Where you live, and how much it costs to live there can make a huge difference in what your finances look like. The differences in the cost of living between someplace like Seattle, or San Francisco and where I live, in North Dakota are stark. Oftentimes, when you see someone using a calculator of some sort for your retirement “number” there are some assumptions that get made. People simply assume that they are talking to people who have the same economic circumstances. They also assume that a 20 year old male is going to need the same amount in their retirement account as the next 20 year old male.
Now, let me tell you something that will knock your socks off. At least, it will if you live in one of those bigger cities. Me and my family of 4 (+1 dog) do just fine on less than $70,000 a year. We’re not extremists, living in a small trailer in a campground somewhere, eating only rice and beans all the time either. Could we survive on less? I know we could. We have debt; student loans, car loans, medical bills, a mortgage, and your regular monthly utilities and such. But, the cost of living here makes it not only doable, but affordable to live on that amount.
There are some things that cost about the same everywhere. New and used cars, for instance. A new pickup here still costs about the same $40,000 (depending on model and features, of course). Other, more universal goods, like books, computers, and pretty much anything you can buy off the internet, still cost about the same. But, for many of the other standard items, we’re a lot closer to the source. A pound of hamburger is only about $3.50. A pack of cigarettes is only about $4.50. Compare that to the prices in someplace like New York, and you start to see the benefits.
Where the real difference is, is in the local goods. Property being the big one. I’ve compared a few times in different markets. After the real estate crash a few years ago, prices have gotten a little better, but still aren’t all that close. We own a 2+1 bed, 1 bath, house with no garage on a good sized city lot. When we bought it, back in 2004, we paid a little over $46,000. Some of you reading this likely drive cars that you paid more for. The houses value has gone up some over the years, but the last time we had it valued, which was in 2011, it was worth $57,000. I truly hope there aren’t too many of you driving cars that you paid more than that for, but I’d bet there’s one or two. Comparable houses in some of the larger markets usually are priced closer to $250,000. If I do the quick and dirty math on that, the mortgage payment would be $2,040 more in one of those larger markets.
I don’t have any real way to compare the utilities, but I have the suspicion that we pay less there too. Our house is older (c. 1950), so it’s not the most energy efficient house out there, but we still only pay about $90 a month for our electricity, and about $35-$40 for our natural gas a month. Water, sewage and garbage are lumped together, and usually end up around $50 a month.
Another huge way that our cost of living is different is in travel costs. I don’t mean vacations. For most of that, we’re far enough from a major travel hub that it is usually a little more expensive. What I’m talking about is commuting costs. Last week, I slept through my alarm. I’m supposed to be at work at 8. I woke up at 7:55. I skipped the shower, but I was able to get up at 7:55, get dressed, quickly help get the kids started getting dressed, and still made it to work at 8:15. How many of you would just call in sick because you’d have missed the whole first half of the work day? When I time my drive to work, it’s somewhere around 5-10 minutes depending on traffic. And, when I talk about traffic, what I really mean is if there’s anyone coming when I have to make a turn onto a street and I have to wait ’til they pass. I usually have to fill my 12 gallon tank with gas about once a month. Sometimes I stretch it to 5 or 6 weeks. And then there’s the savings on wear and tear on the vehicle. I rarely put more than 12,000 miles on a car in a year. That makes it really easy to keep a car for 10 or more years!
Now, I’m not telling you all of this just to boast about how cheaply I can live here. Really, I just wanted to make you aware of the differences. What you perceive as “normal” sometimes isn’t. The same is true for me. What is a good paying job here, would be considered a poorly paying job in a big city. People who live in those big cities usually have a lot of amenities that come along with those extra costs. Choices in movie theaters. Professional sports teams. Entertainment venues that can hold more than 30,000 or so people. They pay for those extra amenities in extra costs that aren’t always monetary. Crime rates, crowding, and more competition for jobs to name a few.
How does your cost of living compare? How big is the city that you live in? (for reference, the city I live in is about 15,000 people.)
img credit: afiler, on Flickr
I started this blog to share what I know and what I was learning about personal finance. Along the way I’ve met and found many blogging friends. Please feel free to connect with me on the Beating Broke accounts: Twitter and Facebook.
You can also connect with me personally at Novelnaut, Thatedeguy, Shane Ede, and my personal Twitter.
I love the fact that my round trip to and from work is less than five miles. It definitely costs less for gas and I’m only putting on a few thousand miles per year on the car. Which is awesome 🙂
There are definitely some perks of living in a smaller city. My wife and I have managed to easily live on a combined income of less than $50,000 quite easily several times over the past few years.
We’re significantly higher than that now with us both working full time, which is much nicer but we could easily go back to that if we had to.
Travel and home prices are definitely different. I lived in Seattle for a while, and the cost of living out there was way higher than the Midwest, especially in travel and housing.
Cool post, definitely true that it varies from place to place. I don’t think you could even buy a shack for $46000 in most areas of Canada city or country with our high housing market. I imagine taxation rates and such vary too. Sometimes I’d like to get away from the bustle just to relax a bit…
I live in Panama City/Beach Florida so depending on what time of year it is my city is smaller or larger. I definitely understand the cost of living thing because I moved to this area from Washington DC and still get paid roughly the same and I feel rich down here and felt like I’d never get anywhere in DC. Cost of living makes a huge difference.
The difference from a low cost area and an expensive area is generally the cost of housing and wages. ages usually compensate for the higher cost of living. When you retire, your mortgage is usually paid off. Therefore, as a retiree your costs are somewhat equalized. There may other costs that may be different, but housing and wages are the big ones.
I live in the Chicago area. I don’t think that one could find a single family home of that size for that price around here, and actually feel safe! Let alone find one for that matter anywhere near the city.
There are always tradeoffs. What I’m getting in terms of opportunities living here, I’m paying for with a sky high cost of living. Sometimes I do think about being older and moving to a lower cost area, and how much more the money will go.
That’s one of the perks of living in a smaller city. For retirement, I would consider moving to suburbs or a rural town just for the lower cost of living. When you are not getting the usual income from a good paying job and rely only on pension, it’s best to find a smaller community (15000 populace will do).
Where you live does make a big difference. I grew up in SC where in the parts where I lived you could get a new home built for about $40k. Living in Florida you would be lucky find any that price. You still have to consider as well the lifestyle and what you have access to such as my wife wouldn’t probably to well living in my old town. She likes being close to everything and not having to drive 30 mins to get to a store.
I live in a town that will be hard to leave just because of the cost of living. Housing is very inexpensive. Electricity is cheep due to hydro. There is little traffic. It takes lass than 10 min to get from one end of town to the other. Waiting in traffic ramps up fuel cost. Walking to the store saves as well. Diner at a steak house with a glass of wine for two $25. In Chicago close to $100