Price differences are common throughout the U.S., where cities like San Francisco and New York cost way more than the national average. In fact, the total cost of living in San Francisco is 62.6 percent higher than the rest of the country.
If you’re looking to save money, moving to a cheaper place could be one of the best financial decisions. Find out how moving to a more affordable city could have a huge effect on your budget.
1. Moving could lower your cost of living
The cost of living between different states and cities in the U.S. varies tremendously. Cost of living refers to how much you spend each month on expenses such as rent, groceries, transportation, and taxes.
The Council for Community and Economic Research crunched the data with its Cost of Living Index (COLI). It found that New York City, Honolulu, and San Francisco have the highest cost of living in the U.S. The average price of a home in Manhattan, for instance, is $1.36 million. And a trip to the salon will set you back $68.
Compare these stats to some of the most affordable places to live in the country, including Harlingen, Texas, Pueblo, Colorado, and Memphis, Tennessee. In Memphis, for instance, the average house costs $208,000. And a trip to the salon costs about $25.
The same salary could afford you a vastly different quality of life depending on where you live. In a more affordable city, you could buy a house with the same income that would leave you struggling to pay rent somewhere else.
Of course, there are other factors that impact where you want to live, such as culture, climate, and job opportunities. Some cities may offer the industries that match up with your career goals, while others do not.
But if you have some job flexibility — or even the choice to work from anywhere — you could lower your cost of living by choosing one of the cheapest places to live. With the money you save, you could pay off your student loans faster or set aside a greater amount for retirement.
2. You could pay a lot less in rent every month
While rent factors into general living costs, it also deserves its own category. The old rule of thumb says you shouldn’t spend more than 30 percent of your income on housing. Spending even less will free up more of your paycheck, too — if you can swing it.
But in expensive cities like San Francisco and New York, some spend far more than 30 percent of their income on rent. After all the required expenses are taken care of, they don’t have much for fun stuff like travel and going out to eat. Even worse, that leaves them with a lot less to accomplish their financial goals.
According to the COLI, the average rent for an apartment is $3,783 in Manhattan and $2,493 in Brooklyn. In Memphis, rent is just about $709 a month. In Harlingen, Texas, it goes down to just $628. If you’re looking to save money, reducing your rent could be an effective place to start. Especially if you can reduce it by $1,000 or more.
3. You could say goodbye to state income tax
Another major factor to consider is state income tax. Most states charge an average effective tax rate of 4.05%; Oregon has the highest income tax at 7.75%. But there are seven states with no income tax at all:
- South Dakota
Plus, New Hampshire and Tennessee don’t tax wages.
Based on national averages for income and state taxes, the average American would save $1,977 a year by moving to a state with no income tax. In fact, Student Loan Hero CEO Andrew Josuweit moved from New York to Texas and saved about $15,640 per year. His move was largely financially motivated, and it helped him tackle $107,000 in student loan debt.
But before packing your bags, consider other potential costs of living in a state with no income tax. To gain additional revenue, some of these states charge higher sales and other taxes. Tennessee, for instance, has one of the highest sales taxes in the country at 9.45%.
So before renting the U-Haul, make sure you won’t be spending more of your income on other expenses than you’ll be saving in income tax.
Should you move to save money?
When you relocate, many often think about all the costs associated with moving. You might rent a truck, pay for movers, and handle fees associated with changing states.
But aside from the immediate costs, moving to one of the cheapest places to live could save you a lot of money in the long run. If you can significantly lower your cost of living, you’ll free up a big chunk of your monthly income. And if you eliminate state income tax, you could have thousands of extra dollars in your pocket each year.
Of course, there are other factors to consider outside of personal finances. Finding a job in your field is an obvious priority, and you may prefer to stay close to friends and family. And sometimes a high cost of living is worth it if you love the culture and vibe of a city.
But if you’re struggling to get by in an expensive place, consider how much you could save by relocating. If you find a new place you love, you could experience a vastly different quality of life with the same income you have now.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.41%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews! |
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.
5 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.