COL ?

[ecowtent]

When discussion turns to living in an area of lower COL, I don’t follow all of the analysis. Are you assessing property taxes, state taxes and general living costs? Do you add in costs for entertainment?

We live in Illinois-yes I know the issues with Illinois are numerous! Property taxes are ridiculous-just over $10K for our house and land. However, state taxes are only 3.75% which are much lower than some eastern states. Cost of basic living are lower as we live near a big city, but in a small town.

How are you analyzing COL?

 

[W2R]

When discussion turns to living in an area of lower COL, I don’t follow all of the analysis. Are you assessing property taxes, state taxes and general living costs? Do you add in costs for entertainment?

We live in Illinois-yes I know the issues with Illinois are numerous! Property taxes are ridiculous-just over $10K for our house and land. However, state taxes are only 3.75% which are much lower than some eastern states. Cost of basic living are lower as we live near a big city, but in a small town.

How are you analyzing COL?

You are right that there are many factors to be considered COL computations. I think some people put too much emphasis on taxes (because many of us resent paying taxes), when there are quite a few other factors to consider.

There are lots of calculators online that will compare COL in one place to COL in another and they give me a pretty good general idea. Here's one:
http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx
I live in New Orleans, and generally the COL is less in the south than on the east or west coasts. But apparently the COL is more here in New Orleans than it is in some parts of the south, if the calculators are correct.

 

[COcheesehead]

I think people can't see the forest for the trees if you put living costs first when deciding where to live. My in laws moved to a lower COL state and left their friends and relationships behind. I don't think they ever recovered from that.
As the OP points out costs have a tendency to balance out. In CO we pay lower property taxes, but higher income and auto taxes. RE is high, but energy is lower. So in the end, live where you want, don't ignore relationships and manage the cost structure as you see fit.

 

[braumeister]

For me, analyzing the COL where I live doesn't really tell me much that's useful.

I think a better way of looking at it would be to look at each of the individual items that you personally consider important and compare them to the equivalent items in another location. Add them up and you can see the dollar impact of moving.

Don't forget that some states tax things that others don't, and also there are some exemptions from taxation that some states allow while others don't. You have to look at the whole picture.

When we moved last year to a different state, some costs went up dramatically, while others dropped a lot. Overall, the difference was quite small.

The COL calculators online are a decent starting point, but they will almost never show your personal situation accurately.

 

[NYEXPAT]

I moved from a HCOL city in the USA to a HCOL city in a LCOL country and noticed a dramatic change in COL. Most importantly was the improvement in QOL. I think with an open mind and good planning, you can have it all!

 

[athena53]

I think a better way of looking at it would be to look at each of the individual items that you personally consider important and compare them to the equivalent items in another location. Don't forget that some states tax things that others don't, and also there are some exemptions from taxation that some states allow while others don't. You have to look at the whole picture.

I agree- housing has always driven the COL calculation for me, but if I were to move to another state in the future, I'd also look at taxation, particularly of SS and other retirement income, and sales taxes. We moved in 2003 from NJ, where food and clothes aren't taxed, to KS, where they are. KS allowed an exemption for sales taxes on food but only for those living in dire poverty.

In my case, I KNOW what state will be my next move, probably 10 years from now- the one where my only DS, DDIL and the grandkids live. No-brainer!

 

[jkern]

COL is highly dependent on individual circumstances. For example, a young couple between 25 to 35 with two small children will probably have Housing, Daycare and Transportation as three big factors. The difference between SF Bay Area and Mid-town USA may be $60k+ per year for this couple. On the other hand, a retiree with a paid off house may have a little difference between the two areas.

 

[SomedaySoon]

I agree that COL can be a personal matter. I had considered living in state X where there was no income tax and lower property tax but it seemed I would have to travel out of the area to "live" and do the things I like to do. I ended up in state Y where I pay higher taxes, but I have much more access to sports/music/arts venues for free or low cost. Overall I think my COL is actually lower here. If all I wanted to do was sit in my house then state X would have been the correct choice. I feel I am much happier with the overall costs of where I "LIVE" now.

 

[kgtest]

COL is highly dependent on individual circumstances. For example, a young couple between 25 to 35 with two small children will probably have Housing, Daycare and Transportation as three big factors. The difference between SF Bay Area and Mid-town USA may be $60k+ per year for this couple. On the other hand, a retiree with a paid off house may have a little difference between the two areas.

Nailed it.

I lived on Maui. HCOL. I lived in Midwest. LCOL. Both provided vastly different experiences, and it seemed at times I was less stressful living in the HCOL area with better natural experiences alleviating some stress IMHO. The islands are calling.

Found that those experiences dried up with the sun and we moved where we could get the best experience we desired without breaking the bank.

 

[Walt34]

I think a better way of looking at it would be to look at each of the individual items that you personally consider important and compare them to the equivalent items in another location. Add them up and you can see the dollar impact of moving.

Don't forget that some states tax things that others don't, and also there are some exemptions from taxation that some states allow while others don't. You have to look at the whole picture.

Exactly. We moved from MD near Washington, D.C. to WV where the COL is significantly lower. Property taxes are less than half of what they would be if we had stayed, and the paid-for house we're living in would be way out of reach for us back there. Those were the two biggies as far as costs go but the main driver for the move was getting out of traffic congestion.

Groceries and gasoline are somewhat cheaper but not significantly so. This is to be expected because a business owner has lower taxes too and a lower cost per SF of land and building costs. And this is not the cheapest part of the state either since it is still within commuting distance of DC, although that is an hour and a half on a good day. I'm astonished at the number of people who do that brutal commute every day.

 

[W2R]

And this is not the cheapest part of the state either since it is still within commuting distance of DC, although that is an hour and a half on a good day. I'm astonished at the number of people who do that brutal commute every day.

I was astonished at that too, until some of those commuters told me what real estate costs in the DC area. It's shocking. They did a lot better living in West Virginia, and carpooling.

 

[Teacher Terry]

I have lived in 5 different states because of work. I have lived here for 20 years and would never consider moving somewhere else just because it would be cheaper. My social relationships are very important to me. At one point we lived in Wichita, KS and that was really cheap. We built a new house, etc and had a lot more bang for our buck. You could not pay me to move back.

 

[daylatedollarshort]

COL is highly dependent on individual circumstances. For example, a young couple between 25 to 35 with two small children will probably have Housing, Daycare and Transportation as three big factors. The difference between SF Bay Area and Mid-town USA may be $60k+ per year for this couple. On the other hand, a retiree with a paid off house may have a little difference between the two areas.

I agree with your points and I'd also add that if one is looking at financial aspects of one area versus another I'd also factor in likely home appreciation for a complete picture. Our Bay Area house cost more than our previous residence in a less expensive housing state but financially we came out ahead over the years because of price appreciation here combined with our prop 13 tax base, while the other house's value has not even kept up with inflation over the year.

 

[fritz]

When discussion turns to living in an area of lower COL, I don’t follow all of the analysis. Are you assessing property taxes, state taxes and general living costs? Do you add in costs for entertainment?

We live in Illinois-yes I know the issues with Illinois are numerous! Property taxes are ridiculous-just over $10K for our house and land. However, state taxes are only 3.75% which are much lower than some eastern states. Cost of basic living are lower as we live near a big city, but in a small town.

How are you analyzing COL?

If you are looking at strictly COL (retirement?) try these sites for info:

State-by-State Guide to Taxes on Retirees (retirement taxes)

Compare Cities (comparison of two cities)

Find The Best Places To Live & Get Your Livability Score - AreaVibes (overall information on selected city)

Kiplinger's ratings for retirement taxes - Illinois is shown as mixed in the latest version (has been for awhile) while Mississippi is rated as a most tax friendly. There income tax structures are pretty much the same (Mississippi is 5% max vs. Illinois at 3.75% flat). I find sales taxes to be within 7-10% depending on where you're looking due to local government adds, and too difficult to nail down for comparison (Amazon's future nightmare). Average home prices per area really leave a lot to be desired, and this is one COL item that really needs to be evaluated - even if paying cash...

Would point out (if you aren't aware) that Illinois doesn't tax retirement income (Social Security, Pensions, 401Ks or IRAs). Does tax dividends, LTCGs, and interest income (our hit in the retirement scenario @3.75%). Also sales tax on food, medicine, and medical appliances is 1%. Property taxes are bad in Illinois as you well know. Property taxes are among the highest in the nation (believe New Jersey is the only one higher). Could downsize to lower Illinois property tax burden. Some states that are less expensive in property taxes do tax retirement income (some tax Social Security as well). Hope this helps.

 

[CardsFan]

So in the end, live where you want, don't ignore relationships and manage the cost structure as you see fit.

+1. Particularly in retirement. Now you have the choice to move (or stay) where you want. The j*b is no longer a factor.

To us, relationships (family and friends) out weigh the lower COL of moving, or the climate we might enjoy more.

In fairness, we are in fly over country, so current COL is reasonable. Moving to just to lower or reduce state taxes just does not sound appealing.

YMMV.

 

[Walt34]

I was astonished at that too, until some of those commuters told me what real estate costs in the DC area. It's shocking.

A lot of people get sticker shock when they take a new job in the DC area or get transferred there. It's not quite as bad as southern CA, NYC, or CT for example, but it's a jolt.

On another thread somebody posted about buying a house for $35k. That hasn't happened where I grew up since the 1960's.

 

[karen1972]

well I left Chicago when State Income tax was still 5% and given the debt there.. not sure 3.75% is going to stay... but it is difficult to judge apples to apples. btw, besides property taxes, the biggest thing you would save moving is cost of college.. Illinois is beyond ridiculous for college costs, so in state tuition elsewhere could easily save you $80K per kid.

Living in Raleigh NC now, all I know is my monthly costs are about $3k less. This obviously includes housing, but I find we found big savings eating out... Hard to find a restaurant where we drop more than $40-60 vs. Chicago, it was easy to drop $100+ and then add in cost of transport (tolls, Chicago parking, plus gas being 30 cents more per gallon for the special mix). Also you start saving a lot in services (so then it depends on if you fix stuff yourself or not). Though there are random things that cost more like Manicures which makes no sense.

Before we moved here we took our budget and looked at what we spend the most on and then shopped and talked to people.. as it only matters what WE spend money on, not what the calculators say. Like we don't have kids so the college savings wouldn't apply but I certainly have plenty of friends sending their kids out of state because in state was so expensive.

 

[ecowtent]

Thank you all for the feedback- especially on what Illinois taxes. I hadn't thought that far in advance for retirement income. We have no plans to move as we built our dream home, but the taxes are crazy. Also, all of our family lives within 30 minutes.


This was more for informational when I am reading posts and understanding where we fit in the general analysis.

 

[doneat54]

I am calculating cost of ownership of my home as taxes, utilities (averaged) and insurance. This is mortgage independent and something I see as the cost of living in this house. I realize that this is not what the OP was talking about, but in terms of me struggling with "can I really justify continuing to live here (in this house)" it is the number I use.

 

[Sunset]

I moved from a HCOL city in the USA to a HCOL city in a LCOL country and noticed a dramatic change in COL. Most importantly was the improvement in QOL. I think with an open mind and good planning, you can have it all!

Good thing you are not SOL with abbreviations.

 

[Sunset]

well I left Chicago when State Income tax was still 5% and given the debt there.. not sure 3.75% is going to stay... but it is difficult to judge apples to apples. btw, besides property taxes, the biggest thing you would save moving is cost of college.. Illinois is beyond ridiculous for college costs, so in state tuition elsewhere could easily save you $80K per kid.

Living in Raleigh NC now, all I know is my monthly costs are about $3k less. This obviously includes housing, but I find we found big savings eating out... Hard to find a restaurant where we drop more than $40-60 vs. Chicago, it was easy to drop $100+ and then add in cost of transport (tolls, Chicago parking, plus gas being 30 cents more per gallon for the special mix). Also you start saving a lot in services (so then it depends on if you fix stuff yourself or not). Though there are random things that cost more like Manicures which makes no sense.

Before we moved here we took our budget and looked at what we spend the most on and then shopped and talked to people.. as it only matters what WE spend money on, not what the calculators say. Like we don't have kids so the college savings wouldn't apply but I certainly have plenty of friends sending their kids out of state because in state was so expensive.

I personally feel IL State tax will be going back up from 3.75 pretty soon. It's true that retirement income is not taxed, so that is lessening the hurt a bit.

We are outside Chicago itself, so lots of chain restaurants are easy to find, park and eat for well under $80 for 2 , and only the big freeways are tolled which we hit only occasionally.

Still I look and see many other States with zero income tax (so all SS, interest, IRA, etc) is tax free and they have lower property taxes as well.

However, unless the entire clan moved, we are stuck near family for a while.

 

[Koolau]

I have always struggled with this concept (difference in COL, place to place.) The reason is that we all find ways to adapt to changing COL areas. In the midwest, we lived in a 2800sf tri-level which we sold for $150K. Now our 1100sf condo in Hawaii is worth $550K (though we paid $100K less for it a few years back). So, in reality, we probably could not have made the move had we not been willing to "downsize" our housing expectations. We adapted rather than "accepting" the difference in COL.

We have found ways to adapt other costs such as transportation (older cars), food (eating out less and shopping bulk), electricity (no AC), etc. Our RE taxes and income taxes are much lower here - go figure!

So, my point is that simply using one of those comparison web sites isn't very useful unless you already know what the potential adaption mechanisms are. It's true that Hawaii is much more expensive than most of the midwest, but we don't spend nearly the difference due to our adaptations. YMMV

 

[Music Lover]

I have lived in 5 different states because of work. I have lived here for 20 years and would never consider moving somewhere else just because it would be cheaper. My social relationships are very important to me. At one point we lived in Wichita, KS and that was really cheap. We built a new house, etc and had a lot more bang for our buck. You could not pay me to move back.

+1.

Although I do live in a LCOL area, moving to save a few $$ is not something that I would ever consider. I have had some of the same friends for over 3 decades that I see on a regular basis...that can't be replicated if I live elsewhere.

 

[W2R]

+1.

Although I do live in a LCOL area, moving to save a few $$ is not something that I would ever consider. I have had some of the same friends for over 3 decades that I see on a regular basis...that can't be replicated if I live elsewhere.

There is absolutely nothing wrong, and everything right, with living even in a HCOL area because of friends and family there, or for other sound reasons.

That said, I think it's important to know if one is PAYING to live in a location with a higher COL as opposed to another with a lower COL, and what your money is buying you. It's just like any other purchase IMO.

I'd have to have some reasons that were pretty important to me before I'd move to SF or Manhattan, for example.

The other side of that coin, is that I don't live in the lower COL rural South because here in New Orleans we enjoy all the amenities, people/culture/art/music/architecture, and businesses that New Orleans has to offer. That is what I am buying with the differences in COL between here and some tiny rural community in northern Louisiana, which would be less expensive than here but could not offer the same sort of lifestyle.