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Where Are The Highest Profit-To-Living Areas?

Where Are The Highest Profit-To-Living Areas?

I spent some time in a much bigger city over the weekend, visiting some friends whom are blowing my earnings out of the water.  It made me wonder, by simply changing areas where you live, what is the opportunity to increase your profit to life ratio?

For the purposes of this article, I will define profit to life as the following:

Profit To Life Ratio = Net income (after taxes) minus cost of living, whatever that may be, on a month to month or year to year basis, divided by net income.  This figure can be wildly variable depending on lifestyle and where you live, which I would like to investigate further.

P2L RATIO = (NET INCOME - COST OF LIVING)/ NET INCOME

P2L PERCENTAGE = P2L RATIO * 100

Suppose your basic living expenses are $2000 a month, and that can include a myriad of different sources that all add up depending on who you are, what stage of life you're in, and where you live.  If you're making $8000 a month, your profit to life ratio would be .75 ((8000-2000)/8000).  Your P2L percentage would be 75%.

Now that I've outlined a basic concept of the figure by which to measure different areas, we also have to define a career - because they're not all born equal, and where there may be ample opportunities for one field, there may be very few for another.  The key here is to find what cities have the highest incomes relative to the average cost of living.  By moving to such a city, it may be possible to shave years off of your retirement plan should economic conditions stay the same in that area.  Since I am most familiar with engineering, I'm going to focus on that since I have a decent idea of national salaries in my mind as a baseline, which I will corroborate with different sources.

I will investigate 10 different large metro areas and compare them to 10 smaller metro areas, with cost of living for each place, as well as average salary for a Senior Mechanical Engineer.  You might live in an area where your salary is in the upper echelon of national salaries, but if your cost of living is even proportionally higher than your income increase, you're better off moving somewhere much cheaper and taking a huge pay cut - the key being that your P2L ratio increases.

Someone who has already figured out the best place to live

Someone who has already figured out the best place to live

Before I go into my analysis,  I found a nice Forbes article that highlights some research done by Mark Schill of Praxis Strategy Group, which took economic data from the 53 largest metro areas in the United States from the US Census, and compared them to a derivative number of median incomes from the US. Bereau Of Economic Analysis.  What they obtained was the following list where the cost of living is lowest when median income is factored in with the whole picture.  In order of highest relative salary to cost of living (I think they refer to it as "effective" or "adjusted" salary), they are below

1.) Houston, TX

2.) San Jose, CA

3.) Detroit, MI

4.) Hartford, CT

5.) Dallas, TX

6.) Atlanta, GA

7.) Cleveland, OH

8.) Pittsburgh, PA

9.) Cincinnati, OH

10.) St. Louis, MI

11.) Charlotte, NC

12.) Birmingham, AL

13.) Kansas City, MO

14.) Memphis, TN

15.) Boston, MA

Note the lack of some of the more major hubs where salaries are massive - NYC, San Francisco.  The cost of living is simply too insane for them to make the list, even though the median incomes there are the highest in the nation.

In the spreadsheet below, you can see the list I've created for some of the larger and smaller metro cities - it is self explanatory if you examine the graphic, so I'll let our readers do just that.

Notice New York City - Absolute Shit-Tier Conditions, by any standard.

Notice New York City - Absolute Shit-Tier Conditions, by any standard.

This chart isn't without its flaws - Cost of living is largely an individual and unique number, and the values shown above are for a single person with no children.  I encourage readers from different career fields to punch in their current incomes and profession into the payscale cost of living calculator, and you can see if your income would increase relative to the cost of living if you were to move to the city of your choice.  Another flaw with this is that I simply do not have the time to investigate smaller cities and suburbs, where there may be local incomes for certain professions that crush the big-city competition due to their competitive salaries relative to a national average, but low costs of living.

As you can see, the "average" P2L for a Senior Mechanical Engineer, living in an average city, with an average cost of living is 0.66.  This number could be higher or lower depending on your individual career and experience in that field.  It is important to establish a baseline for what you should aim for - but above the average should be a good starting point.  In this situation, if you were a Senior Engineer living in Portland, OR, you might highly consider moving to any of the cities highlighted in green, and you will see a direct increase in your profit from working without changing your lifestyle.

Much in the same way that the best way to increase your fuel economy is by changing you driving habits, not your car itself, the same can be said of changing cities with a different cost of living.

Where can you reduce your cost of living where you currently are?  Once you have trimmed off all the excess, and still feel that you need more, then would be a good opportunity to seriously investigate payscales and opportunities in other cities.  Keep in mind that the above P2Ls only apply to the career that was chosen for this article, and the numbers may be vastly different within your own field.  If you move and fall on your face, you can't say I didn't tell you not to.

Oh, and one more thing: AVOID NYC LIKE THE PLAGUE.

Reaping The Benefits of Investing: 17.9% YOY Gains Edition

Reaping The Benefits of Investing: 17.9% YOY Gains Edition

Don't ankle bite the stock market - you look silly

Don't ankle bite the stock market - you look silly