It’s no secret that big city living is expensive. We’ve all heard stories of starving artists sleeping 6 to an apartment in Boston, aspiring actors working three jobs to make ends meet in Chicago, or the infamous $500,000 closet-sized apartment in New York City. Talk to people you know who live in big cities and you’ll hear more of the same- usually accompanied by complaints about just how hard it is to get by.
Unfortunately, those stories generally aren’t exaggerations. The truth is, living in a big city is extremely expensive, especially if you want to buy an apartment in a prime location or rent anywhere close to downtown. And on top of the cost of real estate, you’ll also be on the hook for higher-than-average taxes, climbing food costs, and expensive everything else- from daycare to private schools. With all that being said, it’s easy to wonder why people choose to live in a big city anyway. As someone who lives in one of the cheapest regions of the country- Central Indiana- it seems like such an unnecessary struggle.
But then again, big cities do offer some things that small towns simply cannot- the hustle and bustle of the crowds commuting, the big buildings towering overhead, the nightlife, the shopping, the scenery, the people-watching, the street fairs and the culture. All of those charming attributes can be hard to find anywhere outside of a major city or metropolitan area, and nearly impossible to find anywhere in the Midwestern United States.
But those perks come at a high cost for anyone who isn’t already well-to-do. (Related: Why Gen Y Can’t Afford Prime Real Estate Any Longer) And those who want to get rich might want to consider an entirely different lifestyle altogether. That’s right- I’m talking about a big move to the Midwest.
The Financial Benefits of Midwestern Living
It’s hard for people from big cities to fathom just how far your money can go in the Midwestern United States. For example, when I tell people I bought my 2,000 square foot Indianapolis home on 1/3 of an acre for a cool $188,500, they often look at me like I have three heads. In fact, I’m pretty sure they assume I’m being dishonest somehow, or that my home is actually a giant cardboard refrigerator box.
But they’re wrong. My house is actually extremely nice and well cared for, with professional landscaping, granite countertops, and custom woodwork from top to bottom. The bus picks my kids up at the end of the driveway each morning, and we live in one of the top-rated school systems in the state. Not only that, but we have two community pools, two community tennis courts, and walking trails all throughout the neighborhood. And guess how much I pay for it- a total of $360 annually for neighborhood upkeep, pool access, and recreation. And my property taxes? $1,850 per year.
So, what’s the catch?
To be frank, there really isn’t one. That’s just how much it costs to live in most parts of the rural and suburban Midwest. To see just what I mean, let’s compare several big cities across the U.S. with their smaller, Midwestern counterparts. (All housing and income data comes from the U.S. Census Bureau and uses 2008-2012 figures. Cost of Living Index figures come from the U.S. Census.)
According to the U.S. Census Bureau, the Cost of Living Index “measures relative price levels for consumer goods and services in participating areas for mid-management standard of living. The national average equals 100 and each index is read as a percent of the national average.” So basically, the COL Index is a theoretical price index that is used to measure the relative cost of living in a specific place and time. As you can see, the cost of living for the biggest cities in the U.S. is almost twice that of some of the smaller, Midwestern regions. To put things even more in perspective, let’s add a few more columns and some more data:
And herein lies the problem. Let’s start with San Francisco, California as an example. The median housing value for 2008-2012 was more than 700 percent that of the median housing value in Memphis, Tennessee during the same timeframe. However, the median household income was only twice as much. With such a huge disparity between incomes and housing prices, it’s no wonder that only 36.9 percent of San Francisco residents owned homes from 2008-2012.
And New York City? You can get more than 4 times as much house in Indianapolis, and most likely a yard and a private garage to park your cars as well. Yet, the median household income in Indianapolis is only $10,000 less than the household income in New York City. So, what gives?
The Midwest: What You Give Up
Living in the Midwest may not be all that exciting, but it’s not the worst thing in the world either. Instead of big city street fairs and galleries, we’ve got small town festivals and church open houses. Instead of world-renowned museums and attractions, we’ve got corn mazes, empty fields for kids to play in, and the local park. And in place of ballroom dancing, fine dining, and Broadway shows, we’ve got the movie theatre, the bowling alley, and the public library.
People who live out in the boondocks also go without the luxury of living near much of anything. For example, my husband’s parents owned a lake house in South Dakota that was more than a half hour from the closest store of any kind. Imagine making dinner and realizing you’re out of eggs or white wine, but having no option to run to the store quickly to pick some up. Simply put, living in many parts of the Midwest can be downright inconvenient, if not isolating. And, in some rural areas, a trip to the nearest town to buy groceries can seem like a pretty big deal.
Obviously, there are cultural trade-offs too. For example, many parts of the Midwest are lacking diversity, and a lack of exposure to other cultures could lead to children that aren’t especially well-rounded. And if you want speak other languages fluently with locals, you’ll probably be out of luck; most parts of the Midwest are full of people who speak English-only.
Career aspirations might also have to fall to the wayside if you choose to set up camp in most parts of the rural United States. If you want to work for Google, Goldman Sachs, Apple, or P&G, for example, you’ll either have to find some sort of unicorn work-from-home position at one of those companies, or just let the dream go. On the other hand, you could always choose to live in the suburbs of a big city in the Midwest, such as Chicago, and look for an opportunity at an international firm.
How to Get Rich in the Midwest
In many parts of the Midwest, $1 million dollars will buy you an actual mansion- something with 10,000 square feet or more and several acres of land. Away from the big cities, you might even get a pool and pool house for that amount, lakefront property, or a custom garage that holds 5 or 6 cars.
But you don’t really want to do that, do you?
The real way to get rich in the Midwest is to take advantage of the low housing prices, low taxes, and low cost of living. Instead of going big, try to buy a house on the low end of what you find acceptable and stash all of your money away instead. Personal Capital can then help you track your own finances or have someone professionally manage your money.
And that’s probably the best thing about living in the Midwest anyway; the Joneses are few and far between. When everyone around you lives a humble lifestyle without too much grandeur or luxury, it’s easy to blend in with the crowd. Unlike people in the big cities, Midwestern folks are less concerned with name brand fashions and flashy cars, private university degrees and family trees. In the Midwest, no one knows if you’re old or new money, and no one cares.
If you’re living in the big city and struggling to get by, consider moving to a place where even a modest income can make you instantly rich. After all, the money you can save could mean the difference between struggling to get by or getting rich, renting forever or owning your dream home, and traveling the world or staying home. And there’s no need to worry about missing out on all the things big cities have to offer. Thanks to low prices on everything from real estate to groceries, Midwestern folks often have one thing big city people don’t- the money to travel anywhere we want.
- Cost of Living Index, Selected Urban Areas, Bureau of Labor Statistics
- State and County Quick Facts, United States Census Bureau
Do you think living in the Midwest would be worth the potential savings? What are your thoughts on living outside of a big city? Are there enough good jobs out in the Midwest to make it rich?
The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.