Life in Spendy Town: Can Living in an Expensive City Sabotage your Dreams of Financial Independence?

By Brad Beckstrom

Who knew?  That’s what I keep telling myself. When I was in my 20s, I drew a circle around the Washington DC Metro area including Northern Virginia, Baltimore, the Eastern Shore, and surrounding areas. I said, “This is where I will live. This will be my zone of influence.” (I actually said that. Not sure why, maybe it was business related, or I was reading some Dale Carnegie books at the time). Little did I know that red circle I drew encompassed 4 of the 5 richest counties in the United States and 6 of the top 10.  Literally, all within a one hour radius of Washington, DC. This area really does make San Francisco and Silicon Valley look like chump change.  LA, New York, Honolulu, forget about it. Washington, DC is where (a lot) of the money is. Not convinced? Just take a look at the U.S. Congress and the money machine that supports it.  

There are some advantages to living in a wealthy part of the country:  jobs, great schools, museums, sports franchises, bays, lakes, rivers, beaches, mountains all nearby. So, it’s a great area to live right? Unfortunately, a lot of people feel that way. So, not only are we beating LA and New York in spendyness, we also regularly beat them with some of the worst traffic in the country. Real estate is equally ridiculous, along with property taxes. High-paying jobs and expensive real estate spillover into everything. Most restaurants are fancier and more expensive. Real dive bars and affordable local spots are getting harder to find, often being priced out of their locations even in the close in suburbs. Everybody, grocery stores, retailers, parking garages, jacks up their prices because they can (or need to.) Good deals become harder to find.

When I start comparing Arlington, Virginia to cities like Raleigh, North Carolina, Tampa, Florida or Boulder, Colorado using online calculators (links below), I start to see a trend. Housing is really driving the majority of cost-of-living differences on these these calculators. I’ve tried to use other online comparison calculators (see list) but once they add housing, it throws everything off. For instance, it might say something like a $100,000 salary in DC is worth $170,000 in Raleigh, but this has very little to do with the price of milk or taxes and everything to do with the fact that house in the DC area will cost you 3X.  

Arlington, VA. vs. Raleigh NC. From CNN Money, Cost-of-living calculator.

Real Estate

So, if you want to live in a high cost city but are pursuing financial independence, is there a way to hack the system? Real estate is the big factor here. When I wanted to buy a home in Washington, DC I had to get comfortable with a couple of things including living in a less desirable neighborhood, having roommates, and having a tenant in an English basement that had a separate entrance. In other areas, duplexes (or quads for the more adventurous) allow you to live in one of the units and rent out others. This is also helpful for obtaining financing. You may even need to take on another investor, as I did on my second rental property. My other investor was also my roommate. But, if you can, it’s always preferable to get your own loan then look for roommates.

The idea here is to reduce your costs, supplement your income with rental income, create tax deductions, and live close to where you work to reduce your transportation expenses. Making these sacrifices allowed me to actually make money on each of the homes I lived in and fully cover my mortgage. Real estate can be a huge factor in helping you reach financial independence. I always went by the motto: “Don’t buy property that you wouldn’t want to live in yourself.” I was able to use this formula in cities including Raleigh, NC, Annapolis, MD, and Washington, DC before finally getting married and buying a home here in (Spendy Town) Arlington, VA.

What if you haven’t chosen your zone of influence or are not sure where to settle? This opens up a whole world of opportunity for Geoarbitrage (Leveraging a high salary or financial independence in a low-cost area, like Costa Rica or Portugal) . Exploring different cities including international ones where you may like to settle down someday. For the explorers among us, finding affordable rentals in low-cost cities are an excellent option. This frees you up from many of the time-consuming responsibilities that come along with being a landlord and a property owner. There are a lot of good options out there, all of which don’t involve buying an oversized home in an overpriced suburban neighborhood.

If you can figure out the real estate element, the other cost-of-living items you’ll find are completely within your control regardless of where you live.

Groceries/ Household items

We’ll start by looking at non-housing expenses in the Raleigh area for example. Groceries are 3% less than here, based on grocery spending surveys. To be honest, that 3% is probably a rounding error. I don’t think most people would move to save 3% on groceries. The key here is to find several low-cost grocery options in your city and supplement that with Amazon for affordable household supplies. We use Costco for most non-perishables and Trader Joe’s for smaller items. I’ve gotten pretty good at finding low-cost household items on Amazon, including furnace filters, paper products, dog treats etc.  There’s a plug-in called wiki-buy by that auto checks other sellers with lower prices right in your browser. I also randomly check prices on these products with quick Google searches that usually pull up a variety of low-cost options.


Unless you work at home, your car is paid off or,  even better, you use a bike or public transportation, your transportation costs are going to be high. A gas guzzling SUV will have a pretty similar monthly expense regardless of where you drive it.  Think about buying your next car like it was your last, and make it a small one. The DC area is actually fantastic if you can work at home, skip the commute, and avoid driving during rush hour.


I found it interesting that several cities I looked at, including Raleigh, North Carolina and Tampa, Florida, had higher energy costs. This could have something to do with the Africa hot temperatures Florida experiences in the summer, but we get some hot weather as well as quite a few more cold snaps here in Virginia.  A few years ago I took advantage of an $1800 tax credit and over-insulated my home. I can tell you it’s made a visible difference in our energy costs. We use a two level system with a unit in the attic, combined with programmable thermostats. We do our best not to heat or cool parts of the house where not in. Google “free energy audits” combined with your local gas or electric company’s name. Many now offer free audits that go much deeper than the tips I’ve mentioned here.

Health Care

This is the big one. If you would’ve told me that my monthly health care costs would be higher than my mortgage someday, I may have rethought the whole solo entrepreneurial adventure. I’m glad I didn’t. I recommend those pursuing financial independence spend some time working for a company with a solid benefits plan. You can no longer underestimate the value of benefits, versus companies that offer high commissions or high salaries, but limited benefits. You really do need to do the math and incorporate any benefits you currently getting into your FI Plan. If you’re already financially independent, a solid plan for health care is essential regardless of your age. I use combination of high deductible plans, HSA accounts, and self-employed health care deductions to make it all work. It’s gotten to the point where you can’t just keep the same policy year after year. I use Healthcare Sherpa and to compare rates in my local area. It seems like most areas have some combination of high rates and lack of selection along with high deductibles. I can’t imagine any area more expensive for healthcare than Washington, DC but the more cities I look at, including Raleigh, NC, actually had higher local costs. The real challenge for those pursuing financial independence or self-employment is usually more about the monthly premium versus the local cost of care. Don’t take healthcare lightly, over 60% of US bankruptcies are caused by medical emergencies. Your health is truly the last safe investment.


I was surprised that most of the calculators below did not include local taxes. I’ve added them here because it’s important to look at the full tax picture not just whether the state has low income taxes like Florida or Texas. I found this helpful process for giving me a well-rounded view of the total tax picture. I was pretty excited when Virginia came in number 40 on the list!

So before you decide to move, make sure you look at all facets of your own Spendy Town when you make your decision to create a home base or put down some roots. You might be surprised of how much of it really is in your control, especially when you hack away at the nonessentials.


The Frug


Cost of living comparison calculators


The Frug
Financial Independence through Living Lean, Working Lean, and Traveling Lean
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