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This podcast was recorded on June 28, 2016.
Alison Southwick: Just Google the term "best places to live," and everyone has their own opinion. Kiplinger, for example, says that South Dakota is the best place to retire. Woof! No offense, but, well, actually some offense. I think we can do better than South Dakota, and we're going to use science and stats to determine the best place to live a healthy, wealthy, and Foolish life.
The reason why Kiplinger picked South Dakota was mostly for how far your money will go. It's a cheap place to live. But if we're being honest, when there is literally nothing for you to do but freeze your tuckus off, how happy is that pile of money going to make you, outside of setting it on fire? So, again, sorry, not sorry, South Dakota.
Robert Brokamp: Have you been to South Dakota?
Southwick: No, but one of my favorite ...
Brokamp: It's a beautiful state.
Southwick: ... people in the world is from South Dakota. Amber.
Brokamp: It's a beautiful state. Mount Rushmore.
Southwick: I know. That's what they said in their write-up. They're like, "Hey, and your family can come visit you at Mount Rushmore," and I'm like, "One time!" I know, Rick just held up his finger and said "one time," and I was like, "That's right. They'll want to come visit you one time."
Brokamp: Yeah.
Southwick: It is a big state. Is it really pretty?
Brokamp: Yes. It's very mountainous. If you like the mountains then yes, it's a beautiful state.
Southwick: Are they nice mountains?
Brokamp: If you like beaches, it's not a beautiful state.
Southwick: I'm from Idaho, and we've got mountains in Idaho.
Rick Engdahl: There are other states with better mountains.
Southwick: Yeah. There are other better mountains out there.
Brokamp: If you say so.
Southwick: Man!
Brokamp: I'm just trying to help her. I'm just trying to ...
Southwick: Robert Brokamp, brought to you by the South Dakota Chamber of Commerce.
Brokamp: I'm just trying to hold on to the five South Dakota listeners we have.
Southwick: That's true. I'm sorry. You're all good people. I love the people of South Dakota. But it's a cold place to live.
Brokamp: It is a cold place to live.
Southwick: So here's what we're going to look at. We're going to look at the research that we think matters, and that starts with looking at per capita income. Why does this matter, Bro?
Brokamp: Well, I think one thing -- being a financial podcast, as we are -- is we would like to highlight starting with just plain old money. Where can you live to make a decent living? We looked at per household income and the top five states as of 2014, according to the Census Bureau, are Maryland, New Hampshire, Hawaii, Connecticut and -- this is somewhat controversial -- D.C. OK, it's not really a state, but they did include it. If you took that one out, the fifth state would be Alaska.
Southwick: All right.
Brokamp: And D.C. and Maryland, of course, are related. Maryland has a lot of its wealth tied up to being a suburb of Washington, D.C. That's part of why Virginia is No. 8 on the list. Alaska due, in large part, to the oil industry.
What I think is interesting is Maryland is No. 1. Household income average of $76,000. You may recall a study from a few years ago out of Princeton that found that to the degree that money buys happiness, $75,000 was the limit, because that takes care of all your needs.
Southwick: Oh!
Brokamp: Once you start making money beyond that ...
Southwick: It's just gravy?
Brokamp: It's just gravy. And this is from 2008-2009, so if we adjusted it for inflation, it would be a little closer to $80,000.
Engdahl: I really like gravy.
Brokamp: There you go. Says the guy from Maryland, by the way. The resident from Maryland. I just think it's interesting that no state has an average-per-household income at that level of happiness.
Southwick: And if we look at the bottom of the list ...
Brokamp: Yeah. At the bottom of the list you're looking at Kentucky, Louisiana, Alabama, West Virginia, and Mississippi. And we're talking $42,000, or so, for Kentucky down to Mississippi for $35,000.
Southwick: But, of course, income isn't the whole story, because high income might not be enough to pay for the higher cost of living in some of these states, so what's the next stat we're going to look at, Bro?
Brokamp: And as people who live in the D.C. area, we can point to what this is.
Southwick: It's expensive.
Brokamp: It's expensive. If you did include D.C. as a state, it is the most expensive state to live in.
Southwick: Oh!
Brokamp: Metro regions -- I think New York and San Francisco have got us beat, but it's pretty expensive. So we're going to look at a study from Gallup, as well as an organization called Healthways, and what they did is determine financial well-being, so it's not just income, but whether your income covers important things. They had different criteria for their list.
First of all, enough money to buy food, so comparing your income to the average cost of eating. Enough money for healthcare. Enough money to do everything you want. I'd be curious how they define everything, but it's nice.
Southwick: Yeah, because there are a lot of things I would like to do.
Brokamp: Exactly. Macrame in the nude, for example.
Southwick: I've heard. I'm telling you.
Brokamp: Other criteria. In the last seven days, have you worried about money? And then -- I thought this one was interesting -- whether, compared to the people you spend time with, you are satisfied with your standard of living. So I guess you look at the people around you and feel like you are doing the same as those folks, as opposed to looking around and seeing a lot of people who are doing better than you and maybe you're not so satisfied.
Southwick: Right. And we've talked about that, also, in the past. Like when you hang out with people that have more money than you, you just start trying to keep up with the Joneses and all that stuff.
Brokamp: So according to this well-being index, the top five states for financial well-being are Hawaii, Alaska, North Dakota, Wyoming, and South Dakota.
Southwick: I don't know. I'm suddenly skeptical of this study. Hawaii and Alaska are extremely expensive places to live. I mean, at least Hawaii is. I assume stuff is not cheap in Alaska, either.
Brokamp: I thought about that, especially in terms of Hawaii and as someone who grew up in Florida close to the beach -- a similar type of situation. I think if you love the beach, and you live there, once you've paid your housing, you don't have to pay anything additional. You just go to the beach for all your entertainment.
Southwick: Yeah, but a Big Mac costs, like, 10 bucks in Hawaii.
Brokamp: Does it really? Ten bucks?
Southwick: I don't know. I'm going to have to Google it. I mean, you don't have to take my hyperbole seriously ...
Engdahl: Eight bucks.
Southwick: Seriously? Man, Rick was fast on the research. Eight bucks for a Big Mac. I mean, how happy can you be in the face of $8 for the cheapest piece of food you can get on the mainland?
Brokamp: That's a good question, other than pointing out that they do have higher income, so with the higher income, they must be able to buy more Big Macs.
Southwick: I guess so. Now we know the states where people make the most money, and we know the states where people at least make enough money to pay for stuff, but which states are the smartest with their money?
Brokamp: That is a great question, and fortunately, we have a report from WalletHub that provides an answer, at least according to their criteria. They have "2016's Most and Least Financially Savvy States." They looked at all kinds of criteria, but you would break it down into things like spending and debt, financial literacy, credit rank -- meaning their credit score as well as how much and how well they use their credit -- and savings rank.
And the top five states with the people who are the smartest with their money, according to WalletHub, are Minnesota, New Hampshire, North Dakota, Connecticut, and New York.
Southwick: All right!
Brokamp: I thought this was interesting because I'm always curious about what the behaviors, predictors, and indicators are of future financial success, and a lot of it is stuff you cannot do. For example, taller people are going to have higher lifetime income. People of Russian ancestry have higher lifetime income. All kinds of things that you can't do much about in your life, but this looks at what people do with their money. It measures things like credit score.
So when I saw that North Dakota was turning up on a lot of these lists, I was a little concerned, because all this stuff is based on numbers from a few years ago, as well as current reports. North Dakota was doing very well because of the oil boom. It's not doing so well, now. In fact, just a week ago, the State of North Dakota announced that that they had set up this fund in 1987 to sock away money during oil booms so they could rely on the fund during a bust. It's about to run out of money.
Southwick: Oops.
Brokamp: That's how much the drop in oil is affecting them. But then when you dig into this survey, or the study from WalletHub, you see that there are actually other reasons why people in North Dakota are coming out high on these lists. For example, they have a very high credit score. If there's one thing I would look at about someone to predict how their life is going to play out in terms of finances, it would be credit score. So people in North Dakota not only benefited from the oil boom, but they have good financial habits which makes me feel like they're going to weather this pretty well.
Southwick: They're going to be OK.
Brokamp: They're going to be OK.
Engdahl: Wall Drug, here we come.
Brokamp: Wall Drug! Have you been to Wall Drug?
Engdahl: Absolutely.
Brokamp: Oh, my gosh, I love Wall Drug. We've got to take a road trip. We've got to do the Motley Fool Answers Road Trip.
Engdahl: Oh, yeah.
Southwick: We're going to go to the Dakotas and The Villages.
Brokamp: It would be awesome.
Engdahl: It's not on the way.
Brokamp: Anyone who is a willing sponsor, contact us. Rent the RV and put us on the road.
Southwick: I don't know that I want to do that. Let's move on to another stat that we think is important, because you, our dear Motley Fool Answers listeners, know that health and wealth go hand in hand. Like two peas in a pod. Like ham and cheese. Like stuff that goes together.
So let's talk about what the healthiest states are. This comes from America's Health Rankings Annual Report. They looked at trends in obesity, smoking, diabetes, and physical inactivity, and their top five states were -- do you want me to say it or do you want to say it?
Brokamp: You go ahead. You're having fun with it.
Southwick: No. 1 is Hawaii, again!
Brokamp: There we go.
Southwick: No. 2 is Vermont. Three, Massachusetts. Four, Minnesota. And five, New Hampshire.
Brokamp: And a lot of these states also rank high on a lot of these other financially related rankings. I've done a lot of reading about this, and there's a bit of a chicken-and-egg thing whether people who are healthy accumulate more wealth or that wealthy people are healthier. It could be that because people are healthy, they don't have to spend as much on healthcare. They don't miss work. Things like that. On the other hand, if it starts with wealth, it's because wealthier people can afford better healthcare. They don't have a lot of financial stress. Regardless, when you look at these studies of the healthiest states and states that are doing well financially, there's a lot of correlation there.
Southwick: So health is obviously important, but another important thing that we wanted to point out was which state is the most drunk. And there's science behind this, by the way, people.
According to the National Institute on Alcohol Abuse and Alcoholism, the states with the highest alcohol consumption are New Hampshire, Washington, D.C., and Delaware. In New Hampshire, their per capita alcohol consumption is about 4,600 gallons. [Editor's note: The correct number is 4.65 gallons per capita.]
Brokamp: Wow!
Southwick: Yeah, that's a lot of booze. And in case you prefer craft beer, Vermont has the highest number of craft breweries. There are 8.6 craft breweries per 100,000 people. Oregon has 7.4 per 100,000 people, and Colorado has 6.1 per 100,000 people. Why should we care about the alcohol consumption in a state, Bro?
Brokamp: Because, perhaps to your surprise, or perhaps not, generally people who drink are better off financially than people who don't drink.
Southwick: See? Some of you listeners thought it was going to go the other way.
Brokamp: That's right! I'm looking here at the study called, "No Booze? You May Lose," by Bethany Peters and Edward Stringham. What they found is that the people who do drink more make more money than the people who abstain. And by the way, I'm someone who does not drink, so perhaps I should change some of my habits.
And there's some theories about this. It could be that you have more social capital. You're going out and you're drinking more. For example, they found out that men that go out to bars at least once a month earn an additional 7% on top of the 10% that the average drinker makes above the people who abstain. So not only should you drink, you should go out to a bar and do that.
Southwick: At least once a month. That's not bad. I can handle that. Well, let's now move on, because money isn't everything, and look at the overall quality of life. And this comes to us from the OECD, which I think stands for the Organization for Economic Cooperation and Development. They rank the states according to quality of life. They looked at employment rate, income, air pollution, crime, civic engagement, life expectancy, percentage of the population with a high school degree, and self-reported life satisfaction. So Bro, who topped the list for overall quality of life?
Brokamp: The answer is (1) New Hampshire, (2) Minnesota, (3) Vermont, (4) Iowa, and (5) North Dakota.
Southwick: One of the Dakotas comes in again.
Brokamp: There you go.
Southwick: I feel like Minnesota, Vermont, and New Hampshire keep popping up.
Brokamp: They do. And unfortunately, if you are to look at the bottom, not only in this, but in many of the rankings we've talked about, you're once again going to see, frankly, a lot of states from the South. You're looking at the bottom five for this list -- West Virginia, Arkansas, Alabama, and Mississippi.
Southwick: Well, I don't know that I really want to live in New Hampshire, Minnesota, Vermont, Iowa, or North Dakota. They're just very cold. Like Hawaii I could get down with. I can get down with that. But I don't know that I could do these cold states.
Brokamp: You've just got to do the old snowbird thing. Get the little condo in Florida or Hawaii and go there for the winter. Rent it out in the summer. Make the extra money as an investment. That's it.
Southwick: Airbnb it?
