What’s Keeping You Poor This Month? Your Location
“Now, here, you see, it takes all the running you can do, to stay in the same place. If you want to get somewhere else, you must run at least twice as fast as that.” — Lewis Carroll, Through the Looking Glass
Are you where you want to be? Physically, I mean. I’ve lived on both coasts of the United States, but I’m still not sure exactly where I want to end up — or even how to choose where to go. If you feel the same way, I’m excited to tell you that we’ve created an Affordable Living Index of 69 cities in all 50 states and Washington DC. This may get you one step closer (puns always intended) to figuring out where you want to live.
The index is a tool that anyone can use to get an idea of the cost of living of their city. We started with the most populated cities in each state and sprinkled in a few other locations that scored highly in rankings of most livable cities. The Affordable Living Index ranks all of these locations based on 12 factors to help you figure out where you want to live and how much you can expect to pay in order to stay there.
State & Local Taxes
Benjamin Franklin once wrote that “in this world nothing can be said to be certain, except death and taxes.” So we measured taxes first, state by state. The data comes from the Tax Foundation (taxfoundation.org). While the Tax Foundation is primarily an organization that lobbies Congress on tax policy and has policy stances we may not necessarily share, it is an excellent resource for tax data in general.
The Affordable Living Index shows the marginal Income Tax rate for a married couple making $50,000 per year, which is pretty close to the national average. The Sales Tax rate is a combination of the state sales tax plus the average local sales tax rate in the state. The Property Tax rate shows the median property tax rate in the state. Property tax rates vary widely by city and county, however, so in the future we hope to list the actual tax rate for each city included in the Index.
The Capital Gains Tax rate shows the long-term rate (which assumes that you have held your stock for at least one year before selling). This tax is particularly nice to avoid because corporate stocks are already subject to double taxation (companies pay income tax on profits and then stock owners pay tax on the gains) — it’d be nice to make that second layer of taxation as small as possible, right?
It seems that taxes aren’t necessarily as certain as Franklin thought. You may notice that a number of states do not impose certain taxes, as shown below.
- No Income Tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming
- No Sales Tax: Delaware, Montana, New Hampshire, Oregon
- No Capital Gains Tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
There’s no such thing as a free lunch, however. Even states that don’t impose more than one category of tax (Alaska, Nevada, Texas) still need to make revenues. Texas has some of the highest property taxes in the nation. New Hampshire and Delaware have exceptionally high taxes on corporate income. Tennesse, an overall low tax state, has the highest sales tax. And Nevada…well, how much money have you lost in Vegas?
That being said, you can use these numbers to better understand if your own tax situation is efficient or not. You may not care if property tax is high if you live modestly in a small home, but if you make the big bucks, you’ll care deeply about income tax. Just because every state finds a way to get its taxes in aggregate, doesn’t mean you can’t optimize your life by optimizing your location.
Everyone needs to live somewhere, so housing prices are an important measure of a city’s cost of living. Our index shows the median sales price per square foot in each city (or the median listing price if sales data were unavailable). The numbers come from Zillow’s Home Prices & Values database.
The Heating and Cooling cost rankings should be taken with a grain of salt. A house’s energy costs vary widely based on the size of the house, its insulation, and its owners’ habits. We recommend that readers use these rankings to get an idea of whether a city’s climate is hot, cold, or mild. Some people thrive in the heat, some people love the cold, and some people want it to always be Spring.
No Car, No Problem
The Walk Score and Bike Score come from the Walk Score website. Higher scores designate that a city is easier to get around in by foot or on a bicycle. If you want to move to city where you can live car-free, these rankings are a great place to start.
Have Savings, Will Travel
We’ve also included rankings of how close a city center is to the nearest airport, because proximity to a major airport means cheaper and more convenient travel for its residents. Also, airports are typically in larger metropolitan areas which could mean cheaper groceries and other goods from big box stores that don’t exist in smaller towns. This ranking doesn’t adjust for how big a city’s airport is or how many destinations it services.
America the Beautiful
Finally, the rankings include data on how many national parks are located in each state. This is meant to give a rough idea of how close you can be to nature (a meaningful and affordable way to have fun)! The data comes from the US National Park Service. This doesn’t account for how close the national parks are to a given city, however, or how many state or local parks may be available to you as well. Here in Northern Virginia, for example, we have access to over a hundred state and local parks, in addition to Washington DC’s 23 national parks (yes, 23 within just 70 square miles!).
We often don’t think about these factors when we’re moving to a new place. We usually move to a new area because the job market is good. But since the point of Monte Largo is to free you from your job, we’re challenging our readers to think bigger about where they see themselves.
We purposely didn’t create an overall ranking of the cities because different factors will be important to different people. It’s up to you to figure out where your ideal location is without some artificial rating based on what we value.
We hope that you enjoy checking out the Affordable Living Index as much as we enjoyed creating it. If you’d like us to add your city or have suggestions to help us improve the index, let us know in the comments!
Alejandro is a financial planner with Monte Largo Financial Advisors LLC.