HCOL vs. LCOL Areas: The Costs and Benefits

Whether you know it or not, the area you live in has a huge impact on your living cost.

Or stated another way, your decision on where to live impacts how much money you need to spend.

Just because you prefer living in one location versus another.

For example, when you live in a high-rise, high-end condo in L.A. or New York, your cost of living is going to be WAY higher. This is a “HCOL area”

HCOL City Meaning

A “hcol” city is a term used to describe a city that is considered to be high cost of living.

This designation is often used when comparing the cost of living in different cities, as it can help to give an accurate picture of the relative affordability of each location.

In general, hcol cities tend to have higher prices for basic necessities like housing and food, as well as higher taxes and a higher cost of living overall.

As a result, residents of hcol cities often have to budget carefully in order to make ends meet.

However, hcol cities also tend to offer a higher quality of life, with better schools, amenities, and job opportunities.

For many people, the trade-off between cost and quality of life is worth it, but it is important to consider both factors when making a decision about where to live.

Compared to living somewhere else.

Like the Midwest.

Or a cheaper neighbourhood.

Like Detroit, Chicago, or somewhere else.

These are “LCOL areas”.

LCOL City Meaning

A “lcol” city is a city where the cost of living is lower than the average cost of living in the United States.

The term “low cost of living” can refer to a number of different things, including the cost of housing, food, transportation, and other basic necessities.

In general, cities with a lower cost of living are more affordable places to live, and this can be a major factor in deciding where to live.

For many people, the ability to live in a city with a lower cost of living can be the difference between being able to afford rent or not.

Additionally, living in a low cost of living city can also mean having more disposable income to save or spend on other things.

While there are some drawbacks to living in a low-cost of living city (such as a lack of public transportation options), the overall affordability can make it an attractive option for many people.

Why Should You Care About HCOL vs LCOL Areas

Because where you live matters. And it can save you a TON of money.

But you might still be wondering:

  • What’s so important about knowing the differences between HCOL and LCOL areas?
  • How does it affect you?
  • And why should I care about it?

Well, for one thing, the more you know about the differences between HCOL and LOCOL areas, the better you can do financially.

Leaving you more money to spend on shit you care about.

Many people don’t know just how much farther they can stretch their money. Just by moving and deciding to live someplace cheaper.

You can end up wasting a lot of money by living in the wrong area. You might even be living in an area you don’t even like all that much.

So, let’s run some numbers.

If you make roughly $400 a week you’ll net around $1,600 a month which comes out to $19,200 a year.

Now, some folks are happy making that amount of money. But if you live in a HCOL area, you’re going to have problems. 

Living in a HCOL area while making $19,200 a year will leave you – BROKE!!!

You’ll find you’re tapped out a lot. Constantly checking the balance of your bank accounts.

And virtually have nothing saved up for retirement whatsoever.

That’s not a smart way to live. 

You can even live in a cheap, inexpensive apartment or house in a HCOL area. And still lose money on everyday necessities and purchases.

Like food, gas, transportation, lotion, toothpaste, deodorant, and more.

Even insurance companies will want to charge you more. And that’s why you should care about HCOL vs LCOL areas.

So you can make a plan.

And decide if you really wanna spend the rest of your life living where you currently rent or own.

Because like me, I hope you’d want to keep more of your money to yourself. And get the most bang for your buck.

While getting the most out of the area you live in. Without having to spend all of your coins just to live there. 

The Science Behind HCOL and LCOL Areas

Next up is…

  • How do HCOL and LCOL areas work?
  • And who decides what a HCOL area is and what a LCOL area is?

Well… here’s the answer – no one really decides which areas are LCOL and which ones are HCOL.

At least not individually. 

Several factors go into determining what creates a HCOL area vs a LCOL area.

For example, the location, quality of schools, and hospitals can all drive up the cost of living in an area big-time.

Even seasonal and local attractions that bring in a lot of money can increase the cost of living in any given area. 

So… you should do your research.

Find out all you can about a specific town, city, or neighborhood.

Because well-known areas with a high cost of living normally include places like New York, Pennsylvania, Washington D.C., California, and Washington state. 

Another factor that affects how high or low the cost of living in any given area is how many people live there.

And how crowded it is.

Areas with a strong job market and lots of businesses also attract a lot of people. Which means a higher cost of living. 

How to Use This Knowledge to Your Advantage

Now that you know more about the differences between HCOL areas and LCOL areas, it’s time to look at how you can use this information to your advantage. 

A big part of the “American Dream” is all about saving up enough money to retire somewhere nice and comfortable.

Homes are one of the largest purchases many of us will ever make.

And in order to get to this point, people have to save a bunch of money — for a really long time. 

Some folks will work most of their life making $19,200 – $32,000 (or something similar) a year.

While saving about $5,000 per year, if they can.

Only to find out… they can’t afford the nice place they’ve found and want to live. 

So, let’s take a closer look at that scenario.

Pretend you worked for 35 years and saved $5,000 a year.

You’d have $175,000.

Do you know how far $175,000 would get you in a place like New York or Los Angeles?

Not very far.

The median listing price for a house in L.A. is almost 1 Million Dollars.

And you might be asking how can I use this information to my advantage?

Well, you can start by focusing on making more money.

A good way to do this is working in a HCOL area while living in a LCOL area. Or, work in a HCOL area and move to a LCOL area when you retire. 

Because that $175,000 is going to stretch a lot farther in a LCOL rural, laid-back area.

Versus an expensive ass city.

Control Your Money, Control Your Life

So are you ready to take control of your money and your life?

Have you realized working most of your life just to settle for a house in a city that leaves you broke isn’t worth it?

If so, it’s time to start planning your financial future.

No one is forcing you to live in a HCOL area. You have the power and freedom to think for yourself.

Do what’s best for you.

And this might mean:

  1. Saving up enough money by working in a HCOL area
  2. Using that money to buy a nice, large home in a LCOL area after you’re retired or even before. 

Because life is short.

You don’t have to work your ENTIRE life.

Or even the majority of your life to live somewhere nice. Unless you wanna get fancy and absolutely need to live in a HCOL area.

Then you’ll need a crazy amount of money to achieve your goals.

Because living in a high-rise city like New York costs thousands. So you need a plan.

And if you’re only making an average amount of money each year ($25-$30k), you’re gonna have a hard time achieving it.

Note – living in a great condo in a major city like L.A. or New York might sound great when you’re young.

But, that idea can become less appealing once you’re older. Or have kids. 

So, I’ll leave you with two questions and one final thought.

Would you rather work your ass off for nearly half a century to afford a nice apartment in the city?

Or would you rather work less, enjoy life, and retire comfortably in a massive home in the country where the cost of living is cheaper?

You’re in control, you decide. 

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