Skip to main content
Advertiser Disclosure
We do receive compensation from some partners whose offers appear on this page. We have not reviewed all available products or offers. Compensation may impact the order in which offers appear on page, but our editorial opinions and ratings are not influenced by compensation.

The Ascent Logo The Ascent Logo - Blue circle with an A in it and the ascent a motley fool company to the right of that

  • Credit Cards
  • Banking
  • Brokerages
  • Loans
  • Mortgages
  • Knowledge
  • Latest Picks
  • Search Icon Click here to search

Credit Cards

Top Picks
  • Best of January 2021
  • Cash Back
  • Balance Transfer
  • Travel
  • 0% APR
  • Rewards
  • Bad Credit
Knowledge
  • Beginners Guide to Credit Cards
  • How to Rebuild Your Credit
  • Maximize Your Credit Card Rewards
  • Learn More About Credit Cards
Credit Card Tools
  • Compare Cards
Looking for a new credit card?

Explore the best credit cards in every category as of January 2021.

Get started!

Banking

Top Picks
  • Best Savings Accounts
  • Best Bank Accounts
  • Best Money Market Accounts
  • Best CDs
  • Best Checking Account Bonuses
Knowledge
  • Beginners Guide to Banking
  • Everything You Need to Know About Savings
  • Money Market Accounts Made Easy
  • Learn More About Banking
Looking for a place to park your cash?

Check out our top picks of the best online savings accounts for January 2021.

Get Started!

Brokerages

Top Picks
  • Best Brokers of January 2021
  • Best Online Brokers for Beginners
  • Best Options Brokers
  • Best IRA Accounts
  • Best Roth IRA Accounts
  • Best Robo Advisors
Knowledge
  • How to Open a Brokerage Account
  • Beginner's Guide to Brokerages
  • Learn More About Brokerage
Just getting started?

Explore our picks of the best brokerage accounts for beginners for January 2021.

Get Started!

Loans

Top Picks
  • Best Loans of January 2021
  • Best Personal Loans for Bad Credit
  • Best Loans for Debt Consolidation
  • Best Low-Interest Personal Loans
  • Best Personal Loans for Good Credit
  • Best Personal Loans for Fair Credit
Knowledge
  • Personal Loans Made Easy
  • Debt Consolidation Guide
  • How to Pay Off Debt
  • Learn More About Loans
Thinking about taking out a loan?

Before you apply for a personal loan, here's what you need to know.

Get Started!

Mortgages

Top Picks
  • Best Mortgage Lenders of January 2021
  • Best Mortgage Lenders for Poor Credit
  • Best Refinance Lenders
  • Best VA Mortgage Lenders
Knowledge
  • First Time Homebuyers Guide
  • Home Loans Made Easy
  • The Complete Guide to Refinancing
  • How to Get a Mortgage with Bad Credit
  • Learn More About Mortgages
Tools & Calculators
  • Mortgage Calculator
Compare Rates
  • Today's Mortgage Rates
  • Refinance Rates
  • 15-Year Mortgage Rates
  • 20-Year Mortgage Rates
  • 30-Year Mortgage Rates
  • Jumbo Mortgage Rates
  • VA Loan Rates
  • 5/1 ARM Rates
  • 7/1 ARM Rates
  • FHA Mortgage Rates

Knowledge

Knowledge Section
  • All Articles
  • Credit Card Articles
  • Banking Articles
  • Brokerage Articles
  • Personal Loan Articles
  • Mortgage Articles
  • Personal Finance Articles
Recent Articles
  • IRS to Redirect Some $600 Stimulus Payments That Went to Closed Bank Accounts

    Personal Finance

    IRS to Redirect Some $600 Stimulus Payments That Went to Closed Bank Accounts
  • Biden's Unemployment Proposal Could Replace 86% of Lost Wages

    Personal Finance

    Biden's Unemployment Proposal Could Replace 86% of Lost Wages
  • U.S. Childcare Costs Are Crippling. Here's How Biden Plans to Help

    Personal Finance

    U.S. Childcare Costs Are Crippling. Here's How Biden Plans to Help
  • Stimulus Check Update: Biden Pushes for $1,400 Boost Not Just for the Jobless

    Personal Finance

    Stimulus Check Update: Biden Pushes for $1,400 Boost Not Just for the Jobless

Published in: Research | Nov. 4, 2019

10 Best Cities for High Salaries and Low Costs of Living

By:  Matt Frankel, CFP

Share this page:

Yellow Facebook Icon Share this website with Facebook
Blue Twitter Icon Share this website with Twitter
Yellow LinkedIn Icon Share this website with LinkedIn
Yellow Mail Icon Share this website by email

There are some parts of the U.S. that are extremely cheap to live in. The problem is that most of these places also have relatively low average salaries, which tend to cancel out the financial benefits of cheaper housing, groceries, and other expenses.

However, maybe there are places that offer the best of both worlds. To try to find out, The Ascent analyzed cost of living and salary data for more than 200 of the largest metropolitan areas in the United States to see where the best combinations of high salaries and low costs of living can be found.

Key findings

  • Kalamazoo, Michigan and Huntsville, Alabama have the best salary to cost-of-living ratio.
  • Harlingen, Texas is the metropolitan area with the lowest cost of living.
  • In Denver, Colorado, utilities cost about 78% of what the average American pays.
  • At $72,400, San Francisco has the second highest average annual salary, but the cost of living there is almost double the average.

Some cities are cheap to live in

The Council for Community and Economic Research regularly publishes cost of living data for metropolitan areas in the United States. Specifically, they compute a Cost of Living Index, or COLI, for each metropolitan area, that takes a few weighted factors into account. Housing costs make up nearly 30% of the total and are the largest individual category. Groceries, utilities, transportation, healthcare, and the costs of services and miscellaneous goods are also factored in.

The Cost of Living Index is designed so that a score of 100 corresponds to the "average" cost of living in U.S. metropolitan areas. For example, a score of 200 would mean that it costs approximately twice the national average to live in a certain area.

Some places are just cheap to live in overall. Harlingen, Texas is the metropolitan area with the lowest overall cost of living, with a COLI of just 73.8. In other words, this means that your cost of living in Harlingen will be more than 26% less than the same standard of living in an average U.S. city.

Other cities are cheap when it comes to certain expenses. In Kalamazoo, Michigan, for example, housing costs just over half (53.3%) of the national average. In Denver, Colorado, utilities cost about 78% of what the average American pays. And in places like Columbia, South Carolina, healthcare costs are significantly less than in most metropolitan areas.

Some parts of the U.S. are great places to make more money

On the other side of the equation, some metropolitan areas have average salaries that are significantly higher than other parts of the U.S.

According to the latest data from the Bureau of Labor Statistics (BLS), the average salary in the United States is $51,960. However, average salaries are much higher in some areas. In the San Jose/Santa Clara metropolitan area, for example, the average salary is $80,480 per year -- almost 55% more than the national average. However, the cost of living in the San Jose area is a staggering 160% more than the U.S. average.

Not surprisingly to anyone who's tried to shop for a home there, housing costs are the main reason. In other words, you make a significantly higher salary but you can expect to pay far more for your basic living expenses.

Other metro areas at the top of the salary list are in the same boat. The San Francisco metro area is No. 2, with a $72,400 annual average salary. However, San Francisco's COLI is more than 200. Also towards the top of the list are high-cost areas such as Washington, D.C., Boston, Seattle, Hartford, and Denver, just to name a few.

What cities offer the best combination?

As we've seen, the problem is that many of the places with the lowest costs of living also have some of the lowest salaries, and some of the places with the highest salaries cost a fortune to live in.

In other words, cost of living is a relative concept. If your annual living expenses add up to $30,000 in a certain place, but you only make $29,000, you may not feel financially secure at all. On the other hand, if your annual expenses are $60,000 somewhere else, but you make $80,000, you could be very financially comfortable indeed.

A low cost of living doesn't really help unless you're earning a high enough salary to take advantage of it. Conversely, a city that is known for high salaries isn't necessarily going to help you thrive financially if it costs too much to live there.

With that in mind, let's dig a little deeper to see which U.S. metropolitan areas offer the best combination of both. In other words, where can you earn the highest salary relative to the cost of living?

To figure this out, we divided the mean annual wage by the cost of living index in every major U.S. metropolitan area. And we found out that some metro areas are indeed great places to live for a combination of high salaries and a low cost of living. Here are the 10 best cities according to this methodology.

One interesting observation is that all of these areas have below-average costs of living. In other words, you won't find any expensive cities with disproportionately high salaries -- these are cheaper places to live that pay relatively high salaries, on average. Only five of the 10 have mean salaries greater than the national average, but all allow residents to stretch their income better than most.

Also, just to give you an idea of just how much more affordable these metropolitan areas are, consider that the median salary-to-COLI ratio in U.S. metropolitan areas is 485.3. This implies that the places on our list are anywhere from 16% to 26% more affordable than the average U.S. metropolitan area.

One final important point is that this analysis looks at metropolitan areas, not just cities. This may seem odd -- after all, there can be significantly different costs of living within the same metropolitan area. It certainly costs more to live in Manhattan than in one of the New York City metropolitan area's New Jersey suburbs, just to name one example. However, by looking at metropolitan areas, it helps to account for the fact that some people live in the city while others don't.

This is just one piece of the puzzle

All other things being equal, it's obviously nicer to have a higher salary compared to our cost of living. However, it's not the only important consideration when deciding where to live. After all, if this was the only deciding factor, we'd all live in Kalamazoo or Huntsville.

As legendary investor Warren Buffett once said, "price is what you pay, value is what you get." Obviously, many Americans find tremendous value in living in or near places like New York City or San Francisco, otherwise they wouldn't deal with the relatively high costs of living. If a certain area has top-notch public schools, for example, it could make an expensive living situation more acceptable.

The bottom line is that it's great to have a high salary and low cost of living. However, these should be taken into consideration along with the other, less quantifiable, factors involved with living in a certain area before making any major life decisions.

Sources

Data sources include Council for Community and Economic Research (Q2 2019) and Bureau of Labor Statistics (May 2018). Analysis was done using the most recent data available.

Other Research

The Average Cost of Car Insurance in 2021

The Largest Mortgage Providers in the U.S.

Study: What Consumers Really Want From Banks

Average American Household Debt in 2020: Facts and Figures

Like this page? Share it!

Blue Facebook Icon Share this website with Facebook
Blue Twitter Icon Share this website with Twitter
Blue LinkedIn Icon Share this website with LinkedIn
Blue Mail Icon Share this website by email

About the Author

Matt Frankel, CFP
Matt Frankel, CFP icon-button-linkedin-2x icon-button-twitter-2x

Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice, and in 2017 he received the SABEW Best in Business Award.

Other Research

The Average Cost of Car Insurance in 2021

The Largest Mortgage Providers in the U.S.

Study: What Consumers Really Want From Banks

Average American Household Debt in 2020: Facts and Figures

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.

The Ascent Logo

The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.

btn_facebook-yellow btn_twitter-yellow btn_instagram-yellow

Copyright © 2018 - 2021 The Ascent. All rights reserved.

About The Ascent
About Us Contact Us Newsroom How We Make Money Editorial Integrity Ratings Methodology
Legal
Terms of Use Privacy Policy Accessibility Policy Terms and Conditions Copyright, Trademark and Patent Information
Learn
Credit Cards Banking Brokerage Loans Recent Articles

By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

Back to The Motley Fool