Live Where It's Cheap

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More effective than giving up luxuries, using coupons, choosing store brands, or buying in bulk, the most powerful enabler of frugal living is to live where it's cheap. (See also: Voluntary Simplicity as Hedonism)

For basic stuff like rent and food, it can easily cost two or three times as much to live where it's expensive. For example, compared to where I live now (Champaign, Illinois), my rent in Manhattan would be 326% more while groceries would cost 57% more. (That according to this cost of living calculator at CNN Money.)

Of course, there are downsides to living where it's cheap. There's probably less to do and less to buy, although the internet eases those burdens immensely. (There's a lot less need to go to the big city to shop, and between on-line entertainment and DVDs, you don't miss out the way you would have just one or two decades ago.)

Many will argue that they have to live somewhere expensive. Maybe their family is there. Maybe their job is there. (If you're a ballet dancer, you have to live where there's a ballet company. If you're a TV scriptwriter, you have to live within commuting distance of Hollywood.) Maybe they just really, really want to live there.

That may be. I'm not here to second-guess the necessities of your life. Rather, I want to suggest that you think deeply about what you want and about the best way to achieve those wants.

Learn From My Experience

Even if you really want the amenities of an expensive location, think about whether living there is the best way to take advantage of them.

I lived in Los Angeles for a while, back in the mid-1980s. That gave me the opportunity to do all sorts of things that aren't possible anywhere else. (For example, I was able to shop at a store dedicated to selling survivalist supplies — they sold foods preserved for long-term storage, books on building and stocking your survival retreat, water purifying equipment, etc. There aren't many of those around.)

But living there was so expensive! Working at a regular job, I only had so much time to take advantage of the unique opportunities of my location.

For example, I only managed one visit to the La Brea tar pits and only went to one comedy club. (My life wasn't quite that boring, but my other adventures — such as camping at Joshua Tree and Sequoia National Forest — didn't depend on living in Los Angeles. In fact, they'd have been easier if I'd lived in some small town in Nevada — less traffic to fight through when heading out for some weekend camping.)

The money I saved the first year after I moved to Champaign just on rent would have covered the cost of flying to LA, staying in a hotel, hiring a limo, and admission to the La Brea tar pits, with enough left over for cover and drinks at the comedy club.

Throw in the savings from everything else being cheaper as well — food, gasoline, electricity, clothing — and it probably would have paid for two such trips.

What you're actually going to do (as opposed to what you'd theoretically be able to do) makes a big difference. If you're not going to buy something, it doesn't much matter how easy it is to buy.

If you're a serious skier, living close enough to the slopes that you can ski any time you get a couple of hours off is a huge boost to your standard of living. If, like me with the comedy club, you only get on the mountain once or twice a year anyway, you might just as well live somewhere cheaper and then take a ski holiday.

Income Also Varies

For some work, the amount of money you can earn may vary depending on where you live. For other work, it doesn't.

The amount that writers, artists, or web designers can charge has little to do with where they live. For other jobs, especially for jobs providing personal services to locals (hairdresser, receptionist, clerk, massage therapist), it's possible to earn a lot more per hour if you live somewhere expensive than it is if you live somewhere cheap. That's partly because the people who are hiring you have more money, and partly because your competition can't afford to undercut your price (because they need more money to live there just like you do).

On the other hand, where you live will usually have no influence on non-work sources of income — your stocks and bonds will pay the same dividends and interest no matter where you live.

This insight sometimes leads people to figure that they should live where they can earn the maximum amount during their working years, planning to save up money (investing in those stocks and bonds), and then move somewhere cheap where their dividends and interest will go further. That can work, but it often doesn't. The high costs of living somewhere expensive — especially when you figure in the higher taxes on that higher income — often leave you with little in the way of actual surplus savings.

The details matter. There's no alternative to actually doing the calculations yourself if you want to get the right answer.

Live Where It's Really, Really Cheap

One option worth considering is living where it's really, really cheap. Especially in rural areas, it's often possible to find housing that's virtually free (or even actually free, such as in exchange for a few hours of work as a caretaker).

Another option for living where it's really, really cheap is to live overseas in a country with a lower cost of living. You have to live where people are poor if you want to save money (otherwise you can do just as well living someplace cheap in the U.S.), but there are plenty of places where it's cheaper to live than it would be anywhere in the U.S.

My Strategy

To my mind, the winning strategy in this, as it is in most financial decisions, is to think carefully about what you really want, check prices, and make a budget that lets you afford the things that are most important to you.

My own calculations have led me to live someplace fairly cheap, yet fairly close to some big cities. (St. Louis, Indianapolis, and Chicago are all close enough to make day trips; Chicago by train.)

The decision was pretty easy for me. I want to be a writer. What I get paid is the same no matter where I live. By living somewhere cheap, I'm able to be a full-time writer. If I lived somewhere expensive, I'd have to get a day job. And then I wouldn't have as much time for writing. I'd be less productive and less happy. I'd also make less money from my writing, putting me even further behind.

Many people choose to live where it's expensive, but to do so on the cheap — a house in the far-out exurbs and a fuel-efficient car for commuting. That may be the best choice for them — as I say, I don't want to be second-guessing somebody else's life — but a lot of people make that choice by default, rather than because they ran the numbers and figured out that it put them ahead of where they'd be if they lived someplace cheap.

If you've been living in a big city, you'll probably be pretty surprised how much cheaper you can live in a small town or a rural area — and even more surprised how accessible the big-city amenities turn out to be for someone who's not spending every waking hour earning enough money to pay their big-city rent.