Is it Impossible to Build Wealth in Your State? (Ranked)

Building wealth is possible in any state by understanding the interplay between cost of living, income opportunities, and personal financial decisions, rather than relying solely on low living costs.

• Wealth building hinges on living on less than you make, regardless of geography.

• High cost of living areas often provide greater income opportunities that can offset expenses.

• Focus on increasing income or decreasing expenses to maintain financial flexibility and build wealth.

Geographic location significantly impacts financial life due to varying costs of living and career opportunities across states. While some states have demonstrably higher or lower living expenses, the ability to build wealth ultimately depends more on individual financial choices and leveraging available opportunities. By focusing on increasing income, managing expenses, and making deliberate financial decisions, individuals can overcome geographical constraints and build wealth regardless of their state's cost of living.

Cost of Living Differences

• 00:00:52 The US Bureau of Economic Analysis sets the national average cost of living for a single adult at approximately $56,000 annually. California, New Jersey, and Hawaii are identified as the states with the highest cost of living, exceeding the national average by 12.6%, 8.9%, and 8.6% respectively. Conversely, Arkansas, Mississippi, and South Dakota are ranked among the lowest, falling 13.5%, 12.7%, and 11.9% below the national average.

• 00:03:16 Despite differences in state living costs, 47% of Americans view the cost of living as their biggest obstacle to saving money. High costs for essentials like gas, housing, and travel universally hinder wealth building. However, areas with high living costs often present more significant career opportunities and higher income potential, challenging the simple assumption that low-cost states are inherently better for wealth creation.

• 00:03:50 A case study comparing 'California Carly' and 'Arkansas Adam' illustrates that higher income potential in high-cost areas can offset increased expenses. Carly, earning $100,000 in California with a $64,000 cost of living, had a higher after-tax income margin ($72,000 - $64,000) than Adam, earning $55,000 in Arkansas with a $49,000 cost of living ($45,000 - $49,000 before taxes, implying a deficit or very tight margin for Adam). This suggests career opportunities and income growth are crucial factors, not just cost of living.

• 00:05:57 Individuals can control their financial situation by leveraging income opportunities and assessing their location. Pursuing vocations with higher earning potential in high-cost areas can make living there justifiable. Additionally, evaluating local cost differences, like commuting from a lower-cost suburb to a higher-cost city, can significantly impact one's financial margin.

• 00:07:38 Taking ownership of financial circumstances involves two primary levers: increasing income or decreasing expenses. Deliberately seeking higher-paying opportunities or developing new skills can increase income. Alternatively, moving to lower-cost areas to match one's current earning capacity helps decrease expenses. Strategic application of these levers is key to preventing cost of living from solely determining wealth-building ability.

• 01:00:50 The current economic environment often allows renting to be cheaper than buying a home, especially in high-cost areas, due to recent rapid increases in housing prices and interest rates. Property owners who secured low interest rates and pre-2020 pricing can offer more reasonable rents. Understanding this market dynamic allows individuals to make informed decisions about whether to rent or buy, capitalizing on existing arbitrage opportunities in residential real estate.