Really, I’m Not Kidding – Move To Florida!

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This guy loves living in FL!

One of my friends who lives in DC loves to complain about paying federal income taxes every year – ironically he’s a federal government employee so his salary is paid out of federal taxes. Nonetheless it’s pretty predictable that at least once or twice around March or April he’ll cry, “Taxation without representation!” (DC residents have no formal representation within Congress.) He’s not the only one that complains about living in DC for one reason or another; other friends living and working in DC love to complain about:

  • the weather (too hot! / too cold!)
  • high costs of living and housing
  • high rates of taxation (have you seen the DC income tax schedule? Aack!)

Whenever this happens, my general refrain is the same.  You should just move to Florida. We’re livin’ the dream!

And then they laugh, and I laugh with them and the conversation moves on when they’ve finished venting. But here’s the thing. I’m not actually joking.

 

Let’s Start With The Weather

Florida gets a bad rap weather-wise, with associations of heat and hurricanes. But the reality is quite different. Where we live, high temperatures in January are in the mid-70s, and in July they’re in the mid-90s. (The last couple of times I’ve been in DC it was 100+ and humid as anything.)

In FL, there’s the possibility of hurricanes, but does DC really want to go head to head with South Florida in terms of extreme weather events in the recent past? Since moving to FL in 2006, we’ve endured a few tropical storms (most of which were just some heavy rain without any significant flooding). But DC? In that same period, my friends have had a snowmageddon, a microburst, an earthquake, and – heck – THEY got to greet Hurricane Irene and experienced flooding from some of the outer bands of Super Storm Sandy. Each of these events caused them to lose power for extended periods of time (measured in DAYS).

So if living in DC hasn’t prevented extreme weather from coming your way, why not move to a place that has building codes that account for it as a possibility!

 

And The Money?

My friends have also convinced themselves that the COLA (that’s cost of living adjustment) that they receive on their federal salaries for living in DC MORE than makes up for the higher cost of things like housing and taxes.

But the thing is, that’s not actually the case.

Let’s Look At Some Numbers

For comparison’s sake, let’s look at a federal employee who is on the GS payscale (not all are, but it’s an easy way to compare because GS salaries and their COLA equivalents are listed online). For someone who’s well educated and has been on the job for a few years, they might be up to a GS 12, step 6 or so. (Don’t worry if you don’t know what that means.)

If you’re living in an area like we do (that has no COLA), your GS 12-6 salary would be $70,319. In DC, with a 24.22% COLA, that same 12-6 earns $87,350.

By the time you mentally round up and down, the DC salary (wow! almost $90K) is almost $20K more than the non-COLA salary.

But Then You Pay Taxes

COLAs are salary adjustments and are fully taxable. And a good chunk of that mental $20K benefit gets eaten up here. (These tax #s assume a single person with the standard deduction.)

Florida DC
Salary $70,319 $87,350
SSI 4,360 5,416
Medicare 632 786
Fed Income Taxes 10,735 14,691
Locality Income Taxes 0 4,449
Take Home Pay $54,591 $62,009

Okay, so after taxes that huge “almost $20K!” boost in income has been depleted down to $7,418.

Assuming you’re a strict budgeter that’s going to live on the same amount no matter where you live, that means you have an extra $7,418 to save or invest each year. But let’s be honest, it’s a LOT easier to live on a budget in a place with a low COL like FL than it is in DC.

 

What About Buying A Home?

This is something my friend really wants to do within the next year, and here’s where living in DC is really going to affect his long term savings and investment rates. And here’s why.

The median cost of a home in Florida is $143,900. In DC it’s $424,800.  Assuming my friend keeps his spending to $2,500/month in both locales, it would take him 1.17 years of saving save up a 20% down payment in Florida, compared to 2.65 years in DC.

He’s pretty good at delaying gratification, so saving up for extra time isn’t a huge deal to him. But here’s what should be.

 

Taxes And Interest Are Sunk Costs

If he goes for the DC home, these sunk costs are HUGE! Let’s just look at what those sunk costs really look like.

For comparison’s sake we’re going to assume he buys a median priced home in both locales with a 20% down payment using a 30 year mortgage at 4%. Handily, property taxes in both locales are about the same, 1.09%. (I used the 2010 numbers found here.) However, Florida has a generous $50K homestead exemption that means full time residents don’t pay taxes on the first $50K of home value which brings the effective rate down.

So what do housing expenses in year 1 look like?

Florida DC
Mortgage/Mo $549.60 $1,622.45
As % of take-home pay 12% 31%
Yr 1 Taxes $1,023.51 $4,630.32
Yr 1 Total Housing $7,618 $24,099

Buying a median home will cost my friend an extra $16,481 in the first year alone. If we assume he loves his home so much he stays in it until he’s old and grey, what will it have cost him over the whole length of the mortgage?

Florida DC
30 Years of Interest $82,736 $244,241
30 Years of Prop Taxes $52,512 $203,284
30 Years of Sunk Costs $135,248 $447,525

In choosing DC, he’ll have an additional $312K in sunk costs over 30 years.

 

But A House Is An Investment, Right?

If we assume homes increase in price with inflation (which on average, they do), then at the end of 30 years what will my friend have gotten out of his investment?

Florida DC
30 Year Sunk Costs $135,248 $447,525
Initial Price of Home $143,900 $424,800
Money Into Home over 30 years $279,148 $872,325
Home Value At End of 30 Years $294,478 $869,313
End Value – Money In $15,330 -$3,012

Yes, the number for our friend is NEGATIVE if he stays in DC. His sunk costs were more than the inflationary increase in property value even on a higher valued property.

Moreover, what if my friend had invested the difference each year? That is, what if he chose to live in FL and pay FL housing prices and taxes, but invest the remaining income up to the same percentage that he would have been paying for a home in DC.* (In the early years of his mortgage the DC house + property taxes would have been about 38% of after tax pay, decreasing to about 22% at the end of the 30 year mortgage term.*)

So assuming a 6% CAGR on these “unused” funds, what could my friend have at the end of 30 years?  Get ready to gag.

$1,138,018.55

That’s right. By living in FL, my friend could accumulate over $1.1 million dollars in taxable investments in that 30-year period just with the “extra” money he didn’t spend on (largely sunk) housing costs.

So for one last comparison: With the same resources, here’s what my friend could end up with.

Florida DC
Home Value At End of 30 Years $294,478 $869,313
Taxable Investments $1,138,018 $0
Total Wealth Generated $1,432,496 $869,313

For those keeping track, this means my friend could accumulate ~65% more wealth if he chose to live and buy a home in Florida instead of DC. Not to mention the intangible benefits of living so much closer to Mr PoP and me.

 

It’s Not Just A Florida / DC comparison

While the numbers might change a bit depending on the exact locales compared, the lesson is still the same. If you have a choice between living in:

  1. a low cost of living, low tax area, or
  2. a high cost of living, high tax area

chances are that your COLA (which at 24.22% for DC looks pretty freaking generous) isn’t going to make up for the true cost differences between them.

 

* To come up with this, I assumed that salary growth would be 2.5% per year, and taxes would stay the same percentage of gross every year. Perhaps imperfect assumptions, but I’m not about to try and guess at tax rates decades in the future.

 

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So who wants to move to FL now?!?  Does the sunset convince you?

99 comments to Really, I’m Not Kidding – Move To Florida!

  • Nice comparison. I wonder if any other of your readers have actually ever made this move?
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  • Great in depth analysis Mrs. Pop! I did the same sort of analysis when I was thinking about moving to Nebraska, but not quite as detailed. It seems like the most important thing no matter where you move is the housing price. It’s just such a giant piece of most people’s investments that it makes a ton of sense to find an area with cheaper housing. I don’t ever want to purchase a house is Chicago proper for that reason. It’s just so gosh darn expensive when there are perfectly good houses in the burbs or other cities.
    CashRebel recently posted..What would you do with your furlough time?My Profile

    • I think housing makes a difference because it really is low hanging fruit. You make a couple changes to your housing situation and it can have more of an impact than all the lattes you could drink.

      Do you have an idea of where you want to go next after Chicago?

  • Oh can I come live in Florida? It sounds amazing and so cheap! I could easily buy a house and enjoy the sunshine all year round. Let me know if you have any smart, financially savvy single friends and I’ll be on the first plane over 😉
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  • I like to vacation in Florida but I like living somewhere where the seasons change. I LOVE fall and I love having a white Christmas!
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    • Hmm… I think Wyoming and South Dakota are both income tax free, though not sure about COL and property taxes. But they do have seasons!

      • Washington has no income tax, and the seasons do change somewhat. It’s not as extreme in western Washington, but they change. And, in Western WA, if you want snow, you just head up into the mountains.

        Of course, there is a high COLA for some parts of Western WA. But some parts are still fairly affordable.
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      • Jenn

        Just moved overseas after being stationed in South Dakota for 3 years near the Black Hills. It was wonderful! No state income taxes, low end of property tax spectrum, low cost of living. Only problem is the cold winter, which doesn’t work well with my DH’s arthritis. We’re looking to return from overseas to the San Antonio, TX area, and possibly buy land for our future retirement. The property taxes are higher, but overall cost of living is still way better than where we came from in CA!!!

  • I cry a little every time I see your spreadsheets…..a tear of joy.

    Awesome piece. I love Texas. We have fantastic Congresspeople, wonderful schools and weather that can’t be beat.

    One question about your housing chart. You use a 400k plus number for DC housing. Most people don’t actually live in DC but in the surrounding area. Does that housing cost include those spots? I know housing is expensive because my sister in law and her husband paid a ton for their little tiny house in Arlington, but I’m not sure it’s that high….
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    • I think the $424K includes surrounding areas, and it’s a median so 50% are less. My friend rents in the city now, but is looking at houses all around, and the top of his list is Montgomery County, MD (and he thinks it’ll cost around $400-450K there) but he claims the public schools are like mini Harvards. (I said they better be considering what it’ll cost!)

      • Matt

        Housing prices in Northern VA and MD near DC are similarly expensive to DC, sometimes even higher (zillow through Mclean to see). The only way to really buy a cheap place is to live in a dangerous/hard to commute from area like Anacostia or to buy a super small condo (like 500-700 sqft).

        That being said I think the difference is not as bad as you project because you have left out the mortgage interest deduction. Having a higher income means you have income in a higher tax bracket (probably 28% but maybe even 33%) so you get more money back when you deduct. It’s still better to live in a low cost area, but not by as much as you’re claiming here.

        Final thought. Last week the wife and I drove through Williamsport PA. It’s a quaint little town in PA where you can buy super amazing historic buildings for super cheap. Having a home from the early 1900’s brings its own set of problems, but when they cost 50-150K they sure are tempting.

        • Ooh, and condos have two bad things going for them:
          – fees that are more sunk costs
          – your financial life is tied to others who might not make good decisions… (see condo associations issuing assessments to cover delinquent accounts or residents that want to increase amenities – and cost for all)

          As for the mortgage interest deduction, I think you’re over-estimating its “benefit”. In both scenarios, our earner would be in the 25% marginal tax bracket, which includes AGIs up to $85,650 for singletons. And deductible interest is only a “gain” inasmuch as it exceeds the standard deduction, so you need to subtract off the standard deduction before counting any benefits. I ran some numbers quickly on the original spreadsheet…

          If the DC earner stays single and never has kids (thereby making the hurdle to interest deduction as small as possible and maximizing this “benefit”), and the standard deduction grows at the same rate as inflation… the DC earner only gets about $15.5K back as actual cash on his tax return, spread out over the first 15 years of ownership. The mortgage interest deduction is a BAD investment… a DC house would cost $161K more in interest over 30 years, and he’d get about $15.5K of that back from this “benefit”. That’s a worse than -90% return.

          That said… if we do what we did with the FL scenario and assume he invested the “mortgage interest money” after filing his tax returns every year (at 6%), he’d have about $65K in a taxable account at the end of 30 years. Better than $15K for sure, but still in no way making up the gap of total wealth between the two scenarios, though it does drop the lead that the FL scenario has from 65% to 53%.

          Personally, I wish popular support for the mortgage interest deduction would disappear since it’s one of those programs that people tend to misunderstand and think is a “benefit” when all it does is skew decision making choices and the majority of the monetary benefits (however small they are in comparison to the cost it takes to get them) actually go to high income earners. This article is about a year old now (http://www.nytimes.com/2012/10/28/realestate/mortgages-who-really-benefits-from-interest-deductions.html?_r=0), but it cites that 2/3rds of the monetary benefits of the mortgage interest deduction go to the top 20% of all income earners. Can’t imagine it’s changed drastically since then.

  • Great stuff! We’ve been thinking about almost this exact scenario, as we currently live in Boston but have thoughts about moving to Pensacola, FL where my wife’s family lives. The income opportunities are very different, but so is the COL and you’re spot on about housing being right at the top of the list. We could but a nice home in Pensacola for less than $100k, whereas that would buy us something just a little bit nicer than a cardboard box up in Boston. That alone skews things so far in favor of the lower COL area.
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    • I’m not as sure the income opportunities are as different as some people tend to think. Mr PoP and I both earn good money at our jobs. There might be fewer companies to jump ship to than if (for instance) we worked in San Francisco, but in an increasingly global world I think that becomes less and less of an issue.
      I have a friend that works for a major government contractor, but lives in FL and telecommutes most of the time, going to HQ for a couple days every few months. She’s getting paid the same as her coworkers that work out of the DC area full time.

  • Florida sounds great! We really, really want to move by the beach. It’s part of our ten year plan. Hoping we can save some money, so by the time we move to Florida, it won’t matter what kind of jobs we have.
    Great analysis!
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  • This is so true! I’m making the move from the DC area to Rochester, NY this weekend (!!!) and couldn’t be more excited. The prices of EVERYTHING in DC are terrible and I am so excited to get away from that. I can’t wait to see rent prices that are less than half what we’re paying now! My bf is getting a huge raise to move up there- more money in a less expensive area? The best of both worlds :)
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  • Anne

    Great post! This is exactly why we live in Nevada. Vegas’s average home cost is a bit more than Florida, but far from excessive at $165k and why we picked this location over where I used to live in California. Granted we bought a really big house anticipating kids in the next few years and the market heading back up, so long term we think it’s a great place to be. It shares the warm weather of Florida, and while it gets super hot here we think it’s a fair tradeoff for the lack of humidity :).

    • How are the taxes in Nevada? I’d imagine they could keep them low by charging all the tourists… that’s basically what we do here in Florida. (Thanks to everyone who vacations in FL, BTW!)

      • Anne

        Nevada has no state income tax; they tax gambling industry profits pretty heavily so we like to joke that Steve Wynn pays our taxes. Property taxes are also on the low side, I forget the actual % of valuation but I pay about .9% of the purchase price of our house yearly and it can only go up 3% a year without a voted increase.
        Our sales tax is on the higher end, but like many states groceries are exempt so for those of us who don’t spend a ton it’s not a big deal. Plus it gets the tourists who shop at all the expensive stores on the strip, as does a higher than normal hotel occupancy tax- thanks tourists!

        • Sounds like Nevada’s tax structure is very similar to FL. Guess it makes sense since they’ve both got lots of tourists and seasonal visitors to supplement the low taxes residents pay.

  • Great post! W’s family is moving out of the state soon, and I’m not going to lie, we have been thinking about moving elsewhere. Or at least a long-term stay!
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  • Meghan

    I’d love to leave DC! I just need the good job, and I have not seen any on USA Jobs in Florida. I see myself leaving here in a couple of years, preferably to go back to Colorado, but I’d go to most states. There is lots of opportunity in DC, but being a federal employee generally sucks, so it’s not so worth it. :)

    • haha, my friend LOVES being a federal employee. Do you have a job in DC right now that would let you telecommute? I know some positions at my friends’ agencies are allowed to do so.

  • You’ve convinced me. Florida is now on the list of possible next places to move to.

    What cities would you recommend in particular?
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  • Low COL/low tax is the way to go. It always amazes me when my wife and I watch House Hunters and see how little house you get for usually double or triple the price because it’s on one of the coasts in the high COL areas. I ran through a similar analysis when my wife and I were trying to decide on a 15 year or 30 year mortgage. 30 year won hands down as we can come about more than $10k ahead and still have the house paid off in year 15 just by investing the difference.
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    • I think the thing that boggles my mind with shows like that is how HUGE numbers get thrown around as though they’re normal for middle income folks. “I’m a single low-paid public school teacher, but I’d love to buy this house for $380K.” Really? That sounds like a good idea?

  • No offense to Florida, but it’s still too hot :) Of course, I define anything over 70F as too hot, with a preference for 55-60F… Living in DC is expensive and crappy for all the reasons you listed, but there are also lots of jobs here (at least non-government related). I’m wanting to move to the north/mid-west (Colorado, Wyoming, etc), for many of the same reasons, except I’m looking for the colder weather. Will that change when I get older and so many older folks seem to gravitate towards warm weather? – Maybe, and then I’ll consider Florida :)
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    • haha, I think you get used to it in the same way that you get used to a colder climate after living there a little while.

      As for the jobs, I think for information workers like Mr PoP and I (and most of our friends), telecommuting is going to be more and more popular in coming years. It’s cheaper for companies to own little real estate in comparison to the marginal cost of moving bits across the internet instead of across the building.

      • I lived in South Texas (near McAllen) for 10 years – I *never* got used to the heat and humidity, I couldn’t wait until I could get out of there (my mom got out as soon as she retired). I liked the state, but not the weather!
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        • Never having been to McAllen, I can’t really compare, but it seems to be pretty far inland in TX. Around here, the closer you are to the coast, the more the water normalizes the temperatures by functioning like a giant heat sink. Barrier islands (and land near them) don’t get quite as cold at night, nor do they get quite as hot during the heat of the day. When I’m running, I can often feel a measurable temperature differential by crossing over a bridge in the direction of the large body of water. Most of the time, the temperature change is in the direction my body wants it to be. =)

  • We live in the Seattle area, crazy high COL. We’re not in downtown, but for what we paid for our house, we could have a MANSION in FL. We wouldn’t consider moving to FL, but do enjoy visiting relatives there. The one thing we have been chatting about lately is moving a little further east for a lower COL, but still close enough that my commute wouldn’t change. For now. Very interesting numbers here!
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  • It’s so funny that I read this today. My boyfriend is a resident of Florida and he’s always telling me these things. We might actually settle down there when we’re ready to get married and pop out some babies.
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  • I moved to the Florida panhandle.sleep from the DC such urns (Virginia) and it was the best decision ever. I will admit I don’t have as many career options and advancement options here but Florida is so much nicer overall. Other than citizens insurance that is.
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    • Ahh, trouble with Citizens? We let one of our policies with them get bought out last year, so now we only have to deal with their BS once per year.

      But we’ve actually got a post on insurance coming up… not sure if it’ll be this week or next.

  • I’m not sure I can be convinced to move to florida because although your heat/humidity factor doesn’t differ much from DC’s humidity factor, it does here! There is no humidity and no mosquitos! The weather IS the best thing about living here But do you win when it comes to cost of living? Hell yeah!! COL is really the ONLY reason I’d consider moving anywhere else, but I’m kind of a west(ish) coast girl now. I think I always have been even when I lived in Michigan.
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  • Like Tonya, I love the west coast… I just don’t like the high cost of living! I’m wondering why housing prices are so low in Florida? I would think it would be as expensive as any beach/coast area, but those are crazy low!
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    • Well, that’s the average for the whole state, so it includes inland prices as well. But if you think about it, we have way more coastline than CA, so if I’m remembering the whole supply/demand curve correctly… when supply is high, prices decrease!

      That said, if you want to buy an insanely expensive beachfront mansion in FL you can. There are several for sale for $10mm+ around here. But you can get a lot of the perks of living here without having to go quite that extreme.

  • Travis

    I have similar discussions with friends that still live in California, where I grew up, vs. Utah, where I live now. They get so fixated on income that they lose sight of CoL. And sadly, the incomes for many of them are very similar to Utah (perhaps 10-20% more), yet their cost of living is double. Ouch. I don’t know about you, but I’d be willing to take a 10% reduction in pay if my cost of living could be cut in half.

    My property insurance was $420 this year for my house that I built in 2005. My property taxes were about $1,600. While I would like to be in a state with no income taxes, I don’t mind the 5% state income tax since it is partially offset by really low property taxes, cheap insurance, etc. I couldn’t imagine living back in CA, or in states like NJ and NY that tax people to death.

    • A 10% reduction in pay for a 50% reduction in costs – absolutely!

      Our property insurance rates are on the higher end (since we have things like hurricane coverage mandatory in policies), but when I was comparing flood policies with my friend in DC I couldn’t believe what they were quoted as flood premiums! Ours are so much cheaper.

  • I understand the frustration with having taxes taken out and your city can’t even make it’s own decisions (congress has to approve money for DC to operate). I don’t feel bad for any of them though because they could easily move a little bit in one direction and live in Maryland or Virginia. They can still work in DC but have representation and potentially find a lower cost of living area. Because let’s face it, if everyone lived in Florida, it would get a little crowded. :)
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    • haha, it might get a little crowded. Really, I’m mostly advocating for the people smart enough to do the math and see the arbitrage opportunity to move here. Sadly, that’s a much smaller crowd.

  • CincyCat

    So, you’re saying that a lower tax burden actually makes a place more desirable to live in? Crazy talk! Imagine if that same principle were applied to businesses! Seriously, though, I would totally consider a move to another state (lower income tax, a definite draw) if proximity to family were not a consideration. Your family are close to you in FL, aren’t they?

    • haha, way to call us out. We’re definitely not reinventing the wheel here. =)

      Mr PoP has some extended family in the area, and we expect his parents will move down here FT eventually (though they do spend quite a bit of time down here already), but neither of us grew up here. My family’s actually on the completely opposite side of the country. That’s actually how most of our friends from high school and college have ended up. Very few live anywhere near their parents or where they grew up.

  • Prob8

    Thanks for this post Mrs. PoP. As you know, my wife and I are strongly considering this move. Next year we will plan to make a trip down there to start our search. We’ll probably try a trip in the summer and one in the winter to get a full flavor.

    Thanks for citing the real estate taxes. My real estate taxes in Illinois are 2.4% of the house value. I almost sent in a photo copy of my middle finger with my tax payment. Moving to FL will certainly reduce that annoying sunk cost. Having my state income tax go from 5% to zero doesn’t hurt either.

    Sounds like the heat/humidity are similar to my area so no big change there. Winters are the big difference – oh, and the Ocean.

    • You’re welcome! I think I owe you an email back, too! We’ve got a few more posts in the works about insurance and stuff which seems to confuse a lot of people that are new to the area that I hope will be very useful. =)

  • My dad and step-mom live in Florida and he tells me all the time we’re are stupid (in a nice loving and supportive way) to stay in such a high cost of living area. They have a good-size paid for home on a decent sized lot and paid a fraction of what we paid for a 2-bed condo. In fact our property taxes are more than many peoples’ mortgages. I’d love to move, but bf’s job finance job is pretty NYC focused, so unless I start making significantly more money, it will be hard for us to move.
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    • I love that your step-dad is able to call you stupid, “in a loving and supporting way” That’s a healthy relationship! =)
      As for your BF’s job, without knowing what area of finance he’s in it’s tough to say what the job prospects would be in a different area. But I will say this – contrary to the opinions of many working in bulge bracket firms, people use money and need transactional help doing so all over the country. There are many successful boutique and regional broker dealers around the US that make a healthy living for their employees working with smaller clients. Take, for instance, Raymond James with its corporate headquarters in St Pete.

  • Stop! Stop now!! At least give us until the kids are done in school.

    Well, maybe not that long. If we can get a relative to manage it, we’re going to swing down to your fine state and buy a property soon. In case that doesn’t work out, do let me know if you decide to open PoP Property Management LLC. Only half kidding on that one. :)
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  • I posted the comment and just to torture me a little more, the page swung back up to the “crab on the beach” picture. I love the water.
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  • Nice breakdown and comparison! Sure makes me feel good about living in Georgia 😀 We also have a few friends that live in DC. I understand that they love their jobs and that’s a great reason not to move – but I DON’T understand why they don’t just take two steps to the right and live in Virginia instead of DC! They refuse to live outside the district, but they always complain about how expensive it is and how outrageous taxes are. Doesn’t make much sense to me, but I guess it doesn’t have to.. I’ll just sit here and enjoy my very low cost of living.
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  • My aunt is a federal employee and she moved from Miami to DC for work a few years ago. Kind of the opposite move of what you’re suggesting. I’m not sure which she prefers. One of my (grown) cousins stayed in FL and the other is living in Manhattan.
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  • This is really funny because I was trying to convince my Dad to move to Florida just last week. He was complaining about how is is dreading cold weather this year. It would be perfect for them, but they are too set in their ways to move anywhere at this point.

    I had a horrible experience with my first venture into Florida living, but I’m sure that was all due to living in the ‘hood. I’m sure there are much nicer places to be. I think with all the older people, health care would be a great field to be in. It’s really cheap where we live, so we’ll stay probably until Jim is pension eligible and our daughter is finished with school, but who know’s after that? We might be tired of cold. We’ve considered Las Vegas, but I’m sure FL would be just as good.
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    • I think avoiding the cold weather is a big part of why older folks come down here, at least for the winter. Who wants to deal with snow and shoveling when you’ve got arthritis or osteoporosis!?!

      We’ll have to talk FL at FinCon – I’m dying to know where you were for your internship! =)

      • Matt

        One weather thought, if you’re planning to own property in a warm area for 20+ years you really should look into the effects global warming will bring to that area. I don’t want to start a whole huge science debate here, but there are probably going to be some pretty big climate changes in the next 20 years that will likely affect property values (and if your property is too near the water the rising sea may force expensive sea wall construction/additions to prevent it from being submerged). If you’re only going to be there another 10 years you will probably be fine, and even if you stay 20 or 30 your world probably won’t end, it’ll just get more expensive. I like it warm, but this is one of the reasons I’m looking to settle long term in a place that is a bit colder at the moment.

        There’s some good info here.
        http://www.ucsusa.org/gulf/gcchallengereport.html
        http://www.ucsusa.org/gulf/gcstateflo_cli.html

  • Joe

    Nice post! I am from Western NY (where taxes, winters, and a lack of jobs exist), but spent 9 months in FL last year for an internship. I really enjoyed the area (gulf side), and came very close to staying. Ultimately I ended up home in NY again, but am now considering a return to FL.

    The only thing I didn’t like about FL was the humidity in July/August and the fact that my car insurance rate TRIPLED! If I end up going back, I will likely pursue official residency and see if I can get some of those things figured out.

    • Your car insurance tripled!?! Oh no! When we moved down, I avoided getting a new license and changing my registration for longer than I should have because I thought my insurance would skyrocket and instead it dropped by about 25%. Maybe it’s just really dependent on what kind of car and where you’re coming from/going to?

      • Joe

        That’s really interesting that yours dropped 25%. I was in Pinellas County (Clearwater/St. Pete) and I guess that’s one of the highest collision areas in the state. My dad’s Geico policy is dirt cheap up here in Western NY, but they were NOT happy when they found out where I moved. What was so ironic is that I actually drove my car MUCH less in FL after buying a bicycle to do a lot of my commuting/exploring. Pretty frustrating.

  • Great comparison. I live in NYC and it is pretty much the same comparison. I used to work in the federal government…and I didn’t think the COLA made up for the high cost of living. I work for the state now and the COLA difference is event worse. Working in the NYC metro area, I get a $3000 COLA increase only. So if I lived in upstate New York or Western New York where many cities are much cheaper, I’d only be making $3000 less but houses/rent are a fraction of the cost!
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  • Karen

    No, please don’t encourage more people to move here. We don’t need more rude people who can’t drive, especially the idiots who use their hazards in the rain.
    Try TX, NV, AZ, SC, GA….lol

  • Maverick

    I love FL in the winter. Summer, not so much…it’s air conditioned house, to air conditioned car to air conditioned store, ugh. That’s how it was when the Mrs and I stayed at the Aunt’s place in Ft. Myers for the month of August. We rented a small boat to go out in the gulf and even the fish were jumping to get out of the hot water (red tide)! I now see why the “snowbirds” migrate. If you do it right you can claim FL as your residence for tax purposes.

    Regarding houses…FL houses are cheaper due to construction type. For example, there are no basements, windows can be single pane, no snow load on the roof, and utility excavation is shallow (no worry of frost).

    • AC ends up being mostly a choice, even in the summer. Most days our AC is off until the evening. We have fans going and doors and windows open to keep air flow during the day, but shut everything up and cool everything down for bedtime.

      As for construction, I’m not sure if it’s “cheap” or just less expensive. We don’t have basements or anything like that (honestly basements disgust me a little so I’m totally cool with that!), but I know we have higher standards for things like roof, siding, and window construction for wind events.

  • It is completely ironic that a federal employee who is likely paid more than the national median income would complain about paying federal taxes.

    I think the weather of Florida would be tempting but I love living in ND. We have state income taxes here but they are very reasonable. We have the lowest unemployment rate and a lot of money from the oil boom. The winters here are definitely the downside.
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  • Wow! That is awesome! What are the other states that have low taxes, low to no COLA and low Property tax? Is there a way for people to get all these information somewhere?
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  • Kristy

    I’m not sure if anyone has pointed this out to you yet, but your math is off. As a federal employee, I can assure you that there is something called the “rest of US” locality rate. That amounts to an adjustment of 14.16% of base pay in 2013 (adjusted annually). So, working in DC is only ~10% higher gross salary than not working in DC. I was there three years, and you can bet I will not be going back!

    Locality rates and COLA rates are technically different things. COLA applies to civilians in Hawaii/Alaska/a few other random island locations, while locality rates apply everywhere. COLA is also going away for civilians, as it was non-taxable and excluded from retirement calculations. Locality is taxable and included in retirement calculations.

    There… more than you ever wanted to know about civilian pay!

    • Thanks for the clarification on COLA vs locality (my DC friends seem to use them interchangeably =P ). And oh my gosh I can’t believe that the generic locality payment is 14%! Why don’t they build that into the base rate? That seems like a super strange way to split it out, especially when they put the “rest of the US” locality at the very END of this pdf that I was using for my reference. (https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2012/general-schedule/saltbl.pdf) Ah well… OPM probably has bigger things to worry about right now than making their pdfs easier to understand.

      That change makes the math come out in an even more astonishing way in favor of moving somewhere with a low tax/low cost of living structure.

      When I entered the additional 14% benefit for the generic FL scenario, can you believe the after tax salaries differed by less than $500 per year? ($61529 vs $62009) Heck, you probably can if you lived through the move – depending what kind of tax structure you moved into. Wow!

      For future readers of this, though – even though it’s technically incorrect for the GS payscale, I’m going to leave the numbers above up since it’s an illustration that even if you’re making ~25% less, by moving to a low cost/low tax area you can still come out WAY ahead. Which is really the moral of the story =)

  • I’ve heard so much good things about Florida – its nice weather, beautiful beaches and simple way of life. I do hope to visit the place som time.

  • […] Planting our Pennies: This is a really great breakdown of the variables to consider when comparing a high-cost-of-living area to a lower-cost-of-living area. You’d be surprised at how much the cost of housing alone impacts which one is a better financial decision. […]

  • Nice comparison! For me, having grown up in North Dakota and now living in Colorado, I don’t think I could handle the lack of seasons. No matter how much I sometimes don’t like the cold, the thought of no real winter sounds so unappealing! I know the thought of an almost constant summer sounds great to most, but not for me!
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  • I appreciate what you did with the cost comparison, but I think you neglected some of the financial downfalls associated with living in Florida. Most importantly, the lack of income tax means that people end up getting charged per-use for a lot of things that are paid for by taxes in normal states. Things like parks, and roads. When I lived in Florida, this drove me bonkers! Rich people didn’t bat an eye and paid for these things, while poor people couldn’t afford such things, and therefore could not go on certain roads or to certain parks! I personally would rather pay income tax according to my salary and help out society a little, over having these things offered at the same price to everyone, but with some not being able to afford their use.

    The odd thing is that I now live in WA, where there is no income tax, but parks here are free, as are roads. I’m pretty confused about where the money for these things come from, but happy to be living in a place where public spaces are offered to everyone free of charge.
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    • Florida’s a big state, so perhaps your experience was very different from my own. Just curious – what part of the state were you in?

      I’m pretty cognizant of fees, and I’ve never felt like I encountered many of them here – certainly fewer than some other states I’ve lived in – and I enjoy a wide variety of public amenities on a pretty regular basis.

      The last time I used a toll road was 6+ months ago, and the $2.50 it cost to take the fast route to drive some 80+ miles across the everglades seemed more than fair. If I hadn’t wanted to pay, there was an alternate route with a lower speed limit and no toll that I could have also taken.

      Our local parks do NOT have entry fees. State parks around here sometimes have nominal ones that are often on the honor system or combined with a parking fee. (Private parks like those owned by the audubon society or other preservation organizations do often charge, but that’s their prerogative as private entities.)

      There are public parks with PARKING fees (though certainly not all of them by any stretch), not ENTRY fees. These tend to be areas where there is a public interest in limiting the amount of space dedicated to parking in favor of wildlife. To encourage people to leave their cars behind (arrival on foot or bike is free!), there is also a beach trolley (that accommodates bikes, coolers, foldable beach chairs…) that costs just $0.50 and allows people to leave their cars at shopping centers a couple miles inland in favor of riding the trolley from there to your favorite stop on the beach and back. Or if you’re going to go to one of these areas all the time, residents can buy an annual parking permit good for many different locations for $60. If you’re going every day or going every weekend with a car full of people, that would be cheaper than the trolley over time.

      Personally, I’d rather there be limited parking (and the small fees that provide a dampening effect on demand for more parking spaces) in areas like this in order to prevent paving paradise to put up a parking lot. Cue Joni Mitchell? =)

  • Ha ha! Well I do agree that I’d rather we not pave over the parks! :)

    I lived in South Florida – Hollywood (outside Fort Lauderdale) specifically. I worked in Miami, so my refusal to pay to drive on roads sometimes meant much longer commutes. And sometimes paying for tolls could not be avoided, because there really was no way to get from point A to point B without paying them (such as when going to the Keys). There was a great rather large park near my house that I believe was a Hollywood city park, which charged entry fees (even of pedestrians) on weekends. The fees made me so sad, because I felt that it blocked a lot of people from being able to use the park!

    I lived in Los Angeles for awhile, and I agree with you that people really should consider cost-of-living when making choices of where to settle. In L.A., most people don’t make that much more money than they would in other areas, yet the cost-of-living is much, much higher!
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    • Ahh, I never spent much time in that area, though I have run through a few of those parks for road races. But they didn’t stop and make us pay entry fees then =)

      Tolls for the keys? I guess if you take the turnpike (I HATE THE TURNPIKE!) down to homestead that has tolls, but there aren’t tolls for the overseas highway, I don’t think. The other toll that I can think of off-hand down here is the sunshine bridge in tampa. It’s about $1, but man is the show worth it. Crossing that thing is gorgeous! Even better than the 7 mile bridge on the way to the keys, I think.

      I think places like LA are crazy – it’s so expensive and in addition there’s a huge emphasis on status spending. I don’t feel like we encounter a ton of that here, and you probably don’t up in the pacific northwest either. Mr PoP wouldn’t mind if we ended up there for a year or two someday.

  • Hey hey, I’m happy to hear another advocate for living in low-cost areas!!

    I definitely agree that a person can build wealth faster in a low-cost part of the U.S. than they can in a high-cost part of the U.S., even despite pay discrepancies. (And if people are earning a living and/or earning “side hustle” money online, they get paid the same rate no matter where they live, which is yet another reason to live in a low-cost area.)

    Sure, there are some jobs that require living in NYC or DC, but those are more rare than people think. (Professional ballerina? Sure, move to NYC. Certified financial planner? You can do that almost anywhere.)

    As you mentioned earlier, I credit my ability to build a mini-real estate empire with the fact that I live in a place that has super-affordable housing. :-)
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  • […] Here’s to a happy and prosperous new year for everyone! And holy crap, unless you’re in PoP-land, IT. IS. COLD. Stay warm […]

  • I’m sending this one to my wife. We moved from Miami, FL to Chicago or from her favorite city to mine!

    One thing that struck her was they gave her a raise for cost of living and after taxes, etc it ended up being a few dollars less than what she made in Miami.

    My one comment would be it’s not all about the money! We do have plans to move back and my choice would be to do the snow bird thing with 6 months Florida and 6 months Chicago, need to be FI for that to happen. Thanks for the article.
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    • It’s certainly not all about the money, but when friends are constantly complaining about the weather or the traffic in DC and saying at least the money makes up, they’re fooling themselves. =)

  • Thoughts about increasing income vs. saving to increase wealth? There’s only so much you can save, but there’s an infinite amount you can earn.

    I think Florida is a good place to retire due to its lack of state income taxes. I just couldn’t find specific industries or companies to join when I graduated from college or b-school to make my fortune. Could you share some specific companies and where in Florida to find employment?
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    • “I think Florida is a good place to retire due to its lack of state income taxes.”

      Personally I’d rather not pay state income tax when my income is high enough to make a difference. After financial independence, our draw down will be low enough that even if we move to a state that taxes income it won’t make nearly the difference it does for us now.

      As for jobs, there are jobs in just about any industry you want. Finance, tech, health care, tourism, real estate… Mr PoP is in tech sales, and I’m in finance/tech. Not to mention there’s definitely a growing trend of people who live in Florida and telecommute to jobs that might have traditionally been located in other states. A friend of mine works for Booz, but lives in Sarasota. Others for tech companies out of SF while living in Naples or Fort Lauderdale. Or for BCG while living in Palm Beach. As long as you’ve got an internet connection, if you’re an information worker, chances are you’re pretty location independent.

  • titoskinzdc

    Hey Mrs PoP me and my family thinking of moving to central orlando fl pretty soon and was hoping if you can give us some info about the area and anything else we should know about?

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