It’s Not the Ratio, It’s the Delta

I sometimes see a misconception regarding living in a high-cost vs. low-cost of living (HCOL v. LCOL) area. It goes something like this: “I make 2x more, but my expenses are 2x more, so it’s a wash.”

This is not true. If you make 50k and spend 30k, you save 20k. If you make 100k and spend 60k, you save 40k. Since increasing savings is the easiest way to change your future net worth, this is big deal. I started my career in NYC, so I know what this did to my savings account in my 20’s.

Just because you live in an HCOL area, doesn’t mean you have to have a high cost of living. I paired my NYC salary with a low rent (the 2023 equivalent of $900-$1,400) and no car, which are the easiest ways to save money in an HCOL.

Not all expenses are higher in an HCOL—mostly it’s housing and dining. Commuting (for me) was a lot cheaper. Other expenses, like travel, clothes, and “stuff” are pretty much the same where ever you live, so living in an HCOL means that you have more money to spend on those things. HCOL areas themselves are usually desirable travel destinations, and you can do that for free.

So, when planning where you live, if you are deciding between HCOL and LCOL, use the delta, not the ratio. Of course, if you can, working remotely and pairing an LCOL home with an HCOL job can give you the best delta.