Perhaps one of the most pressing concerns for Americans has been managing finances while keeping pace with the skyrocketing cost of living. The geographic cost of living dramatically impacts a person’s financial health, as it determines salary, disposable income, and expenditure.
Related: The average American confronts new 401(k), retirement savings facts
The Missouri Economic Research and Information Center has found that the states with the highest cost of living are Hawaii, California, District of Columbia, Massachusetts, and Alaska, respectively.
Somewhat surprisingly, Alaska beat out New York for the state with the fifth highest cost of living in the first quarter of 2024. This may be somewhat of an outlier, as Alaska’s remoteness from the rest of the continental U.S. inflates the cost of necessities such as food, utilities, housing, and transportation.
It’s no surprise that high cost of living greatly increases monthly and annual expenses, but areas with a high cost of living also typically offer higher salaries. Therefore strategic budgeting and financial planning are of great importance, no matter where you’re located.
States with the highest interest in personal finance
A recent study conducted by EvenBet Gaming found that interest in managing personal finances, relative income, and opportunity for saving varies by state.
The research identified the average monthly net salaries and estimated costs for a single person, and search term data from Numbeo and Google focused on budgeting, financial planning, and saving money. Scores were identified based on available savings and total search count for financial planning terms.
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Some key findings include:
- California residents searched Google for financial planning insights the most out of any state — over 300,000 times over the past few months. Based on applying the 50/30/20 rule to the state’s high average salary, residents have the opportunity to save $1,000 per month.
- New York state residents have the highest average salary out of every state, allotting more money for spending, and saving up to $1,144 per month on average. New Yorkers search for financial planning terms almost as much as Californians.
- Residents in Texas and Florida have comparable savings opportunities, with an average monthly savings per person of $962 and $828, respectively. Due to relatively low costs of living, both states have ample opportunity to save, and have searched for financial planning tips between 195,000-200,000 times over the past few months.
- New Mexico residents spend the least on monthly expenses out of all U.S. states, allowing them to save $832 per month despite a lower average monthly salary than other states analyzed.
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How to keep up with escalating costs of living
With the cost of living increasing nationwide, the typical suggestion to move to more affordable cities and states has become moot. U.S. households are spending an additional $11,500 annually to maintain the living standards of January 2021.
Related: The average American faces one major 401(k) retirement dilemma
Securian Financial recommends a few small but mighty changes to keep your finances in check:
- Cut out rarely used recurring expenses. Consistent monthly charges on ‘nice to have’ services like streaming subscriptions and gym memberships can add up quickly, yet are easily forgotten about and often go unused.
- Set a food budget. In the age of food delivery apps, ordering take out can quickly turn into a large monthly expense, when considering the taxes, fees, and delivery tips associated with each transaction. Plan groceries to make most meals at home, and only budget in takeout and restaurant visits that you can afford.
- Consider reducing transportation costs. If you live in an area with reliable public transportation or bikeable roads, take advantage of it. Not only is it cheaper than driving, but most companies offer commuter benefit packages that allow you to use pre-tax dollars to pay for transit or parking.
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