Financial Considerations When Moving to a New State

Hubby and I used to live in the Midwest. We met in Illinois but neither one of us are from the state. I ended up there because of school and hubby had moved there for work. We were tired of the brutal winters and yearned to live somewhere new. Being serious nerds, we actually made a spreadsheet to evaluate where we should move to. We contemplated moving to Washington, California, Colorado,  Oregon, and Nevada.

Hubby is from Washington so that landed the state on our list. We thought about moving to California because southern California has such amazing weather. We also looked at Colorado due to the abundance of outdoor activities. Oregon was on our list because it’s close to family in Washington but not too close, lol. We liked Nevada as well because of the sunny weather and easy access to entertainment.

The sunshine is partially responsible for why we decided to move to Las Vegas. However, there were other factors we took into account. Here’s a look at the financial considerations we looked at before deciding to uproot ourselves.

Cost of Living

This is a big one. If you move to a state with a higher cost of living, ideally your income should also increase. Otherwise, you’re going to have to redo your budget and cut your spending. Cost of living was an important factor for us because we wanted to make sure our dollars would go as far as possible.

Looking at the cost of living helped eliminate California right away from our list. We dreamed of living in San Diego with its amazingly mild year-around climate but we weren’t willing to pay for it.

According to CNBC, these are the 10 most expensive states to live in:

  1. Hawaii
  2. New York
  3. California
  4. Massachusetts
  5. Alaska
  6. Connecticut
  7. Maryland
  8. Vermont
  9. Rhode Island
  10. New Jersey

Notice a theme? A majority of these states are on the east coast. Given the high cost of living and the harsh winter weather, we were pretty convinced that we should move west.

Through our research, we knew that it was going to be cheaper to live in Nevada than the state we were moving from. Vegas was hit hard by the housing crisis so we were confident that housing would be affordable. We’ve also visited friends in Vegas before and gone shopping with them. We saw first-hand how low the prices were for consumer good.

This is how I describe Vegas to family and friends – it offers the big city lifestyle at affordable prices.

State Income Tax

There are currently 7 states that don’t impose an income tax. Keep in mind, this is just at the state level. You still have to pay taxes to the good ol’ federal government. Here are those 7 states.

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming

Nevada has no state income tax. That was a HUGE draw for enticing us to move here since it means we get to keep more of our paycheck.  States make up for the lack of an income tax through other means. Washington has high taxes on gasoline, while Texas and Florida have higher than average property taxes. Nevada benefits from the high number of tourists to Las Vegas, and that’s how the state gets a majority of its revenue.

Property Tax

Hubby and I knew there was a strong likelihood that we’d want to buy a house once we settled into Vegas. As I mentioned, Vegas was hit hard by the housing crisis. In a sense, housing prices were “reset.” They returned to the pre-boom levels and made housing affordable again. Aside from affordable prices, we were also attracted by the low property tax rate.

Here’s a list of average property taxes for all 50 states from lowest to highest. At the low end, Hawaii has an effective tax rate is 0.32% while the highest effective tax rate is found in New Jersey at 2.31%.

Nevada is ranked 9th lowest and that is music to our ears. For a $200,000 house, the annual property tax comes out to be about $1,000. In Illinois, I had purchased a house for $128,000 and the property taxes on it were over $3,000 every year! Buying a house is a big enough expense so every little saving helps.

State of the Government

To be honest, I feel like very state has its issues but some states are a little better run than others. Illinois has its share of crooked politicians and there always seems to be one budget crisis after another. A lot of my friends who’re employed by the state of Illinois are worried that there won’t be any money in the pension fund when it’s time to retire.

We’ve also read about California’s budget troubles in the news. Plus, California’s one of the most highly regulated states so that was another reason we ruled out moving there. I remember visiting San Diego in college and seeing hotel signs that warned of laundry chemicals that can cause birth defects.

Investments and Retirement Income

You might be surprised to learn that states having varying rules on investment and retirement income. Much like state income tax and property taxes, different states do have different rules. Nevada is one of the most friendly states for retirees because it doesn’t tax dividends, pension income, and social security benefits. As with income tax, you still have to pay taxes to the federal saving government, but every bit of savings helps.

Think about it this way. Even a difference of just 5% on $100,000 means paying $5,000! Wouldn’t you rather keep as much money as you can? That sure can give your savings a nice boost.

Have you ever moved to a new state or are thinking about moving? What are some of the financial considerations on your mind?

Moving somewhere new is exciting. However, there are definitely some financial considerations when moving to a new state.

 

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