Where (and why) budgets are stretched the farthest
ORLANDO, Fla. – Nov. 9, 2018 – In some areas of the country, homeowners live beyond their means. Researchers at online loan marketplace LendingTree recently dug through credit report data to compare average household income, credit inquiries, the use of revolving credit lines, debt unrelated to housing and mortgage balances. They hoped to identify areas where residents are living beyond their means – and areas where they're relatively conservative in their spending.
Overall, Florida cities ranked toward the bottom of the list, meaning they have a high number of residents living beyond their means.
At No. 38, Miami ranked highest in Florida, though it was still in the bottom half of the 50 cities. Cities closer to the bottom include Tampa (No. 41), Jacksonville (42) and Orlando (46). Residents in San Antonio, Texas; Riverside, Calif.; and Las Vegas ranked last, suggesting that residents there struggle to pay their bills.
To determine an area's cost of living, researchers looked at different variables, such as high vehicle expenses in San Antonio, lower income levels in Riverside, and high unemployment in Las Vegas.
While researchers found plenty of places where homeowners were living above their means, they were surprised to find that some of the most expensive housing markets tended to have more residents living within their budgets. For example, pricey cities like San Jose, Calif. (which incorporates Silicon Valley) and San Francisco top the list of cities where people are most likely to live within their means. Raleigh, N.C., was also in the top three, thanks to modest mortgage-to-income ratios. In these locales, higher education and greater salaries may be helping them to stick to their budgets better.
Regardless of the reasons, the researchers noted that spending more than you have can have far-reaching consequences.
"The longer it takes to pay off a debt, for example, the more one pays in interest," according to researchers. "That added cost can have a compounding effect, leaving less to invest in retirement savings, college funds or a home. Additionally, hard credit pulls and high credit utilization will lower your credit score, as does missing monthly payments."
Source: "Places Where People Spend Within Their Means," LendingTree (Oct. 31, 2018)
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