6 second take: If you want to cut costs, moving may help to lower your cost of living. Figure out whether it's the right choice for you.

Moving to lower your cost of living isn’t just something to consider for retirement. The work world isn’t the same work world it was 20 years ago. Nor is much of anything else. For many people, it could make sense to move somewhere cheaper in order to save some expense.

Cost of living varies by location. We all know that cities like New York and San Francisco are far more expensive places to live in than small towns. Especially so if those towns are located far from the Northeast or the West Coast.

It’s more than just taxes and housing. And it’s not all roses. But there are legitimate opportunities for some people to relocate to significantly improve their financial situation.

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Expenses That Vary by Location

The two biggies are housing and taxes. Rent prices and costs of homeownership are far lower outside of most major cities and their suburbs. In many cases, a move from a major metropolitan area to a low cost of living area could save thousands of dollars per month in housing expenses alone.

Rent prices and cost of ownership are roughly related. Areas with high ownership costs have high rents, while areas with low ownership costs tend to have lower rents.

Taxes

Taxes also vary widely by location, with the Northeast and the West Coast harboring some of the most onerous tax burdens in the country. But they’re not alone. Inland cities like Chicago provide some competition.

Taxes in general tend to be lower in the South and Midwest, but you don’t necessarily have to move far to reap the rewards of lower taxes.

Crossing state or county lines can significantly alter your total tax picture. Even moving out of a location with a city or village tax can ease some budgets significantly. Some high-tax states border other areas with significantly more favorable tax climates, while most other expenses are relatively equal.

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Food and Fuel

The cost differential between locations extends beyond these big-ticket items. Food and fuel vary significantly by location. Food items are often cheapest near their source.

Meanwhile, fuel varies both as a function of transportation and in terms of taxes, so there isn’t as linear of a relationship. But states that tax heavily tend to tax everything. Other necessities like clothing also have geographic cost differentials.

Ah, What Technology Has Brought

Technology has been the greatest change of our time. And it didn’t skip on affecting cost of living.

For some people, technology makes it possible to work nearly anywhere. The primary restrictions most often voiced are reliable internet service and reasonable access to an airport with decently scheduled service. The internet is often necessary for working remotely, and air travel is necessary for when work requires an infrequent face-to-face component.

Technology has also leveled the playing field in ways we couldn’t have anticipated. Local stores may charge differently from each other for items, but you no longer need be inconvenienced to shop elsewhere. Virtually anything you desire can be at your doorstep tomorrow or the next day.

Amazon and other virtual retailers have democratized the cost of living where things like clothing can be obtained without a geographic premium. We don’t have that luxury with gas or utilities, but many of our expenses can be somewhat location independent.

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The Equity Factor

There are always trade-offs. One major consideration when thinking about relocation is equity buildup.

For many people, home equity is a major portion of their wealth. When you move to an area with lower cost of housing, you trade lower expenses for lower opportunity. This shouldn’t be a deal breaker, but it should be understood.

When you’re in a major metropolitan area and struggling to pay the mortgage on what seems to be a major piece of real estate, the upside is that eventually you own that real estate. And if history serves as a guide — which it tends to do with real estate — you’ll also own a great deal of appreciation.

Living in a lower cost of living area, you may be able to purchase a home for a fraction of what one would cost in a major metro area.

Consequently, once you pay it off, you’ll own something less. Something far less, in most cases, once lower appreciation is also factored in.

If you’re starting out, the relatively lower expenses may enable you to eliminate debt sooner or save more money. If you’re moving closer to retirement, building home equity may not be a concern. The financially literate approach is to make sure you build enough investment equity with your housing-cost savings to end up equal or ahead. That’s what keeps it from being a negative.

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Other Downsides of Moving to Lower Your Cost of Living

Relocating to a lower cost of living area won’t work for everyone. Some already live there! But there are other considerations, as well.

There are fewer employment opportunities outside of major metro areas. Even areas with decent employment prospects might not afford the same career progression. For remote workers and solopreneurs, this may not be an issue. Some people can work anywhere. But others have to live near work that isn’t mobile.

There’s more to location than cost. More rural means less of everything else. Less art, less entertainment. You may find great venues, but even then you’ll find fewer of them.

Relocating Locally

Relocating locally is often overlooked.

Sometimes moving just a few miles can make a big difference in your cost of living.

Real estate taxes are very much a function of location. Changing counties or school districts can make a big difference. Crossing state lines can also dramatically alter your tax and total cost picture. It isn’t always necessary to move away from everyone and everything you know to realize significant savings.

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The Bottom Line on Moving to Lower Your Cost of Living

The bottom line is that relocating for cost purposes is a financial decision that must be made in context. For many people, moving away from friends and family isn’t something they would consider, no matter what the savings would be. There are a lot of factors that you need to look closely at in light of your own individual situation.

For some people, it can make a lot of sense. They may end up moving away from some family and friends, but closer to others. For many, a savings of a few thousand dollars a month on housing expenses and taxes isn’t something to discount quickly.

The decision needs to be balanced with other factors. Perhaps it’s a good idea, perhaps not. Or it may be an issue of timing. It might not be the best choice right now, but maybe it will be down the road.

Doing the best for yourself financially doesn’t always mean doing the cheapest thing. It does, however, mean that you are aware of your options and give them due consideration. Then you know that what you’re doing is by choice, and that — given all the factors — it’s what’s best for you.

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