Why Living In A High Cost Of Living Area Isn’t A Bad Thing

I am from a high cost of living (HCOL) area and I see that as neither a roadblock nor a bad thing when chasing FI. In fact, it has several positive elements. A few reasons why I believe this to be true are:

  • the higher earning potential
  • the higher rents (keep reading for my explanation)
  • and the local tax-payer funded services, entertainment, parks, and recreation programs.

Now, I've never proven that theory, but I have lived it successfully and I am certainly interested in hearing counter-arguments.

Higher earning potential

First, I am certain that my salary would be substantially lower in a low cost of living (LCOL) area. Not all industries are like that, of course, but many are. And if my salary was lower and my savings rate was the same, I would end up saving fewer dollars.

Secondly, in the northeast where I live, housing costs are relatively high. And while my mortgage payment doesn't go up, rent and real estate taxes do. Rent rates are reflective of current housing and tax and, therefore, adjust upward annually. If I were to rent out a portion of my house as an apartment or Airbnb, it would pay most of my mortgage. In a few years, it might pay all of it plus the real estate taxes. Without housing costs eating up a large portion of earnings here, I'd be free to save most of my relatively higher earnings in other investment vehicles.

Local services

Next, the parks and recreation programs and facilities are manned and offer alternatives to joining private clubs or paying duplicate memberships. As do our library systems, which are funded by our real estate taxes. I can take tennis and golf lessons, even guitar and piano lessons, for free or at a small cost.

We live near large bodies of water–including bays and the Atlantic Ocean–and as a result, there are beaches with lifeguards, marinas for parking and launching boats, and even campgrounds for boats, tents, and campers.

The free concerts and activities are a compelling reason to stick around town on any given evening. And the library programs are full of activities for all age groups. Plus, everything is a short walk, drive, or bike ride away.

How I spend

On top of that, I think I have more control over the amount of money I spend–or don't spend–than I do earn. Of course, I strive to earn as much as I can the traditional ways–through education, advanced training, experience, and an outstanding work ethic. But, beyond that, controllable spending is my ticket. As a result, I can save more of the higher income here than I would save in a LCOL area with lower wages. That means more dollars to compound, invest, and multiply.

What about you? Are you in a HCOLA trying to reach FI? If so, you can probably achieve desired results more from deliberate spending decisions than moving out of town, especially if you're in your higher earning years.

  • Can you grocery shop a bit smarter? Regional grocery stores are less expensive than the international section of supermarkets. Fresh ginger, bok choy, millet, and quinoa are pennies to the dollar at Patel Bros. and H&L Markets.
  • Produce and farmers markets offer discounted produce after a certain time period has elapsed.
  • Buying food as ingredients instead of prepared is a controllable expense. Oatmeal costs about $0.79/pound, yielding 16 servings. Add a half of banana for a quarter. Compare that to a package of instant oatmeal with 20 grams of added sugar at $0.50 per serving.
  • And in a land where neighbors keep up with the Joneses, you're more likely to score last year's furniture, fashions, toys, and recreation equipment at a bargain in a HCOLA. In fact, your neighbors will likely brag about how a perfectly good item is going to the curb. Last week I scored a set of dishes, glasses, and bowls for under $10 for my daughter's college house.
  • Like your tea in the morning? While coffee requires extra ‘work', the sheer act of boiling water and pouring it over a tea bag in your own recyclable cup is ridiculously easy and costs you pennies, literally. Also, add some hot water to a jar with oatmeal and maybe a few raisins. Cover it up and savor hot oatmeal at your desk with a short list of ingredients that you can pronounce.
  • Mind your investment expenses. While this may seem obvious, you’d be surprised how many high income people do not heed this.

Too often I hear my neighbors and co-workers complain about paying too much for “fill-in-the-blank” and not having enough money to retire as they fill their yards with toys, driveways with new cars, and pay for yearly “once-in-a-lifetime” vacations. At least some of us here in HCOL land buy discarded toys at yard sales or online, drive older cars, and gift our children with experiences to remember.

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6 thoughts on “Why Living In A High Cost Of Living Area Isn’t A Bad Thing”

  1. This is absolutely true for me. I plan to continue living in my HCOL area and building equity in my condo and continue to control my spending in order to save $$ to invest in stocks. When it is time for retirement and the higher salary is no longer an advantage, I will liquidate my assets and move to a LCOL area. I live in Victoria, British Columbia, Canada and there are lots of low cost of living areas within British Columbia, so I will not have to move far. In the meantime I will enjoy the big (little) city life in my downtown condo within walking distance to work.

  2. Lucky are you, to be able to walk to work! And it’s wonderful you’ll have lower cost options while still living in BC. Keep going and good luck with your index fund contributions, if that’s what you meant by stock investing.

  3. I’ve been living in the Washington DC area for close to 30 years. It’s pretty amazing that four of the five richest counties in the US surround the Washington Beltway. I’ve been able to raise a family and manage expenses using a combination of house hacking, low transportation costs, cherry picking the best options for grocery and household items from Costco, Trader Joe’s and Amazon. I found that real estate is really the thing that drives up costs in this area. If you can get past that, many of the other expenses are just as manageable in a high cost of living area versus a low cost of living area. I’ve written about my experience as well as comparing the Washington DC area to Raleigh North Carolina where I lived before moving back to the DC area.

  4. I completely agree with everything you said! I live in the SF Bay Area and while everyone always complains about the HCOL, holding most else equal, I’m head. For example, an iphone will cost $1,000 no matter where you live. For someone in HCOL with higher income, the iphone isn’t bad of a hit compared to someone in a LCOL with a lower salary.

    We are able to living as cheap as most FIRE in LCOL by finding cheaper grocery stores, buying an apartment near our work that was cheaper than everyone else in the Bay Area, and making sure of our legs by walking. Combing that with salaries tend to be higher in HCOL, we have a higher savings rate.

    I’m not trying to brag, but I do want to state that anyone can live in a HCOL and still be able to have a high savings rate just by making a few lifestyle changes.

    • Thanks for your comment JB. No, you are not bragging just saying it the way you see it. I agree that a lot of it has to do with lifestyle choices. Liz Thames wrote so eloquently about the working poor not being able to “frugalize” income you do not earn. (Meet the Frugalwoods – Elizabeth Willard Thames) Those in HCOL probably have a greater opportunity to “frugalize” but choose not to. We’ve pointed out that it is certainly possible when you have an intentional mindset.

  5. One idea that has worked for us is living in a blue-collar suburb of a HCOL county. We enjoy all the amenities San Diego has to offer, while getting the cheaper real estate, gas and groceries near our home. California is particularly advantageous because their health insurance tax subsidies are very generous to mid-income families and Prop 13 means my property taxes never increase more than 2%.

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