Moving to a big city might seem like the best way to start over, find a new job, and start bringing in lots of cash. But just because a city is famous for its workforce doesn’t mean it’s going to be the best place for you to build wealth. You might have gotten a killer raise, but if your loft apartment is rivaling a few year’s worth of college tuition payments, you won’t be able to build up wealth easily.
That was the idea behind Bankrate’s first-ever analysis of cities where it’s easiest to build up wealth, especially for typical middle-class earners. Many people think of “wealth” in terms of fancy cars, big houses, or personalities like Warren Buffett who’s racked up billions to his name. But it’s still possible to build wealth while earning a modest living, said Claes Bell, a banking analyst for Bankrate and the lead researcher for the study.
“Wealth can be as small as having a couple thousand dollars on hand to ride out period of joblessness,” Bell explained, or having enough money saved up to afford a down payment on a house. But in some cities, earning a decent paycheck while also being able to afford the cost of living can make it difficult to save for those things, even with the best of intentions. In cases where expenses outweigh your paycheck, it’s going to be impossible to build wealth. “If you’re making six figures but spending six figures plus one, your net worth is going to be falling,” Bell said in an interview with The Cheat Sheet.
For the rankings, Bell studied the 18 largest metropolitan areas in the United States and studied the after-tax, savable incomes of residents living within those areas. He also incorporated the strength of the job market, housing costs, debt burdens, and access to financial services to help build wealth, among other factors.
Bell’s findings include some surprises. For one, San Francisco doesn’t rank in the top 10. The city ranks first in the country in terms of a competitive job market, but that can’t make up for the high debt burden many people carry, along with the middle-of-the-pack savable income and housing market. San Diego ranks last on Bankrate’s list, as the job market is tight and it’s hard to build wealth without it, on top of steep housing costs.
But just because a city is listed as difficult to build wealth doesn’t mean it’s not a good place to live for certain people, Bell clarified. Those with above-average paychecks can overcome some of the other costs, especially if they don’t have much debt. It works in the opposite way, too. Just because a city is good for building wealth doesn’t mean you’ll automatically strike it rich. If your skill set doesn’t match the good-paying jobs in the area, you’ll struggle to make it big.
If you’re thinking about moving to a new city and want to increase you chances of building wealth, take a look at the top 10 cities Bankrate identified. Keep in mind these are the largest metropolitan areas in the country — smaller cities might have just as good of a chance, if not better, Bell said. By taking a look at the expected wages you could earn and the housing market in the area, you’ll have a good idea of whether you’ll be able to build up long-term savings and investments in that location.
If you’re not sure about where to start, take a look at the top 10 cities.