Should You Relocate to Cut Costs & Decrease Living Expenses?


in General

In an economy where people are experiencing what may be a permanent reduction in income, one of the more radical solutions is to pack up the family and the household contents and head for someplace where the living is cheap—or at least cheaper.

If an income is lost or if it becomes a matter of moving to follow a job it can make sense, but is it always the right thing to do?

I happen to have some experience with making a geographic shift, done mainly to move from a high cost area to a much lower one. During the 1990s my wife and I left New Jersey where we both grew up and where most of our families still live, to start a new life in Atlanta, a much lower cost city.

On balance, we’re certain we made the right move, however at the time it was mostly a move to find something new—which is always exciting—and to begin life in a less expensive environment. At the time, we didn’t have children and we weren’t making the move because of lost employment as many are doing today. It was, in the truest sense, a voluntary move.

The benefits of making a geographic move to a lower cost area

When income is down and the cost of living is up, making a move to a less expensive area can seem like a step back into financial sanity. Often, you can live as well in one place as you do in another, but for less money.

Some of the more obvious advantages:

Lower house prices. When we moved from New Jersey to Atlanta, house prices were substantially less then half the price. Rents were easily 40% lower. In that situation, you can either a) own or rent a bigger, nicer space than you did in the high cost area, or b) live in something comparable for substantially less. If you’re looking to cut living expenses, you can choose plan b until you’re in better shape financially, then go to plan a, buying a bigger home when you can afford to do so. Lower cost housing is one of the biggest reasons people make major geographic moves.

Lower taxes. Lower property values tend to come with lower property taxes. In addition, young, fast growing areas tend to have lower property taxes because as their populations grow, so does the tax base. Not only were property taxes substantially lower in Georgia than in New Jersey, but the annual increases are also much smaller. Areas with high real estate taxes also seem to follow the same pattern with income taxes. Perhaps it’s also the growth factor: a growing state or city increases tax revenue through population growth while a slow or no-growth area has to raises taxes when more revenue is needed. It’s a dynamic that never seems to change.

Lower cost of everything. When housing is cheaper, everything else tends to be cheaper. Lower property values mean lower rents, mortgages and property taxes, which mean businesses have less cost that needs to be passed on to consumers to cover operating expenses. To our delight, when we moved to Atlanta we found that gasoline, insurance, restaurant meals, clothing and recreational amenities were also noticeably less expensive. These aren’t always the big, heavy expenses that weigh you down, but being able to pay less for them gives much needed breathing room if nothing else.

Opportunity to start fresh in life. This is a non-financial factor, but it can be every bit as important as the monetary considerations. If you’ve had a bad run on the job front where you’re living now, sometimes pulling up stakes and moving to a new area to make a fresh start can provide the surge of energy that’s needed to get you going for another big push.

The darker sides of relocating

My wife and I found our move to Atlanta to be exciting, but we were younger, childless and didn’t have an economic gun to our heads. For a lot of people who have children in tow, limited resources and no solid job prospects back home, the stakes are higher.

Extended family and young children. You’d probably be leaving an area where you have extended family and long term friendships for a place where you’ll have neither. Apart from the emotional difficulties that will bring, the situation is even more complicated if you have young children. Family and friends can be available to take care of your children but if you’re moving to a new city you’ll have to make other arrangements, and those typically cost money. Factor that into the total cost of life in your new location.

Loss of cultural or recreational amenities. Very often the areas with lower price structures are either young and growing cities, or older ones experiencing population loss. Cultural or historic attractions may not have developed in the newer cities or may be in decline in the older ones. Also, many areas, new or old, may have less desirable locations. It’s a fact of life, for example, that coastal/beachfront cities (NY, Boston, Miami, LA, San Francisco, San Diego) tend to be pricier than cities that lack natural amenities. By moving to a lower cost city you may be giving up certain natural or cultural amenities that you’ve taken for granted, and that may require developing new interests after you move. How important are those amenities, and do you have a plan for what you’ll do if they aren’t available?

Lack of parallel employment opportunities. What if you move to a low cost city—one that has lower salaries as well—but do so because you’ll have a higher paying job by making the move? On the surface, the higher pay/lower cost of living combination looks like a double win. But if you lose your higher paying job in the new location, the only replacements available locally will be lower paying. In some areas, a move up, or even trying to keep the pay level you have, means moving out of the area—another move!

Over the years I’ve known several people who have followed high paying jobs to small cities (with otherwise lower pay scales) who had to move back home after losing the job, sometimes after only a few months. There were just no replacement jobs to be had in the small city. If you’re considering a move to a lower cost area for a higher paying job, consider the potential for replacement jobs in that market.

The downside of lower home prices. If you relocate to a less expensive city there’s also an almost unnoticed issue that exists in regard to housing. When housing in a region is on the lower end of the range, it usually means one of three things:

  1. The housing market in the area is overbuilt and not very liquid even in good economic conditions
  2. The local economy is poor relative to the rest of the country
  3. The area is experiencing population loss

What ever the reason for the lower costs, the same factors that make buying so favorable in some areas will make it commensurately difficult should you need to sell, especially if you need to do shortly after relocating. For this reason, if you do decide to relocate to a less expensive area, plan on renting for the first year or two. In that way you’ll have time to get established, to know if you want to stay in the area and, most of all, to keep your options open should you need to make another move.

Making a move to a city in another region is something like getting on a rocket to outer space; once the rocket takes off, you’re along for the ride and there’s no turning back. Consider all the factors involved before you decide to go ahead with it, even if you can save thousands of dollars in the process.

Have you ever relocated for economic reasons? Not so much for a better job as much as for the prospect of a lower cost of living? Are you thinking of making a move now?

Kevin At Out of Your RutThis post is from FiscalGeek staff writer: Kevin Mercadante. I’m very excited to have him contributing to the site. You can find out more about him at his own blog

(Photo credit: Shutterstock)

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