The class of 2024, like generations before them, might believe it is wise to venture to major cities after college. After all, cities are where wealth-generating industries thrive. However, many major cities today have become outrageously expensive, especially when it comes to housing. Rather than constantly struggling to make ends meet, many young Americans would be better off starting their careers, and establishing their financial lives, in lower cost of living areas.
Despite the potential financial advantages, Americans do not move from state to state in high numbers.
About 8.2 million people relocated to a different state in 2022, which was a modest increase from 2021, US Census Bureau data showed. That is less than 2.5 percent of the total population.
The reluctance to move needs to change, especially when remote work is an option for some.
About 39 percent of college-educated Americans aged 25 and older did telework for at least part of the week last month, US Bureau of Labor Statistics’ Current Population Survey showed.
Even when remote work is not an option, there are plenty of affordable midsize cities with robust job markets that allow early-career workers to maximize their paychecks. (Except, that is, for Gen Zers able to peacefully indulge in free accommodations from generous parents, which is the superior deal.)
The slowdown in hiring for professional services jobs, sometimes described as the white-collar recession, makes it even more important for those working in affected industries like finance, tech and media to consider opportunities beyond the big, paycheck draining cities. While no one likes to think about the prospect of layoffs, having a low monthly overhead for living expenses would make it easier to weather a job loss while hunting for a new opportunity.
Of course, moving away from jobs in expensive cities could mean lower pay, even for employees of businesses headquartered in New York or San Francisco. However, accepting a salary reduction to live in a city where housing costs less could still put young workers ahead financially.
About one-quarter of Americans fear they would experience homelessness due to their financial situation, a report from micro-investing app Acorns said. Gen Z and millennials are three times more likely to have this concern than older workers.
Leaving expensive cities does not require moving to Small Town, USA, if that is unappealing. For instance, the greater Minneapolis area is home to 18 Fortune 500 companies, including UnitedHealth Group Inc, Target Corp and 3M Co. Minnesota also boasts an unemployment rate well below the national average.
Starting out one’s adult life and career in an affordable area not only helps maximize saving and investing opportunities, while having a chance to pay off debt, but can also protect your mental health. Being surrounded by affluence, or at least the markers of wealth, can wire your brain to experience money dysmorphia — a feeling of insecurity around one’s finances — especially in comparison to those around you.
About 35 percent of people living in a major city report feeling that they would never have the things they want in life due to their financial situation, the Acorns report said.
On the other hand, people often elect to live in areas of the country that best align with their political and moral preferences. A young adult, or indeed anyone, moving to an area purely for financial reasons does not make sense if local laws pose a threat to their quality of life. However, Gen Z needs to be wary of allowing TikTok or the news to be their only sources of information. It is important that those considering a move spend time in the area and speak to people about their political and social preferences. The stereotypes of a region might not align with people’s lived experiences.
Another major consideration is the potential advantage of staying near support systems, like living near one’s family of origin, in-laws or closest friends. As phases of life unfold, it can be helpful to have people who provide free care and support, such as grandparents who are willing to watch grandchildren or help with pickup and drop off, or loved ones who can bring over meals or provide physical support when someone is ill or recovering from surgery.
Gen Z, like all generations, only have their youth once, but taking a few years in early adulthood to establish a financial safety net before moving to a more expensive city could make the difference in building wealth over the long term. Who knows, they might even decide to put down roots in the place where they started.
Erin Lowry is a Bloomberg Opinion columnist covering personal finance. She is the author of the three-part Broke Millennial series.
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