​Great Money Saving Tips People Hate: Move to a Cheaper Area

ESI Money  |

It's a well-known fact of personal finance: people like to save money. They like a deal. If they can get something for $50, that's better than paying $75. Paying $30 is even better.

It's also a well-known fact that people hate having to change their habits to help themselves out financially. You can see scores of evidence that backs this up -- massive credit card debt, extremely low retirement savings, a good percentage having low to no savings, and so on.

So people are caught in a quandary when they hear a great money saving tip that is too awesome to pass up, but requires them to change their habits. Should they love it because it saves them a bundle? Or should they hate it because it forces them to do something not in their nature?

I think you know the answer...they hate the idea. Despite it being able to save them a boatload of money, they hate it.

Today we're starting a monthly series on great money saving tips that people hate. We'll begin with one that's sure to get a response from many.

Hated Saving Tip: Move to a lower cost-of-living location.

This tip recognizes that there are different costs to living in various parts of the world. In New York City, an annual living budget might cost $XX while in St. Louis it may cost 60% of that. A foreign country may cost even less still.

How Much it Can Save You

Hundreds of thousands of dollars over a lifetime -- in some cases, millions.

Here's an example: This calculator will reveal that if you make $100,000 in Kansas City, you need to make $183,316 to have the same lifestyle in San Francisco. In reverse, if you make $100k in San Francisco, you can live the same lifestyle in Kansas City for $54,551.

Take an extra $45,449 each year for 20 or 30 years and see what that adds up to! Better yet, invest the difference each year and you'll see the difference is millions of dollars!!!!

Why People Hate It

Generally, people like where they live and they don't want to move. So suggesting they should move is heresy.

Excuses They Use to Refute It

There are various excuses people use for why this tip is not true (or at least not worthwhile). The most popular are:

  1. There are higher salaries in higher cost of living locations which more than offset the higher costs.
  2. There's a quality of life issue to living in one city very another -- usually expressed in terms of "this city has so much to do".
  3. They have family in the city and want to be near them.

Why the Excuses are Invalid

Any excuse is just that...an excuse. Obviously, people can live wherever they like. They just need to realize they are paying through the nose to live in some areas of the country. If that's their choice, that's their choice. The excuse shows up when they try to deny the cost of living differences and claim they aren't spending more in an expensive city. They are living in denial.

The "higher salary" argument is dubious at best. There are differing points of view on this one but more often than not the data falls into the lower cost market being a better option financially.

The "quality of life" argument always seems to focus on the positives but leaves out the negatives. Yes, NYC has great museums which you may use once or twice a year. But do you want an hour-long, one-way commute (if you're lucky) each day to work? Is that a great quality of life choice? Oh, and is "I can get any type of food at 3 AM" really worth $20k in extra expenses a year? Probably not, since those 3 AM food runs often disappear once a couple settles down and has kids. But there's "culture" in this city? And there's not in other cities? And you can't live one place and visit a different city now and then? Come on!

I will admit that the "living near family" reason is valid for many. Again, if people recognize the cost and willingly take it on to be near family, fine. But most don't. Instead, they claim that the costs are the same so they can feel good about living next to family.

When it Gets Worse: Suggest Moving to a Foreign Country

No one wants to hear that they can cut their living costs in half by moving to Mexico or Thailand. It just seems too crazy!

But there are huge savings moving to a foreign country even compared to "cheap" US cities like Pittsburgh or Oklahoma City. In fact, if you pick the right cities, you can cut the cost of retirement in half. This should be great news for Americans who, on average, haven't saved much for retirement.

The key objections to this idea are that a foreign country is unsafe and has terrible health care. Yes, there are some unsafe countries and areas but you can avoid them (just like there are places in the US you want to avoid). And here's a news flash, the US is way down the line in world rankings of best health care countries (currently #37). You can actually get BETTER care for LESS money in many foreign countries.

The Optimal Financial Solution

The best option to maximize net worth is to have a high income while living in a low cost city. If you do this, you can save a fortune and hopefully retire early.

If you choose otherwise and want to live in an expensive city, that's ok. Just recognize that it's costing you a massive amount of money and will delay retirement for a decade or two.

We're just getting started! If you hated this tip, you'll really despise the next one. Join us next month when we take on man's best friend...

(Photo 1 by Wesley Fryer)

(Photo 2 by PerryPlanet)

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.


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