Here is one of the best arguments for moving where cost of living is low. This comes from a Jeanne Sahadi-penned article at CNN Money. She is discussing the issue of middle class status in various regions and how those living a “middle class lifestyle” pay significantly different taxes.
A dual-income couple without kids and an AGI of $74,443 in Milwaukee can afford a median standard of living, according to the Tax Foundation report. That still puts the couple in the top 20 percent of taxpayers, giving them a tax liability of 8,081, or about 10.9 percent of their AGI (otherwise known as their effective tax rate).
To afford the same standard of living in Orange County, California, the couple would need an AGI of $100,079, putting them in the top 10 percent of taxpayers with a tax liability of $14,506. That represents 14.5 percent of their AGI.
And if they move to New York City, they’d need an AGI of $162,974, putting them in the top 3 percent of taxpayers and giving them a tax bill of $31,139, or 19.1 percent of their AGI.
Is this reason enough to convince people to move away from metropolitan regions like Los Angeles and New York? Perhaps it is for some people. There are benefits to living close to international hubs, including exposure to diverse culture, proximity to the best music, art, and food in the world, and large, close-knit communities and subcommunities. For some people, this is worth the extra expense.
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It could be worth it to move if you have kids. The same jobs paying a couple 74k in milwaukee doesn’t neccessary pay $162k in NYC, so there is the extra pressure of working harder/longer/ to earn more money, which could mean having less time for your family. Recently, one of my friends have decided to move away from high cost NYC, all the way to Singapore.
It’s interesting you mention this now. I’m currently weighing a decision I have to move from Denver to either the Los Angeles or Dallas areas. Both are major metro areas, but they have very different costs of living. Anyone have any input on things to consider when I make this decision?
We live in the suburbs of DC. Interestingly enough, in the past 1-2 years, we have had 4 friends & their families move to Dallas. 3 from DC area, 1 from LA area. 2 friends & their families moved to Denver (both from DC). And one friend move from Dallas to Denver.
In most cases, the decision was made due to growing families and the rising cost of living in the respective areas. Its one thing to live in a condo or small townhouse if you are a couple. But with multiple kids, buying a single family home became too difficult (either pay way too much, or have to commute way too long).
I travel to Dallas for business quite often so I know what that market is like and too be honest, I think they are making the right decision for the short and mid-term. In the long run, it pays to stay in the high cost areas. Remember, these moves are one-way moves. Once you go to a low cost area, you can never come back.
Blog reader: There are places on the web where you can compare cost of living from one city to another. For example:
http://www.homefair.com/homefair/calc/salcalc.html
I have had a few friends move away from here (about an hour north of NYC) to lower cost cities. The big destinations right now, it seems, is the Austin area and the Raleigh area. Everyone that I know that moved to those places is gushing about it so far and we are actually considering moving at some point also. Our problem is that our family is all in the northeast, but it is just getting ridiculously expensive to live here.
We’re moving from Manhattan to Atlanta, GA. I’ve got a relocation package for this move, so no major out of pocket costs for me. It’s a lateral salary move, but the lower cost of living is going to be a huge difference.
It’s just too expensive in the Northeast to raise family. If I didn’t have kids, I’d be able to afford it, but being a first time home buyer, it’s just not working for us.
I remember when my friend got a job in NYC right out of school that was paying him over 70k a year, and just being amazed that he could get that salary right off the bat. But then I did a comparison using a cost of living site similar to the one FMF listed, and saw that all of his money wouldn’t really buy all that much more than my salary would down here in Raleigh/Durham (so yeah, RS, you’d probably find some savings!)
Bankrate recently had an article that mentions how a move like this is one of the ways that you can actually tap your homes’ equity that I reviewed on my site:
http://moneyexperiences.blogspot.com/2006/03/what-your-house-is-really-worth.html
My husband and I did just this a few years ago when we got married. We both had pretty high paying jobs in Silicon Valley, but we wanted two things: to own a house and to have someone [me] stay at home with the kids. And that wasn’t going to happen there.
He grew up in Austin, TX, so it was a natural for us to look there for a job for him, and then a home. And it was nice to buy a nice home down here for not significantly more than the cost of a decent down payment for a crappy house out there. Oh, and without the income tax. Oh, and without having to pay hundreds of dollars a year to renew the tabs on my car. Oh, and … California is expensive. Texas is not.
The loss of my — not inconsiderable — income has been hardly felt, and our savings has never been better.
For professional reasons, such moves may be difficult for some of us during our careers. But, with few Gen Xers and Yers likely to get any meaningful social security benefits, pensions, or retirement health benefits, whatever income we generate from our assets must be utilized efficiently.
Accordingly, I suspect many of us will seriously consider a move to a locale with a lower cost of living during retirement. I’ve been following this phenomenon as I see more and more relevant articles and sites like escapeartist.com; I’d be surprised if more retirees don’t opt to live outside of the U.S., e.g., in Mexico, Nicaragua, Panama, and Costa Rica. With more and more expat communities abroad, it’s not as outlandish as it would have sounded to previous generations.
We considered moving from NYC area to Philadelphia at one point, but decided against it. My wife’s industry is in NYC and we love NYC. So our compromise was NJ. Also, in the three examples, you get much less living space for your money in NYC than in Milwaukee. $1million might buy you a 800 sq ft one bedroom apartment in NYC while the same amount will get you a 4000sq ft 4 bedroom house in Wisconsin.
I am defInitely one of the people who thinks living in a big city (Los Angeles) is worth the high cost of living :)
If moving to Texas to save money, Austin is by far the best choice for people coming from culturally diverse large cities. No other Texas city even comes close! UT is a killer university, art and music are everywhere, tons of great restaurants, lots of outdoor activities, et cetera. Austin is truly the “middle coast” of the USA! Unfortunately, word is getting out. Real estate is EXPLODING and is predicted to continue for much longer. Get in while you can, enjoy, be happy, and make money.
Second best choice is Fort Worth. It’s a “grown up” Austin with more big-business flavor and rustic Texas style. Plenty of *world-class* museums, galleries, art shows, an elaborate botanical garden, and one of the nation’s best zoos. Like Austin, it’s a mellower, people-friendly place. Downtown is lively and fun every night. Don’t move here if you’ll be commuting to Dallas on a daily basis, however. It’s an hour each way, minimum.
Third overall choice (and #1 for value) is the mid-cities area which lies directly between Dallas and Fort Worth. The cities within this area (Hurst, Bedford, Euless, Colleyville, Southlake, and Grapevine) offer safety, convenience, good schools, and close access to D/FW International Airport, two water parks, and Six Flags. Being in the middle of the metroplex offers the best of what Fort Worth and Dallas have to offer at an unbeatable price.
From here on down, life is more about “survival” than “enjoyment”:
Next is a toss-up between San Antonio and Dallas, both of which are fairly dysfunctional. San Antonio is dominated by tourism and a transient population without offering much substance for locals. Crime rates are high and job opportunities are low. Nice place to visit… wouldn’t want to live there.
Dallas is a mixed bag. It all depends upon your financial condition. If you’re in the money, you’ll be able to buy an enjoyable status quo. Otherwise, Dallas will eat you and your children for breakfast with a side of spam and eggs. No joke… Dallas has been the #1 murder capital of the USA for seven consecutive years. Consider this: People who can afford to live in splendid University Park or Highland Park enjoy exceptional public schools, a private police force, a separate water supply (!), fantastic restaurants, and some of the best and most exclusive shopping in the southwest. However, outside of this magical little paradise, everyone else is forced to contend with hideous DISD public schools that resemble prisons, roving gangs, excessive burglary, and a nightlife scene (Deep Ellum, Lower Greenville) that is fraught with opportunistic muggings. And with the recent fallout from hurricane Katrina, it’s only getting worse. Bottom line: Unless you can afford a nice neighborhood and private schools, don’t even THINK about moving your family to Dallas. Want proof? The crime stats at Dallaspolice.net should provide sobering evidence.
Fifth would be Houston… a huge, sprawling, smoggy, unhealthy city with extreme humidity, urban unrest (not counting post-Katrina!), and traffic snarls across the entire city. Still, it does have Rice University, a great museum, and is relatively close to the coastline. Unless you’re getting filty rich here, avoid it.
Amarillo, Midland/Odessa, El Paso, Lubbock, Abilene… not recommended. Only for small-town types. If you’re reading this blog, you probably aren’t one of them.
Cheers! And remember, money is only a means to an end. It’s all about family, friends, good health, and “quality of life!” :)