If you’ve been keeping up with news headlines over the past few years, you’ve probably come across the claims that millions of Americans are relocating from the suburbs to low-cost areas of the country in response to the pandemic’s effect on the economy. According to qBotica, inflation reached a high of 9% in 2022 and is predicted to continue on this trajectory through 2023.
Perhaps you’re considering moving to a less expensive area to see whether it can benefit you as well. While the amount of money required to meet basic expenses may be lower in some regions of the nation or the neighboring county, it doesn’t necessarily translate to more savings or an increase in your net worth. How much more you can save depends on your current location, where you plan to move to, the type of housing you can find, and your household expenses.
1. You Live in a Flood-Prone Area
If you live in a flood zone, moving to a low-cost area makes financial sense. Flood insurance, which is often a requirement in flood zones, can be expensive. According to Bankrate, the average annual cost of flood insurance is $771, but the premium may vary with location. Even with flood insurance, flood damage remediation costs may not be fully covered by your policy.
That said, flood zones are updated constantly, and roughly 25% of flood damage occurs in places that aren’t deemed high-risk flood zones. As long as flooding is a possibility in the area, purchasing flood insurance to provide coverage where your homeowner’s insurance can’t makes sense.
2. You Can’t Afford Your Current Residence Anymore
Owning a home is one of the greatest achievements for most adults. However, a loss of income or a reduced income coupled with higher taxes can make owning a home in the suburbs financially challenging. While there are potential solutions such as refinancing or finding new employment, moving to a low-cost area is also a good idea. It’s an effective way of saving money to get you through the transition. If you’re lucky, you may find a bigger or similarly sized home at a lower price.
3. You’re Expecting a Baby
Housing and childcare costs make up a significant chunk of a new parent’s budget, with the cost of childcare alone adding thousands of dollars to a family’s expenses annually. According to a New York Times survey, young adults cited the cost of childcare as the most common reason for having fewer children.
While mortgage payments nationwide are relatively affordable compared to historical averages, mortgages in some major markets are not as affordable as they used to be, with others getting closer to the tipping point. Saving on housing by moving from the suburbs to a low-cost area when expecting a new child is often a smart financial decision. You may also want to move to a low-cost area because it’s closer to family, there are bigger but affordable homes, or it’s close to your preferred school district.
4. You’re Venturing Into Business
Venturing into business is a significant financial commitment. According to Shopify, small businesses spend about $40,000 on average in their first year of operations. On top of that, it takes an average of two to three years for a business to be profitable. If the startup costs are on the higher end, it can take even longer. There’s no better time to move to a low-cost area than when you’re starting a new business. Doing this will allow you to focus your efforts and resources on growing the business.
According to HomeData, around 33% of renters move each year. With remote work increasingly becoming the norm, moving from the suburbs to somewhere more affordable has never been easier. However, make sure the move will be worthwhile before making any plans.
