Yahoo Finance 5 Middle-Class Money Traps That Are Worse on the Coasts
The middle class has always been unfairly tasked with dodging the pitfalls of capitalism, inflation and just the struggle to make ends meet. While the demographic who considers themselves middle class is constantly in flux, one thing is for sure: Living on the East or West coast of the United States only makes it that much harder.
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The three West Coast states have an aggregate cost-of-living index that is about 23% higher than the average state, according to 2023 data from the Missouri Economic Research and Information Center. The mid-Atlantic and New England states are about 17% above average.
Besides being desirable places to live, the coasts come with high costs of living and frequently set up money traps for the middle class to fall into.
Here are five middle-class money traps that exist on the coasts more than anywhere else, according to experts.
Retail & Restaurants
It’s nice to get a bite to eat at a local eatery or check out a storefront with vendors who run a mom-and-pop operation. What’s not nice is finding out that you’ve spent more money than your middle-class budget can probably afford.
“Eating out at restaurants and shopping at trendy stores are hallmarks of living in some coastal cities,” said Kevin Huffman, financial expert and owner of Kriminil Trading. “While it’s OK to splurge every once in a while, dining out too frequently or a habit of retail therapy can be a frequent drain on your budget.”
Huffman cited a recent Bureau of Labor Statistics report that “coastal households spend a much higher portion of their income (about 15%) on food, compared with the national average (10%). What’s more, a small apartment with less kitchen space can encourage eating out, raising your food costs.”
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Student Loan Debt
“Many coastal cities are home to top universities,” Huffman pointed out. With colleges comes the lingering, time-ticking money trap of student loan debt, which hurts financially more on the East and West coasts.
You do not even have to attend one of these educational in-town institutions to feel the financial strain. If you move to a coastal city with student loan debt from another university, you might find it harder to pay them off due to most of your paycheck being sucked away by the high cost of living in the new city.
“A premium education can have great value but often ends up coming with a high price tag in student loan debt,” Huffman said. “This debt can have a huge impact on your ability to save money for a home down payment or investing for the future.”
Parking
There’s a stark contrast between a day at the beach and paying for a day at the beach. Even worse is living by the beach, not necessarily visiting it every day, but still paying to keep your car parked near it or parked miles away without a wave in sight.
“The cost of parking can be exorbitant in coastal cities, particularly in urban areas where space is limited,” said Stephanie Webb, a travel expert from Tripshepherd. “Whether you’re paying for street parking, monthly garage fees or valet services, these costs can add up quickly.”
Huffman said, “Parking costs are often hideously expensive in coastal cities. Parking in your building for your use (usually a dedicated spot in the garage) or a monthly permit to a municipal garage can easily cost $200 to $300 per month.”
Child Care
Raising your kids on the coast sounds like a delightful way to parent and bring up a family. The problem is that it will cost you more.
“Another sneaky expense to consider is that child care in coastal cities is usually much, much more expensive than the national average,” Huffman noted. “A national cost of child care survey found that parents in coastal cities can expect to pay more than $2,000 per month for care of a baby, compared with about $1,500 nationally.”
“Child care expenses tend to be higher on the coasts due to the overall higher cost of living,” agreed Webb, who highlighted a study done by Care.com that found “the average cost of child care in coastal cities like San Francisco and New York can be significantly higher than the national average. This can place a considerable strain on middle-class families, particularly those with multiple children.”
Fear of Missing Out
FOMO stands for “fear of missing out” or essentially wondering whether everyone else is having fun without you. Some middle-class people overspend to avoid missing out.
“Many coastal cities are hotbeds for young professional types and start-uppers,” Huffman said, emphasizing that “the FOMO is real.”
This also could be seen as keeping up with the Joneses, which feels more prevalent in coastal towns filled with Joneses but felt more by the working middle-class Smiths.
“The pressure to keep up with the lavish lifestyles of your peers can take a bigger percentage of your income on the coasts,” Webb explained. “From designer clothing to luxury vacations, the temptation to maintain appearances can lead to overspending and financial stress.”
Huffman added, “Seeing other people’s huge brunches and weekend escapes on your social media feeds can leave you feeling inadequate and lead to impulse spending to avoid feeling like you’re falling behind.”
He also noted that “those online representations are not reality” for most people.
The Coastal Living Solution
“Living on the coast can offer a plethora of opportunities and experiences,” Webb said, “but it can also come with its fair share of financial challenges, especially for the middle class.”
So, if you are middle class and living on an American coast, how do you get around these financial potholes?
“Create a realistic budget that includes all your costs, including the various hidden costs of coastal living,” Huffman suggested. “Eat at home as much as possible and don’t be tempted to drop money at every trendy restaurant. Bike or take public transportation if you can, and factor in the cost of child care when looking at housing options.
“Most of all, stay focused on your own financial goals and don’t overly concern yourself with the perceived success of your peers.”
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This article originally appeared on GOBankingRates.com: 5 Middle-Class Money Traps That Are Worse on the Coasts
