Time to read: 4 min

When it comes to building wealth, there are several factors that affect how much wealth somebody is able to accumulate and how quickly they are able to do so. Some of these factors, like income, lifestyle, and spending habits, may seem obvious. Others, however, may surprise you.

One aspect of building wealth people often underestimate is their geographical location. When selecting a place to live, people are more likely to choose a location based on proximity to friends or family, career opportunities, or other amenities, than with the goal of building wealth. And yet, where you live can have a huge positive or negative impact of your finances and financial future.

Keep reading to learn if your geographical location is helping you build wealth – and what to consider when selecting the right location for you.

Stretching Each Dollar Further

There is no question that living in an area with a lower cost of living will allow you to spend less money on the costs that account for the vast majority of your spending. From housing to childcare, more affordable cities and towns lead to lower regular expenses and, theoretically, allow you to save and invest more money each month.

However, this only works if your realistic job opportunities and income remain the same in a more affordable location. The unfortunate reality is that lower cost of living cities often have fewer career opportunities and similar jobs may have a lower salary.

If, in moving to a new location, your income will have a similar decrease as your expenses, you may find yourself spending less money, but saving and investing roughly the same amount each month.

It’s also important to consider what hidden costs the location may bring. If it’s important for you to see your family regularly, you may save money from living in a more affordable location, only to find that you’re spending that much, and then some, on airfare to visit them. Similarly, if the town or city doesn’t have good public schools, you may find yourself paying extra to send your children to a private school.

This isn’t to say that more affordable locations to live in won’t help you build wealth – very often, they will! However, it’s important to research more than just the cost of living in a new area, and instead weigh all the financial implications of living in a specific location.

The best of both worlds

Luckily, there is a middle ground between living in an area with an extremely high cost of living, but with high paying career opportunities, and moving to a rural or remote area with lower living expenses, but lacking in high salaries.

While most major metropolitan cities carry heavy price tags, they are often surrounded by much more affordable suburban areas. Choosing to live in one of the suburbs rather than in the heart of the city will allow you to keep the same job (and salary) while reducing your expenses. The commute to work may be longer, but you’ll be able to maintain your income, lower your cost of living, and build your wealth faster.

Additionally, not all suburban areas, even surrounding the same city, will have the same cost. Towns and villages in similar, or even identical, proximity to their large citiy may have wildly different property values, despite having similar amenities.

There also may be cities where salaries are slightly lower, but the cost of living is significantly less, allowing you to build wealth faster even with a small dip in income.

Pay Yourself – Not the Government.

From income tax to property tax to sales tax, there are so many different ways our money ends up going into the hands of the government – instead of your pocket. When determining the right geographical location to build wealth, it’s important to consider how much money you’re likely to pay in taxes, both out of your paycheck, in your property taxes, when purchasing goods, and more!

This blog is for informational purposes. Certain information contained herein (including any forward-looking statements and economic and market information) has been obtained from published sources and/or prepared by third parties and in certain cases has not been updated through the date hereof. While such sources are believed to be reliable, The Tranel Group does not assume any responsibility for the accuracy or completeness of such information. The Tranel Group does not undertake any obligation to update the information contained herein as of any future date.