be able to live out their dream in the cities that never sleep.
Worst Places to Save
Drumroll, pleaseâŚ. This may or may not come as a surprise to you if youâve heard about Chris Christi and various other wealthy families leaving breadcrumbs behind in this state to move to lower-taxed states such as Florida.
The reason being people flock to areas such as Florida, the midwest or South as weâve uncovered above is because of the lack of an income tax. The more you make, the more you need to spend to be able to buy goods competing in a place where the average income in New York living in a 1 bed will get you a mansion in Atlanta. Money has different value dependant on what the majority of residents make.
Worst City:
Newark, New Jersey. This is known as the hardest place to save.
Why?
The median income is one of the highest, roughly $85,751 trailing San Francisco at $122k and in front of New York at $75k.
Cities that surround the states like borders are cities for a reason. They attract top talent, have a limited amount of space and thatâs where most people are located.
Los Angeles, New Orleans, Miami, and New York are also in the top ranks for the worst places to save. With extreme housing and gas, most residents in these cities have to spend their income on mortgages, rent, and groceries.
So I mentioned Florida, a state with no state income tax. This means that if you were to retiree, there would be no state tax on your Social Security benefits, pensions or any retirement income. If you are a New Yorker, that sounds like Heaven.
Including Florida these are the states with no income taxes:
Alaska
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
No wonder the richest person alive lives in Washington state and our president transferred his residency from New York to Florida. Donât worry, tax evasion and sneaking out of paying these hefty fines is common by the rich. Thatâs why Rudy Guiliani exists.
For the rest of us, depending on if you are self-employed or have the luxury to work in a company located in Tampa Bay, it is a huge advantage that will save you thousands per year when it comes time to tax season.
Paying no taxes on earned income, however, has its disadvantages:
Residents still have to pay taxes on dividends and income from investments, not common in most other states unless you sell your investments, and a capital gains tax is enforced.
High property taxes such as in Texas and New Hampshire
High Sales Tax such as Texas and Nevada charging 7% sales tax statewide
During this pandemic, many people are not only moving to states that have more space but are also tax advantageous. Many wealthy individuals chose to live the majority of the year in states without a state income tax for that benefit. But for individuals of all income classes, this also has an effect, a smaller one, of course, making less but still one that adds up.
Since my parents moved to New York as immigrants in the late 90âs, we continued to stay in the city that never sleeps because the opportunities, people, food, culture, and vibe is hard to beat. Financially, we could own more and have more space in Colorado, but why? We are happy with what we have, work hard and pay the price for it.
I hope this helped you understand the cost benefits of living across the US and what you can do to optimize it for your portfolio!