4 Ways How Where You Live Affects Your Finances
“Location, location, location” is the real estate market’s favorite catchcry, but that’s because its importance cannot be overstated. Location won’t only influence what you spend when you purchase your own home or sign a lease. It will continue to make an impact on your finances in the following ways until you move on.
Cost of Living Varies from City to City
We all know that folks pay through the nose to live in some of America’s biggest cities while living costs are more affordable in the nation’s rural areas. However, you might be surprised at the marked differences you’ll find from one location to the next.
Residents of Harlingen, Texas get the country’s best deal, with a cost of living 18.2 percent less than the national average. In contrast, the residents of Manhattan pay for their cosmopolitan lifestyle with a cost of living that’s 125.4 percent higher than the national average. To put it in real terms, the people of Harlingen can purchase a T-bone steak from their local store for around $8.34, which is small change compared to the $15.52 New Yorkers pay for the same piece of meat.
When comparing the cost of living, it’s important to consider several key factors including the price of groceries, housing, and healthcare. Cost of living calculators, like the one featured on the CNN Money website, break these elements down to help you evaluate your current situation and whether you’d be better off moving elsewhere.
Location Impacts Your Car Insurance Rates
We all know car insurance companies consider your driving record, preferred vehicle, and age when calculating your premium, but did you know your location also plays a part? Insurance providers reason that the roads you typically drive influence the likelihood of accidents occurring.
Drivers from Vermont enjoy some of America’s lowest premiums because there are fewer cars and plenty of wide open spaces. Conversely, New Yorkers are slugged as all that congestion increases the chances of fender benders. Hailstorms are common in Oklahoma, so insurance companies cover themselves against claims by raising the state’s premiums. Drivers also pay more in Modesto, California, which has the country’s worst rate of car theft.
Your State Affects Your Taxes
Image via Flickr by 401(k) 2013
Setting taxes is a state matter, so crossing the border could seriously affect your finances. Generally states with the largest population increases have the lowest income tax rates, while states with smaller fluctuations have the highest income tax rates. Residents of Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming are especially lucky, as they don’t pay any income tax at all!
People living in Montana, New Hampshire, Delaware, and Oregon avoid paying sales tax. There’s no state tax in Alaska, but local taxes tend to see shoppers paying an average of 1.11 percent more for their purchases. On the other end of the spectrum, the people of Tennessee pay around 9.44 percent when state and local taxes are combined.
All states charge homeowners property tax, but some charge more than others. It’s a relatively small amount in Louisiana and Hawaii, but much higher in New Jersey and New Hampshire.
Where You Live Affects Rent Inflation
Not everyone’s got a foot in the property ladder, but that doesn’t mean renters escape the financial impact of their location choices. While they aren’t slugged property tax, they’re at the mercy of rent inflation. Average rents have risen since 2010, but those increases have been felt more sharply in certain parts of the country.
The residents of San Jose, California are expected to feel the pinch most, with rents predicted to rise 5.3 percent over 2013. Landlords in this city capitalize on the high volumes of tech employees willing to pay whatever it takes to live near Silicon Valley. Tech workers have also seen rents rising steadily in San Francisco over the years. Rentals are expected to cost 5.2 percent more by year’s end than they did twelve months ago.
Rents are more stable in rural areas with a larger number of vacant homes and apartments. If you’re keen on city life, you can shield yourself from rent inflation in the steady markets of Tucson, Arizona, Jacksonville, Florida, and Kansas City, Missouri.
So consider your location carefully, because it’ll influence much more than your home’s value.
Tags: Personal Finance Tips
, Locational Finances