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Saving money isn’t always easy—especially when the cost of everyday expenses continues to skyrocket. According to data from the Federal Reserve Bank of St. Louis, the personal savings rate has plummeted from the pandemic-era highs of over 20% to a mere 5.1% as of March 2023.
As it turns out, where you live can dramatically impact how much you’re able to save. Forbes Advisor recently compared data from all 50 states and the District of Columbia to determine the best and worst states for saving money, using 10 metrics across four categories: income and debt, cost of living, taxes and housing.
Read on to find out which five states are the most hospitable to savers—and which five are the most hostile.
- Hawaii is the toughest state in which to save due to high living costs and a high debt-to-income ratio.
- California, Maryland, New York and New Jersey round out the five states where it’s most difficult to save.
- North Dakota is the state were it’s easiest state, thanks to its affordability and low debt-to-income ratio.
- The other states where it’s easiest states to save include South Dakota, West Virginia, Missouri and Ohio.
- Northeastern states are heavily represented among the top 10 states where it’s most difficult states to save.
- The Midwest dominates the top 10 list of states where it’s easiest to save.
- High incomes don’t always make saving easier; six states with median household incomes above $80,000 rank among the top 10 states where it’s most difficult to save.
5 Worst States for Saving Money
According to Forbes Advisor’s analysis, Hawaii has the highest cost of living among all 50 states and the District of Columbia, which is putting a strain on many residents’ wallets. The Aloha State also has the highest debt-to-income ratio as of Q3 2022 at 2.25, meaning that many Hawaiians’ debt exceeds their income. (A ratio of 1.0 would mean that debt and income are equal.)
Additionally, Hawaii ranked eighth highest for food scarcity in the three most recent Household Pulse Surveys conducted by the U.S. Census Bureau. Those studies found 13.1% of Hawaiian households reported “sometimes” or “often” not having enough to eat in the last seven days. This statistic could be attributed to the high cost of food in Hawaii, which is due to the state’s isolation and heavy reliance on imported goods. This also makes Hawaii one of the worst states to retire in.
Hawaiians also face among the highest housing expenses in the nation, with the second-highest percentage of income spent on housing at 24.96%. This can make it difficult for residents to allocate funds toward other essential expenses or save for the future.
California is the second worst state for saving money due to its high cost of living. In 2021, residents in the Golden State spent a staggering 25.58% of their income on housing—the highest percentage in the nation. This is largely due to the state’s expensive real estate market, which has been fueled by high demand and limited supply.
Additionally, California has the fourth-highest percentage of renters (27.57%) who spend at least 50% of their income on rent. Due to these high housing costs, California ranks 15th in terms of the percentage of people who are struggling to scrape by.
When surveyed by the Census Bureau in January, February and March of 2023, an average of 40.50% of households in California described their ability to pay for everyday expenses in the last seven days as either “somewhat difficult” or “very difficult.”
While Maryland is known for its high-income jobs, its cost of living and tax burden make it challenging for residents to save and achieve financial stability.
Maryland has the seventh-highest cost of living across all 50 states and neighboring Washington, D.C., making it challenging for residents to make ends meet. High housing costs are a significant contributor to this state of affairs, with the Old Line State having the 10th highest percentage of renters (25.51%) who spend at least 50% of their income on housing.
Additionally, Maryland residents have the third-highest debt-to-income ratio, indicating they have more debt relative to their income than residents of most other states. This can make it difficult to save money and keep residents trapped in a cycle of financial insecurity.
The state’s effective income tax rate is also a significant factor in its ranking as one of the worst states to make a living in. Maryland has the seventh-highest income tax rate at 12.83%, reducing the amount of disposable income residents have available for saving and investing.
4. New York
As many New Yorkers are well aware, the Empire State is among the worst states to live in financially. With the fifth-highest cost of living nationwide, the state’s high housing costs likely put a strain on many residents’ wallets. New York ranks third for the percentage of residents who spend at least half of their income on rent (27.66%) and sixth for the percentage of income spent on housing (23.11%).
To make matters worse, the median household income in the state only increased by 9.54% between 2018 and 2021, ranking 13th lowest among all 50 states and the nation’s capital. This means residents are dealing with rising living costs without a commensurate increase in earnings.
And it’s not just housing costs that pose a challenge for New Yorkers. While the state ranks 19th in terms of the percentage of people who struggle to pay for everyday expenses, an average of 39.33% of households reported running into difficulties when paying for purchases in the last seven days. This makes New York one of the worst states to live in if you’re trying to save money.
5. New Jersey
The Garden State may be a great place to enjoy the outdoors and convenient access to several major cities, but it is also one of the worst states to make a living in. With the 15th highest cost of living nationwide, some residents in New Jersey may struggle to keep their budgets in check.
However, it’s not just the cost of living that makes this state challenging for savers. New Jersey has the highest effective property tax rate in the country—2.26%. That means homeowners in the state can expect to pay a hefty sum in property taxes every year, adding to the overall cost of living.
When it comes to housing costs, New Jersey residents also face an uphill battle. The percentage of income spent on housing among all New Jerseyans is 22.50%, which is the seventh-highest in the nation. Additionally, 26.28% of residents spend at least half of their income on rent, which is also the seventh-highest percentage in the country. These high housing costs can make it difficult for individuals and families to set aside money for savings.
Finally, while the median household income in New Jersey increased by 9.24% between 2018 and 2021, it was still the 11th lowest increase among all 50 states and the nation’s capital. This slow growth in income has made it challenging for some individuals and families to keep up with the rising cost of living in the state.
5 Best States for Saving Money
At the other end of the spectrum are the five best states to save money in: North Dakota, South Dakota, West Virginia, Missouri and Ohio. Here’s a closer look at what factors helped each of these states rank among the best.
1. North Dakota
North Dakota takes the cake as the best state in the U.S. to save money in. With the third lowest debt-to-income ratio in the country for Q3 2022—and the second lowest percentage of income spent on housing costs and rent—North Dakotans are able to keep more money in their pockets.
Additionally, the Peace Garden State has the ninth lowest effective income tax rate—just 8.13%. This makes it easy for North Dakotans to maximize the money they have available to fund their savings goals.
Despite North Dakota’s cost of living, which ranks near the middle (27th place), residents report having little trouble paying for usual household expenses and very few issues with food scarcity.
2. South Dakota
Following North Dakota is its sister state, South Dakota, which offers many of the same financial advantages.
Low housing costs are one reason why South Dakota is among the best places to save money. The state has the lowest percentage of residents who spend at least half of their income on rent (15.11%) and the third lowest percentage of income spent on housing costs among all residents (16.22%). This means that residents can enjoy affordable housing payments and have more money left over for other expenses.
Although South Dakota doesn’t have the lowest cost of living, it ranks 15th lowest for the average percentage of residents who reported having difficulty paying for household expenses (35.37%) and 13th lowest for the percentage of households reporting food scarcity (9.30%) in 2023. So fewer households in the state struggle to pay bills—and most have enough to eat.
Additionally, the Mount Rushmore State ranks fourth lowest for effective income tax rate, making it lower than North Dakota. However, it ranks 19th highest for effective property tax rate.
3. West Virginia
Despite the economic challenges brought on by the pandemic, West Virginia is still one of the best states to save money in.
With a cost of living ranking ninth lowest in the nation, the Mountain State is an affordable place to call home and one of the best states to save money. In fact, West Virginia has the lowest percentage of income spent on housing costs among all states (15.10%), allowing residents to save more of their hard-earned income.
When it comes to income taxes, West Virginia ranks 14th lowest with an effective tax rate of 9.34%. For the median individual income of $28,989, residents only pay $2,709 in taxes.
Additionally, the state has relatively low real estate taxes, with an effective property tax rate of 0.59%—the 10th lowest rate nationwide.
But even with the relatively low cost of living and tax burden, West Virginians still face some economic challenges, with nearly 46% of households reporting difficulty paying for household expenses in the first three months of 2023 and 13% of households in the state struggling with food scarcity.
Missouri, also known as the Show-Me State, ranks sixth lowest nationwide for cost of living, making it attractive for those looking to save money.
Considering housing is one of the largest expenses for most Americans, it’s great news that Missouri ranks ninth lowest for the percentage of income that residents spend on housing costs, with only 17.75% of their income going toward housing.
For renters, Missouri ranks 17th lowest for the percentage of people who spend at least half of their income on rent, at 20.54%.
When it comes to income taxes, Missouri ranks 19th lowest with an effective tax rate of 10.05%. Those with a median individual income of $36,036 would only pay $3,623 in income taxes.
If you’re looking for a state where you can save a lot of money, Ohio might be the place for you. It has the 12th lowest cost of living in the country, making it an affordable place to call home.
As of Q3 2022, the state also ranks sixth lowest for its residents’ debt-to-income ratio at 1.162. This means Ohioans have a relatively low amount of debt compared to their income.
Additionally, Ohio ranked eighth lowest for the percentage of income spent on housing costs (17.62%) and 13th lowest for the percentage of residents who spent at least half of their income on rent (20.34%). The state also ranked eighth lowest for our income tax metric, with an effective income tax rate of 7.97%.
However, food scarcity is relatively high in Ohio, with the state ranking 12th highest for this metric. On average, 12.80% of Ohian households reported not having enough to eat in the last seven days either “sometimes” or “often” in surveys conducted in January, February and March 2023. Still, the Buckeye State is one of the best places to save money.
How To Save Money and Reach Your Financial Goals
Saving money is an important part of financial planning. It can help you fulfill dreams of buying a house, retiring comfortably or starting a business. Regardless of your goals, here are some tips for saving money so you can reach them:
- Set savings goals. What are you saving for? A down payment on a house? A new car? Retirement? Having specific goals will help you stay motivated to save money.
- Create a budget. Using a money-saving app can help you track your income and expenses so you can see where your money is going. Once you know where your money is going, you can start to make changes to save more.
- Open a high-yield savings account. Savings rates are currently higher than they’ve been in years, and it’s becoming increasingly common to find a high-yield savings account that earns an annual percentage yield (APY) upward of 4.00%. Opening an account is an easy way to earn more money as you save.
- Automate your savings. Set up automatic transfers from your checking account to your savings account each month. This way, you don’t even have to think about moving money—saving becomes a habit.
- Reduce unnecessary expenses. Review your spending to identify areas where you can cut back. Are you dining out too much? Are you spending too much money on entertainment? There are probably areas where you can save money without sacrificing your quality of life.
- Find ways to make extra money. If you’re serious about saving, you may need to find ways to make extra money. This could mean asking for a raise, finding a new job, getting a part-time gig or starting a side hustle.
- Invest your money. Once you have some money saved up, invest a portion of it. This is the key to building wealth, as compound interest helps your money grow over time.
How To Save Money in a High-Cost-of-Living Area
Residing in a high-cost-of-living area can be tough on your budget. But there are several things you can do to lower your costs and still live comfortably.
- Focus on your three biggest expense categories. When you reside in a high-cost-of-living area, making smart decisions about your housing, transportation and food expenses can help you save more than cutting out $5 lattes.
- Take advantage of free or low-cost activities. Most towns and cities across the U.S. have free or low-cost activities you can enjoy. This could include going to the library, visiting a park, taking advantage of free museum days or going for hikes.
- Take public transportation. Taking public transportation instead of driving can save you money on gas and parking—and maybe a monthly payment if you sell your car. You could also carpool, walk or bike if it makes sense for you.
- Cook at home more often. Dining out every week adds up quickly—especially in big cities. Cooking at home can save you a lot of money. Not a good cook? Pick up some cookbooks from your local library, watch tutorials on YouTube or sign up for a cooking class.
- Get a roommate. If your living space is large enough, consider getting a roommate or two to share the cost of rent and utilities. It doesn’t have to be permanent, but it can be a good way to temporarily reduce one of your biggest expense categories—housing.
- Negotiate your bills. Many companies are willing to negotiate their prices, especially if you’re a long-time customer or you’re struggling to make ends meet. Don’t be afraid to negotiate everything from rent to your phone bill.
- Take advantage of discounts for seniors, students, military members, medical professionals and teachers. Many businesses offer discounts to these groups, so if you qualify, hop on them.
- Consider moving to a less expensive area. If there’s nothing tying you to the area you live in—and you’re open to relocating—moving to a less expensive state can work wonders when slashing expenses. Thinking of moving? Use a cost of living calculator to see how much you’d need to earn to maintain the same standard of living in a new city.
To determine the states where it is most (and least) difficult to save, Forbes Advisor examined data for all 50 states and Washington, D.C., across four categories: income and debt, cost of living, housing costs and taxes.
We considered 10 relevant metrics, which are listed below with their corresponding weights:
Debt and Income (25% of total score)
- Household debt-to-income ratio (15% of total score): Data comes from the Federal Reserve Bank of New York and is for Q3 2022.
- Three-year change in household income (10% of total score): Data comes from the U.S. Census Bureau’s 2018 and 2021 1-year American Community Surveys.
Cost of Living (25% of total score)
- Cost of living index (10% of total score): Data from the Missouri Economic Research and Information Center is for 2022.
- Percentage of households having difficulty paying everyday expenses (10% of total score): This is the percentage of adults in households where it has been somewhat or very difficult to pay for everyday household expenses in the last seven days.
- Percentage of households reporting food scarcity (5% of total score): This is the percentage of adults in households where there was either sometimes or often not enough to eat in the last seven days.
Data for the percentage of households having difficulty paying usual expenses and reporting food scarcity comes from the Census Household Pulse Survey. We averaged all survey data that had been collected and released in 2023 at the time of our analysis. (Survey collection periods include Jan. 4-16, Feb. 4-13 and Mar. 1-13.)
Taxes (25% of total score)
- Effective income tax rate (15% of total score): Data comes from the Forbes Advisor Income Tax Calculator for 2023.
- Effective property tax rate (10% of total score): Data comes from the U.S. Census Bureau’s 2021 1-year American Community Survey
Housing (25% of total score)
- Three-year change in housing costs (8.75% of total score): Data comes from the U.S. Census Bureau’s 2018 and 2021 1-year American Community Surveys.
- Housing cost as a percentage of income (8.75% of total score): Data comes from the U.S. Census Bureau’s 2021 1-year American Community Survey.
- Percentage of renters spending at least half of their income on rent (7.50%): Data comes from the U.S. Census Bureau’s 2021 1-year American Community Survey.
Based on these 10 metrics and the weighting outlined above, we determined a ranking for all 50 states and the District of Columbia.