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Americans can be extremely passionate about the region of the country in which they live. Chicagoans and New Yorkers will spar over which city has the best pizza, while Kansas City residents will argue about barbeque all day long with people from North Carolina. No matter your loyalty to your city, if you’re talking dollars and cents, there are some clear winners in terms of the least expensive places to live.
Recently, the Tax Foundation, a Washington, D.C.-based organization that collects data and publishes research studies on tax policies at the federal and state levels, created a map that shows the real value of $100 in different U.S. metropolitan areas. Based on data from the U.S. Bureau of Economic Analysis, the data shows that it is more costly to live in some places than others. Honolulu was the most expensive city, where $100 is only worth about $81.37 in value, based on the costs of land and consumer goods. But in Mississippi, $100 is worth almost 40 percent more than in Washington, D.C.
What influences how much $100 is worth?
In order to determine how much $100 is worth in metropolitan areas, the U.S. Bureau of Economic Analysis creates a so-called “fixed basket” of consumer goods in order to give a sampling of how much it costs to live in a particular place. Items in the basket include everything from breakfast cereal to new vehicles to pets and pet products.
Alan Cole, an economist with the Tax Foundation and one of the authors of the study and creators of the map , says that “essentially, the Bureau of Economic Analysis goes out shopping” in order to compare how the cost of items, such as food, clothing, furniture, and services, vary across the country. The two most important elements of the basket are housing costs and gas prices, according to Cole.
“In an area where you see expensive houses, you will see a lot of other expensive things,” Cole says. That’s because if the land is expensive, home prices go up, rent increases, and it is also more costly to start a business. Consequently, manufacturers will charge more for goods in order to meet a higher profit margin needed to pay the rent. Housing prices affect almost everything else.
Gas prices are also essential because of the cost of transporting goods. “It’s not just about what you pay when you fill up your car—anything that needs to be sent to you and anything that needs to be built costs money to ship,” Cole says. Shipping expenses make a place such as Hawaii extremely expensive because imports typically require a lot of gasoline. The closer you are to Texas and the Gulf Coast, where most of the oil comes in, the lower the shipping costs you will pay, Cole says.
Policy differences also play a role in the costs of living because state income taxes and property taxes may add a few more dollars onto the already-expensive housing costs.
Should you relocate to another area of the country?
Your ability to succeed in a different region of the country will depend heavily on your income and personal consumption habits. “If you want a big yard, you’ll have to pay two or three times more to get one in New York, than in Tennessee, for example,” Cole says.
He suggests that before making a move just to save money, you should first evaluate the job opportunities that are available to you.
If you find a job that pays you $40,000 a year in a place like Kansas City, it could provide a comfortable living there. If you were making that same amount in a bigger city, “you’d be struggling to get by and pay the rent,” Cole says.
Cole notes that there’s usually not a huge wage difference between rural areas and cities for the same job. However, there is typically a larger variety of positions available in big cities. Additionally, large metro areas often allow for specialization across different fields, and that can eventually drive up the costs of land and living. If you could specialize in a certain type of work, your income might go from $40,000 in Kansas City to $60,000 in Chicago, where there are typically more opportunities.
It takes more than money to make a home, but spending less may help you have more of a house. If you consider moving to a place with more income opportunities, you may discover new possibilities for your career. On the other hand, the value of inexpensive land and a less expensive lifestyle may help you plan a future for a new family or aging relatives.
Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
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