Why do you live where you live? Why do you reside in that particular place? Did you
choose to live there? Or did that place somehow “choose” you? And what are the financial consequences of you living where you do?
These are questions I never asked myself until I was in my mid-twenties, and had already lived on my own as an adult in 7 different cities across 6 states. I then actually made a thought-through choice to move 2000 miles back to one of those cities, where I lived for the next 20 years. But financial considerations played no part in my initial decision or at any point in those 20 years. While, during all that time, an easy 20 to 30 mile shift in the place where I lived would have yielded me tremendous financial benefits.
Location matters. A lot. And it particularly makes a difference in how long it is going to take you to reach financial independence. So you need to think about your living location choice carefully. Because that choice is going to significantly affect your financial future and your chances for early retirement — which is the bottom line on which the following personal-experience discussion is based.
My Location Misadventures
In my very early twenties, my professional dream was a career in advertising. So I relocated to New York City and worked for several years as a copywriter for an agency in Manhattan. My big mistake was to unquestioningly decide to also live in Manhattan. I did not need to do that. I could have lived in an adjoining borough with easy public transportation access to that same job — and saved A TON of money on rent.
Fast forward 15 years, and now my passion was coral reef diving and my professional dream was a career in marine conservation. And I did both from Miami for 10 years. But (you guessed it) I also lived in Miami. The thing is, I could have easily lived 20 miles away and still dived the same coral reefs and worked the same job. All the while saving HUGE amounts of money on the cost of a house, the real estate taxes on that house, car and home insurance premiums, and more.
The geography lesson, I think, is clear. Where you spend your stash accumulation years matters a lot. And, even in High Cost of Living regions, it is still very feasible to find Reasonable Cost of Living locations that still give you decent access to the job, family, amenities or environmental attraction that has drawn you to that region.
But where you reside during your stash accumulation years is only half the story. The other, just as vital, geographical question is where you intend to settle upon your (hopefully) early-as-possible retirement. I did a lot better on that score.
I Make a Good Location Decision
About the time I was 52 years old, I realized that I was within striking distance of earlier retirement. Or at least I could be if I could manage to do something about my housing cost. (Yes, there it was again.) At that point in time, we had been living for 5 years in Maryland, within extreme commuting distance of Washington, D.C. Our house had appreciated by more than 6 figures, but its mortgage still had 20 years to run and its real estate taxes were no bargain. Bottom line: living in that house was standing between me and earlier financial independence.
Of course, the solution was obvious: move the hell out of there. So we found a Virginia location with milder weather, lower home values and real estate taxes, and a small-town way of life within a half-hour’s drive from a metropolitan center. The profits from the sale of the Maryland property covered the purchase price of the Virginia house — which was sited on just as big a piece of land, actually had more living square footage, and came with even more outbuildings than we had in Maryland!
Making the decision to resettle in a Reasonable Cost of Living area made earlier retirement at 56 a reality for me because resettling brought my basic living expenses down enough to allow my passive investment income to more than cover them. A simple shift in geography had made me job-free 10 years sooner than I had thought possible.
It’s All About Geography
And that is geography lesson number two. Plan to retire in a Reasonable Cost of Living area. Don’t let inertia box you into a High Cost of Living retirement location. Doing that will delay your retirement date significantly and thereby rob you of a good chunk of your remaining living-free days.
If you have been residing in a High Cost of Living area for employment reasons, realize that those reasons will no longer apply when you retire. If you have been living there for family reasons, formulate a visiting plan from your targeted new Reasonable Cost of Living location. And if you have been rooted to a High Cost of Living area for the sake of an environmental (or other) amenity, try to replicate it in a Reasonable Cost of Living area… or shift your priorities in favor of breaking free.
Those are the three major external factors I see that will affect where you end up living: employment, family and environment. You have to go where you can get a (good) job. You may feel a need to live within easy visiting distance of close relatives and friends. Or you may have a strong preference for living away from cold weather (or near ski slopes), near tropical coral reefs (or away from summer heat), and so on.
The error I see people making — which, as we have already seen, I have made myself — is to plant oneself virtually on top of the job, the family or the environmental attraction and thereby end up in a High Cost of Living area that financially eats one alive. A mistake that is made even when a Reasonable Cost of Living area is close at hand.
I could have lived in Brooklyn and still kept my advertising job in Manhattan. I could have lived in Belle Glade, Jupiter or even Hialeah and still enjoyed South Florida’s warmer weather and coral reef diving. Both of which would have allowed me to save money much faster and cut years off my wait to reach financial freedom. And, conversely, I could have ignored my opportunity to relocate from Maryland to Virginia and thereby been forced to wait even longer to reach financial independence. Which would have lost me even more years of job freedom that I have now enjoyed.
If you are now in a High Cost of Living area, DON’T wait to make a location change. The sooner you make that change, the shorter your wait for financial independence will become. And if it is still early enough in your working career that you are not yet rooted to a particular place, consider your alternatives carefully before letting yourself get trapped in a High Cost of Living area. Because you DO have other choices.
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