Can’t Seem to Save?

Feb 11, 2017 by

expensive loft style roomYou know you should save, you want to save, you’re committed to saving, but still you’re not saving, at least as much as you’d like. Feel familiar? Today’s guest post from Ian Bond is all about getting you over the savings hump. Enjoy! – Kurt

When you’ve spent a career handing out financial advice, it’s easy to spot the spending habits that keep people from saving. It’s that yearly vacation, an online shopping addiction, expensive football tickets, or some other culprit. I recently saw a tweet from Dave Ramsey blaming car payments as the #1 dopey expenditure.

I agree that all these things definitely add up to keep you in debt, but I bet you none of them are the #1 reason you can’t seem to save.

The #1 Reason You Can’t Seem to Save? Your Location

I once counseled a couple who agreed that their rent costs were way too high. They decided to downsize to a smaller, less elegant apartment in roughly the same neighborhood, reducing their rent by more than 40%. They loved the building, location, and savings.

Because they moved, their children were now matriculating to new, more expensive, private schools. After everything was said and done, their school fees made up 120% of rent expenses after downsizing.

Not only did they save nothing, they had more expenses than before. Obviously they chose the wrong location.

Your Location’s Hidden Expenses

Buying a home is a huge lifestyle and financial decision with major long-term effects. Most Americans spend more time focused on the amenities of their home than they do on other factors that can cost them, such as:

Your expectations for spending money

If you live in an expensive city, your expectations for everyday expenses start to rise. Just compare the cost of a meal for two at a mid-range restaurant:
Brooklyn: $80
Boise: $40

Your transportation

If sufficient public transportation isn’t available in your neighborhood, that determines how many cars your family needs, plus repair and replacement expenses. Ramsay made a good point about how silly car payments are, but what about the total cost of ownership?

Add up the cost of fuel, tires, maintenance, taxes, license and registration, insurance, depreciation and financing: the average American car costs $725 a month, according to AAA.

Where you shop

Say the home you’re looking to buy is just around the corner from an expensive co-op. Take that store seriously as a potential expense — it’s more than likely you’ll shop there regularly.

Where your kids go to school

If you live in an urban area where public schools aren’t a good option, private schools can easily be 50-75% of the monthly cost of your home. The average cost of private high school ranges from $5,224 to $37,000/year, depending on your state. My clients learned the hard way that it varies a lot by neighborhood as well.

What entertainment you engage in

Find a home next to public parks and a community center and there’s a good chance you’ll take advantage of free entertainment. Live near a luxury cinema, country club, or expensive pubs? That’s going to cost you.

What vacations you take

If you and your significant other are vacation-junkies, your location can make or break your finances. Seattle, for example, is a great place to live if you want to get away: there’s Vancouver, BC, Banff, AB, Las Vegas, NV, and many other great vacation spots nearby.

Some of these costs might seem small in the grand scheme of things, but they can add up to a lot the longer you live in an expensive location.

How to Move and Save

Overcoming the financial burden of your housing choices can be difficult. But if you do it right, your efforts to eliminate debt and save money will become so much easier.

In general, I recommend keeping your housing expenses under 20% of after-tax income. But as I just explained, collateral expenses makes that number no more than a starting point. So tread carefully, and remember that whatever choice you make will affect so many other financial variables in your life.

Talk to your family

Changing your standard of living can be difficult, especially if your spouse and kids are accustomed to it. It’s natural for them not to respond well to change of any kind. Your kids may think about their school friends and revolt at the very thought.

Take the time to discuss and encourage them to be adaptable to new standards of living to increase your chances of success overall.

Do your research

Start out by using a tool like Numbeo or Expatistan, both of which offer detailed data on the cost of living in different cities across the world.

Next, you’ll have to break it down to the neighborhood level. Think through every possible expense scenario. Remember, your location can affect all sorts of related expenses, such as:

The cost of healthcare

Moving in the US: You’d actually be surprised how much the cost of healthcare can vary from state to state. The cost of an identical medical procedure can vary by more than 400%. Take advantage of tools like the Healthcare Bluebook to compare the cost of procedures in different locations.

Moving abroad: In some places, medical care is so affordable that it’s actually better to pay out of pocket then stay in the US and deal with your insurance premiums. Think about that if you’re getting older, or someone in your family has health issues that require ongoing treatment.

Your insurance premiums

Where you live is a huge factor on your car insurance premium. Cities have a much higher chance of accidents than rural towns, and your insurance rate will reflect this. Insurance companies also consider the rate of auto theft in your city when calculating your premium.

Home insurance rates can also vary by region, neighborhood, or even street to street.

Your taxes

Moving in the US: There are 7 states you can live in that only require Federal Income Tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming). All the others will have varying rates of State Income Tax you should consider.

Moving abroad: The USA is one of two countries in the world that taxes citizens for the money they make abroad. Look into the tax rules for the country you hope to move to — there may be opportunities to avoid paying double taxes.

If you move abroad, you’ll also have to consider the cost of periodic travel back to the US. How often do you plan to visit home, and how much will it cost? How do you expect this number to change in coming years?

Talk to your family again

Remember that couple I mentioned in the beginning? After making a second poor housing decision, they decided to make a radical relocation abroad so they could completely rework their finances. The option was never on the table in the beginning, but it ended up being the best choice for them.

Keep a dialogue open with your family as you research and learn about new opportunities to save by moving. You never know what your family will be open to unless you share the benefits and keep discussing your options.

Relocation can be your biggest tool to help you get out of debt and start saving money. Just make sure you do your research and explore all possibilities to make the right choice for you and your family.

Ian Bond is a private banking senior executive with over three decades of experience with Goldman Sachs, Credit Suisse, and Citigroup. Ian is the founder of created to help other executives and professionals rehabilitate their finances and make a prosperous, enduring retirement a reality.

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  1. Lillian

    Ian – Thanks for an eye-opening article. I just used your location-oriented cost control advice within my own city. By driving about 10 miles to a less affluent part of town, I lowered my expense for an eye exam and new lenses from $600 to just under $400. Same product for a third less! Thanks for the wisdom; I hope you’ll post again on this site.

  2. Transportation is definitely one of our bigger costs. Where we live currently we have no form of public transportation and therefore utilize two cars. We are considering going down to one car (we have in the past) but with a new baby we are going to wait it out a bit and see what takes place.

  3. Melanie at Mindfully Spent

    Wow! What a huge difference between Brooklyn and Boise! I expect cost differences like that for rent, but I hadn’t imagined the impact on restaurant charges.


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