Nearly all of us have some sort of budget. We budget for groceries, rent, car payments, fuel, even toiletries. We may think we’ve thought of every expense but have we really? Probably not.
What this post will do is uncover the one area of our budget we can easily overlook. And it is perhaps the biggest expense we have. It’s easy to miss the forest for the trees.
So what is this mystery expense?
It’s cost of living. Are you living in the optimal location for your financial situation?
It’s About Challenging Everything
Why do you live where you live? Is it where you grew up? Do you enjoy its climate? Are the schools good? Really think about why you live there. And then think about moving. Do it.
I’m saying this because the typical American lives 18 miles from mom. Even when their hometowns are becoming derelict, people are still reluctant to move. But why am I challenging this point? Why not just let people stay where they feel comfortable?
Moving away from home may be at an all time low but that probably isn’t a good thing. Rather, America was born on immigrants and pioneers who were willing to take risks and move where opportunity awaits. To live without risk is to live without reward.
Why Cost of Living Matters
Did you know that seven states have a 0% income tax? The states include Washington, Nevada, Alaska, Texas, Wyoming, North Dakota and Florida. Several other states have income taxes only on certain categories like dividend and interest income.
Let’s say you currently live in the state of California. Let’s assume you earn $75,000 – because you read MoneyNing.com and you know how to make money. Without entering in the specifics, the state income tax would come to about $6,000 (mileage may vary). Whereas, you could move to a no income tax state and pay $0 in state income tax. Total savings: 6,000 smackers. That’s enough to fully fund your Roth IRA each year and blow the rest! If you did that for 40 years and earned an annual ROI of 8%, that’s $1,537,676.59. That’s right! You will have an increased net worth of over 1.5 million dollars just for moving across the border to Nevada. Plus, if you did better with your money and earned 10%, then not having to pay state income tax would save you $2,675,737.36.
Yes, there are other tax considerations to consider – ie: moving to a state with no income tax may mean paying a higher sales tax. Or perhaps property tax is higher. I simply used state income tax to make a point. When comparing cost of living expenses, it’s important to consider all state and local taxes plus other living expenses that rise and fall from state to state and city to city. Still, moving to a state with no income tax is a huge advantage.
What About Family?
The best reason to stay put is because of family. Some of us can live anywhere but our family are only in one place. This is a valid reason to stay – regardless of money. Think long and hard though if you’re simply using your family as a crutch – the reason your financial situation cannot be improved. Don’t let this be the case. If they truly love you, they will want what’s best for you. And, as I mentioned earlier, your family probably moved a lot in the past. You would just be next. Future generations will thank you.
I’m Serious About Challenging Everything
How would you like to, at 70 years old, realize that you could have saved millions by simply moving to a different area of this beautiful country called America? Not good, so consider moving now.
Next time you revisit your budget, see how much you could save by moving. Furthermore, see how much more you could earn by moving to a new place. While the internet may have leveled the playing field some, certain locations are still better for making money.
Written by Will Lipovsky for MoneyNing and legally licensed through the Matcha publisher network. Please direct all licensing questions to legal@getmatcha.com.
