The cost of living where you reside can have a huge impact on your financial goals. Here is how it impacts personal finances today – AND in your future.

How cost-of-living impacts financial goals

This is a topic that Karla and I discuss on a regular basis. It really can have a major influence on someone’s ability to achieve their financial goals. We want to understand those impacts and how they relate to our personal finances specifically. Since we talk about it so much, I figured I’d take a moment to write about it too.

UPDATE: This satirical article came out shortly after I wrote this. It’s both funny and sad (too close to truth for many people). Thought I’d share it though because it plays right to my point. The area where we live is expensive. Mt. Pleasant Couple Aiming to Retire at Age 153. (No, that isn’t us.)

What is cost of living

Let’s start at the beginning. Cost of living is quite simply the measure of expenses related to living your life in the area where you call home.

Everyone has costs associated with living life. Those costs can vary quite a bit from one city to another. There will be cities where the cost of living is higher than where you live now. There will also be cities where the cost of living is lower than where you live now.

What makes up someone’s cost of living?

The short answer is: Everything.

Major parts of a family’s cost of living include:

* Housing costs

Average home price and average rent prices are generally the largest component of your cost of living.

* Taxes

Many people don’t consider this, but taxes vary greatly from place to place. There are also a lot of different taxes that can easily be forgotten. For example, a few of the big ones are:

-> Property taxes (real estate)

Property tax on housing will directly impact your mortgage payment. Some cities and states can have property tax levels that vary in the tens of thousands of dollars each year!

-> Property tax (vehicles)

There is probably somewhere that doesn’t charge property tax on non-real estate, but I haven’t lived there yet. Besides real estate property taxes you will commonly pay an annual property tax on vehicles – cars, trucks, RVs, boats, etc. These taxes might be hundreds of dollars per year, or can reach thousands per year.

-> Income taxes

Income taxes vary greatly by state. California’s income tax rates go as high as 13.3%! Florida, and a couple other states, don’t have any income taxes at all. It isn’t hard to see how that can impact your cash flow!

-> Gas tax

The governor of South Carolina just struck down a proposed $.12/gallon gas tax increase here. Pennsylvania has a $.50/gallon tax. New Jersey has one of the lowest at just over $.14/gallon. If you commute to work, this starts to add up. Do you know how much your state charges in gas taxes?

* Utilities

The average monthly utility bill in Washington state is $218/month. In South Carolina, where I live, it’s $292/month. In Connecticut it’s $404/month. As you can see there can be huge differences in this monthly cost depending on where you live.

* Transportation

I already mentioned gas taxes above. Beyond that there are costs associated with insurance, automobile maintenance, parking, and public transportation. Maintenance costs can be especially high for people who live in areas with extreme winters. The snow, salt, and freezing cold temperatures tend to cause more frequent issues with automobiles.

* Health care

Did you know your health insurance costs can vary depending on where you live? I didn’t until we rented an apartment in a different county while our new house was being built. From “moving” just 20 minutes away we saw an increase in our health insurance costs. Of course, beyond insurance, there are environmental factors that impact health – and there are the non-insured medical costs that need to be covered.

* Everything else

Groceries, average dining-out bill, entertainment, and whatever else you spend money on.

A few examples: When looking at the cost of certain grocery items in Charleston SC vs New York NY…

  • Milk costs 9% more in New York
  • Bread costs 21% more in New York
  • Eggs are 1% cheaper in New York
  • Chicken breasts cost 30% more in New York
  • Domestic beer is 53% more expensive in New York

See how quickly that can add up?

These items tend to be a smaller percentage of the cost-of-living total, but still impact your monthly cash flow.

Can cost-of-living really make a big different?

Yes, it can.

Consider a few city comparisons from

Comparing Mooresville, NC to McLean, VA:

McLean is 115% more expensive than Mooresville.
Housing is the biggest factor in the cost of living difference.
Housing is 304% more expensive in McLean.

Comparing Salt Lake City, UT to New York, NY

Salt Lake City is 40% cheaper than New York.
Housing is the biggest factor in the cost of living difference.
Housing is 57% cheaper in Salt Lake City.

That’s just two examples of obviously thousands of cities to compare.

Is it worth relocating to save money on your cost-of-living?

Here’s the question: Is it worth moving to lower your cost-of-living?


For some, it might be. For others it might not be worth it.

If you are moving into the retirement phase of life where you need to be very budget-conscious to assure your savings last – it is certainly worth at least considering the option.

Perhaps you are having a hard time making ends meet because your living costs consume too much of your monthly take-home pay. Looking into relocation options could be an interesting exercise.

Why wouldn’t you relocate to lower your cost-of-living?

Like just about everything in personal finance, it comes down to priorities.

Karla and I frequently talk about relocating to another city to save costs. We’ve looked north of Atlanta, GA and it would save about 25% on our living expenses. We’ve looked at Hendersonville, NC and that would save us about 26% on living expenses.

(Curious what you could potentially save? Compare a few cities for yourself.)

BUT, even though we could save some money, there is a trade-off.

Places that have higher costs of living generally do so for a reason.

Where we live right now has two nice grocery stores within just a few miles of the house – and we’re getting a Costco later this year. Our gym is less than five miles away. We can get into downtown Charleston in less than 30 minutes. We’re about 5 minutes from the Wando river. The schools in our neighborhood are rated extremely well to0. Even though we don’t have kids attending, that does impact the area.

Local community amenities

The two areas we’ve considered are less expensive but they also have fewer amenities. The grocery shopping options are limited. They are further from metro cities. They’re further away from airports. The schools aren’t rated as well. And so on.

Additionally, higher cost-of-living areas often put some of those higher tax dollars into their parks and community facilities. The area where we live right now has a lot of parks within a reasonable driving distance. They are all very well maintained and quite affordable (sometimes free) to visit.

There is a trade-off. What are your priorities? If amenities are truly important to you – I mean truly, take some time to think about it – then you could be stuck with a higher cost of living.

Also consider employment…

Another big factor to consider are work opportunities between two cities. Oftentimes the higher cost locations also have higher paying jobs.

If you relocate to a less expensive city but have to take a big pay cut, you could wind up in essentially the same financial situation.

Of course it isn’t all about money. There are quality of life points to consider. If you prefer a quieter lifestyle, moving to a more rural area – often with a lower cost-of-living – might align well with your priorities.

There are definitely some positives to living in smaller cities.

What do you think?

Do you feel the city where you live right now is expensive? How does it compare to other “dream” cities you’ve thought about living someday? Would it be worth it for you to make the move? If so, what’s holding you back?