The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of SnoQap, any other agency, organization, employer or company. Assumptions made in the analysis are not necessarily reflective of the position of any entity other than the author(s). These views are subject to change and revision.

A Graduate's Nationwide Search for a Cheap City

I'm graduating soon, which is both exciting and scary at the same time. When one graduates, they have the obvious question of "what do I want to do with myself" to answer, but seldom in life do we get the luxury of considering where we want to do it, like when one graduates college. When we choose a college, we're usually limited by financial or geographical factors that dictate where we can and can't go to school. In college, we are primarily consumers and cannot cover the cost of college while in school.

For the first time in many people's young lives, we can take these limits and throw them out the window (sort of), because we're actually making money; we're producers! Us youths are not yet hampered by the shackles of a family to support, therefore having the freedom to pick whatever metropolis can serve ourselves the best as we transition out of our formative years.

Most people stay in their home region or close to where they went to college. Some even decide to take their services internationally, seeking out their employment in a completely different region of the globe. For my search, I'm going to look strictly at/within the good ol' US of A to see what area provides the best cost of living, as that is the factor most use to determine where they end up aside from personal preference.

Cost of living, of course, means the level of prices to a range of everyday items. For example, how much rent differs in New York when compared to Chicago, or Wichita? There are many other factors to consider when deciding where to move after college, but we're going to strictly stick to cost of living because we're a finance website and our publisher limits us to 1,250 words.

The Forbes ranking of the 25 cities with the lowest cost of living includes some small cities like Amarillo, Texas and larger ones like Indianapolis. What's consistent about this list is that there is no city located in the Northeast. In fact, the list primarily consists of cities located in the Midwest.

So why is it so expensive to live near a coast? It's simple! The coastlines of the United States only make up 10% of the total land in this great nation, but 39% of our population (123.3 million people) live there. Both the demand and competition for jobs are high, keeping salaries and cost of living higher than their landlocked counterparts.

A 2015 Forbes article cited that for a family of four to "live well" in New York City, they'd need $500,000 of annual income. And while "living well" included more extravagant dining, trips, and housing, I keep wondering what it would take to "live well" outside of the grip of such high state and city income taxes.

It's fascinating that a salary that has you living large in Jonesboro, Arkansas will leave you living paycheck to paycheck in Boston. For my personal search, I'm staying grounded in my expectations; I know I'll be making entry level salary and won't have much else to spend on the extracurricular activities that the Forbes article mentioned.

Nerdwallet had an interesting article, in which they calculated this exact question based on four significant financial factors. These financial factors were the median household income, the number of houses without a mortgage reported by the 2014 U.S. Census Bureau, the monthly median home value as reported by Zillow Research, and the average credit limit for credit card holders in these towns reported by Experian in 2016.

They found some interesting things from compiling these factors into scores out of 100:

  • The Midwest had the cheapest housing, coupled with high income for many cities. Therefore, those in this region had more buying power because they weren't paying exorbitant housing costs.
  • Californians had the highest access to credit out of any state.
  • Northeasterners had the lowest access to credit out of any region.

What's striking about this list is how wealthy California is. I always assumed that the high wages earned were offset by the high cost of housing and taxes that burden those who live in the state. I guess not because they had a whopping 17 cities in the top 25 of the entire country! That may be due to more development in the technology industry. Heading forward we could expect to see even more California cities on this list in the coming years due to mega-companies like Apple, Disney, and Google that call the Golden State their home.

Even more surprising than that was the lack of cities in states that don't have an income tax at all. That's because while there are nine states in the U.S. that currently don't charge income tax, they make you pay it in other ways. For example, Tennessee makes you pay an extra tax on dividends earned, while also having the worst sales tax in the country at 9.45%! Washington also gets charged in other ways, having the 5th highest tax on gasoline in the country at 37.5 cents per gallon in taxes.

Through this research, the Midwest seems appealing! Three of the top five earning Midwestern cities are located in the greater Chicago area. The wealthiest Midwestern city was Naperville, Illinois, with an income of $104,419 and a house price of $364,300. Compare that to the Northeast's wealthiest city, Newtown, Massachusetts, with a median income of $102,796 and a median house value of $886,400, and you may just be willing to trade in your clam chowder for deep dish pizza.

Of course, credit limit matters when looking at the area's community as a whole. Are they wise with their money, thus earning a higher limit on their credit from banks, or are they irresponsible spenders who cannot be trusted to pay off a high limit? Newtown has a slight edge there, with roughly $70,000 in credit limit compared to Naperville's $67,000.

Many of these factors may seem broad, but that's only because my search is itself nationwide. When I finally do settle on a city with which to take my talents to, I'll be sure to take the aforementioned elements into consideration, while also taking in some of the more individualized and personal factors that I've been ignoring throughout.

Tesla Model 3: The Best of Its Kind... For Now

Mao 2.0: The Rise of Xi