frugal zeitgeist

Cheapest State To Live In

Posted on 07. Dec, 2009 by Forest in General Articles, Saving Money & Finances

As a followup to the recent post Cheapest Places To live I thought it would be appropriate to look at little more in depth at the list I published that showed the Cheapest State to Live In to get a better grasp of what makes these states cheap and if they are suitable for someone looking to relocate.

The list created by Missouri Economic Research and Information Center put Oklahoma, Texas and Tennessee as the 3 most affordable states so we’ll take a look at some of the individual factors for these 3 states.

What factors should we be looking at to determine the Cheapest State To live In?

Sadly it’s no easy easy as saying, State A has costs X amount of dollars less to live in than state B. If you have a specialised job then it may be worth your while living in an expensive state where you can get better pay. This could work for things like the cost of health care too, if you have an illness that needs regular treatment. So for the 3 states mentioned I think we need to look at a cross section of things like housing costs, minimum wage, tax and insurance costs. I won’t look at crime in this post but social issues and living standards are also very important for you to look at.

Cost of buying a home

Demographia.com has a fantastic and highly in depth study to housing affordability throughout the United States. It is updated yearly and is an absolute must read for anyone considering relocation.

In their last study for 2009 data collected in the 3rd quarter of 2008 suggests that Youngstown, OH-PA, Fort Wayne, IN and Evansville, IN-KY are actually the 3 most affordable places for housing. This contradicts the overall list of Cheapest State To Live In data that we are studying but places from all 3 states do make it to the list.

According to this study anything with a rating of under 3.0 is very affordable. They have not exactly defined very affordable but I think it would be fair to assume this means that a family living on average or slightly below average income could afford to live in housing of these costs.

For Oklahoma, Fort Smith appears at no5 with a rating of 2.1.

For Texas, Kileen appears at no17 with a rating of 2.3

For Tennessee, Clarksville is at no12 with a rathing of 2.2

These towns in all 3 states appear well under the 3.0 affordability threshold suggesting that they are very affordable. Taking a quick look at the cost of buying a 3 bed home all 3 States look like they have nice 3bed properties available for under $175k. I saw some good looking 3bed properties closer to the $100k mark in Fort Smith.

Taxes, Possibly the most important when considering the cheapest state to live In!

Our earnings can really be eaten up by taxes. If you live in a state with high taxes are are only getting a medium wage, or less, then no matter how affordable everything else is you may well struggle.

Tennessee immediately looks promising from a tax perspective as they only charge income tax (the big killer!) on interest and dividends and Texas has NO income tax! This means that some other things may be taxed a bit higher so you can judge a bit better based on an overall tax burden figure.

According to RetirementLiving.com here are the tax burdens for our 3 states (The average for USA is 9.7%):

Oklahoma = 9.8%

Texas = 8.4%

Tennessee = 8.3%

Minimum Wage and Income

The average per capita income for these Tennessee and Oklahoma is around $38k with Texas being a little higher at $42k. But more importantly is minimum wages. According to Wikipedia minimum wages in each of the states were as follows (Federal Minimum $7.25 per hour):

Oklahoma = $7.25

Texas = $7.25

Tennessee = $7.25

I knew this was coming! It figures that cheap taxes and house means one thing…. cheap wages. However the idea is you should be able to survive on the min wage (just about). There are plenty of other states carrying low minimum wages but with much higher housing and tax costs.

Insurance!

I’m British so the idea of paying insurance for medical bills makes me cringe…. but it’s a face of life in USA so it has to be taken into consideration. Also vehicle insurance is important as owning a car is very almost essential in USA (from my experience).

The average cost of Health Insurance per worker for each State according to FamiliesUSA.org for August/September 2009 were:

Oklahoma = $11,749 ($12,721 ($3,842 paid by worker, $7,907 paid by employer).

Texas = $12,721 ($4,122 paid by worker, $8,599 paid by employer).

Tennessee = $13,077 ($3,583 paid by worker, $9,494 paid by employer).

The average cost of Combined Premium Auto Insurance for each State according to Insure.com are:

Oklahoma = $846.5

Texas = $945.5

Tennessee = $787.7

And the winner for cheapest State to live in is…

Ok it’s not exactly easy to choose “the cheapest state to live in” but just looking at straight figures Tennessee seems to come out on top with low housing costs, low insurance and low tax. If you blog or do an online job then this is great. However the low local wage (like the other two states) and th possibility that your industry may not have many jobs there means that it warrants more research.

I have not factored in any other really really important things, like the cost of beer (he he), how much food is and the general standard of living.

So this is where you guys come in? What do you think? Do you live in any of these states and how is it? Anything else to add, or just wanna say hi then please leave a comment.

Thanks for reading,

Forest.

Related Posts B

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3. Cheapest Places To Rent
4. Cheapest places to live in America – Topeka, KS for under $840 a month
5. Trade in Your Car for a Horse, Would It Be Cheaper?

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