If you're deep in debt and struggling to climb out of it, life can be difficult regardless of where you live. However, your location can either make your situation more tolerable or increase your misery.
Student Loan Hero compiled the twenty cities on both ends of the debt tolerance spectrum by analyzing average wages, taxes, cost of living, unemployment rate, and average credit score. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. Cities were ranked by the calculated average disposable income of its residents.
Says Elyssa Kirkham, Financial Expert at Student Loan Hero "In the best cities, residents' incomes are high compared to the costs they face — giving them more wiggle room in their budgets. Because of this, they can more easily free up funds that they can use to make extra payments toward debt and pay them off."
Debtors will have it a bit easier in these twenty cities, in descending order starting with the best.
1. Durham, NC – Relatively high wages and a low cost of living give Durham residents an annual disposable income of nearly $22,000 – tops in the study.
2. Kennewick, WA – You may be unaware of this hidden gem in southeastern Washington. Kennewick has a surprisingly high average wage and nearly $21,000 in disposable income.
3. Houston, TX – The fourth largest U.S. city is the third-best place for debtors, with an average disposable income of $20,422.
4. Des Moines, IA – A cost of living that's 10.9% below the national average leads to disposable income of just over $20,000.
5. Austin, TX – Austin's disposable income is nearly that of Des Moines, with a higher cost of living balancing out a lower income tax burden.
The next five cities in order are Kalamazoo, MI; Memphis, TN; San Antonio, TX; Knoxville, TN; and Huntsville, AL. All except Huntsville have costs of living well below the national average (12.2% to 19.5%) but relatively low wages. Huntsville is the opposite, with higher wages but a nearly average cost of living.
Rounding out the top twenty cities for debtors are, in descending order – Dallas, TX; Columbus, OH; Oklahoma City, OK; Kansas City, MO; St. Louis, MO; Dayton, OH; Kingsport, TN; Phoenix, AZ; Amarillo, TX; and Gainesville, FL.
How about the worst cities for debtors? Six of the top ten are in California, thanks mostly to costs of living that are anywhere from 46% to 128% above the national average.
Debtors will be facing a greater challenge in these cities, in ascending order of disposable income starting with the worst.
1. San Jose, CA – While the average wages are high, the tax burden and cost of living is off the charts. There is no average disposable income in San Jose – there's an average annual debt of $12,027.
2. San Francisco, CA – The City by the Bay also features an average debt, but much lower ($1,290).
3. Honolulu, HI – The beauty of Hawaii comes with a high cost of living and a paltry annual surplus of $372.
4. New York, NY – The Big Apple can be a big pain for debtors.It has the fourth-highest tax burden, the fourth-highest cost of living, and the fourth-lowest disposable income ($1,807). Anybody see a pattern?
5. Anaheim, CA – Anaheim residents have a much higher disposable income at $7,994 – but a high cost of living and high unemployment lands Anaheim the title of fifth-worst city for debtors.
Adds Kirkham, "In the two worst cities, San Jose and San Francisco, typical expenses would actually put an average earner's budget in the red each month. Residents living in the Bay Area might find themselves borrowing just to keep up with costs rather than paying down debt. Even among the remaining three cities in the bottom five, high costs of living can keep locals living paycheck to paycheck and never getting ahead."
The next five cities are Washington, DC; San Diego, CA; Oakland, CA; Los Angeles, CA; and Bridgeport, CT. Disposable incomes in these cities range from $9,115 to $10,652.
The rest of the twenty worst cities for debtors are, in ascending order of disposable income – Seattle, WA; Boston, MA; Silver Spring, MD; Portland, OR; Framingham, MA; Providence, RI; Fort Lauderdale, FL; Stockton, CA; Burlington, VT; and Modesto, CA.
You can get out of debt using the same basic principles wherever you live. Start with a reasonable budget that allows a monthly surplus (aka disposable income), trimming expenses if necessary to reach that point. If you continue to rack up debt, you'll never come out ahead.
Kirkham of Student Loan Hero concurs. "In both the best and worst cities, following a budget can help you keep your debt repayment goals on track — and avoid getting back into debt.
Working to increase your income can also be a key strategy to get out of debt faster. If your income is low or even average for your area, look for ways to leverage your work experience to get a raise. If you're already decently paid, you could still earn some extra money by starting a side hustle or getting a second job.
A debt consolidation loan can help you reset your debt terms to better fit your financial situation. If you consolidate credit card debt into a short-term personal loan, for instance, you'll probably lower your interest and get out of debt sooner. Or, if you're in one of the more expensive cities, you could consolidate to a longer term to lower your monthly payments and keep them affordable."
If you want to reduce your interest payments and lower your debt, try the free Debt Optimizer by MoneyTips.