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Wealth Comes From Where You Live…Not Your Salary

success comes from where you liveWant to be wealthy? Well before you start dreaming about luxury cars and huge houses, you might first want to take into account where you live. That’s right, wealth comes from where you live…and NOT your salary.

Wealth Comes From Where You Live…Not Your Salary

Have you ever known a doctor that owned a huge house, had a Mercedes convertible in the third stall garage, and cruised around the lake in a sweet boat on the weekends…but was in debt up to his eyeballs and a net worth of zippo??!! Well, they’d probably never tell you about their financial troubles, but there are plenty of docs that have a huge salary and absolutely no savings or investments to speak of.

Why is this?

It’s because a high salary does not equal wealth. Sure, it can help, but just because you make a lot of money at your job doesn’t mean you know anything about saving, investing, or planning for your retirement.

Instead, I’m convinced that wealth comes from where you live, not your salary.

And what the heck do I mean by that? Ha, well actually, many things! 😉 Read on!

1) The Cost of Living Factor

I live near Grand Rapids, MI where costs are pretty reasonable. Let’s say I earn a salary of $50,000 a year. What would I have to earn to live an equivalent life in New York City?

According to CNN Money’s cost of living calculator, I’d have to earn $125,000!!

wealth comes from where you live - cost calculator

So sure, I could increase my salary from $50,000 to $100,000, but if this move forces me to live in New York, then I’m actually earning far less money! So much for improving my wealth!

The cost of living in your area plays a huge factor in your potential wealth.

2) The Jones Factor

Wise investors often say,

“If you want to make good money on your house, buy the worst house in a great neighborhood.” 

Makes total sense – I mean, you get the appreciation of the great neighborhood at a pretty reduced price – but there’s one factor of this that might actually cause you to save less and spend more…and therefore become less wealthy down the road. This is commonly known as, “the Jones factor”.

Live in the wealthy part of town and you’ll see nice houses, sweet cars, and shiny boats (you know, all the stuff that doctor had in our intro paragraph!). And you’ll get to see them every. single. day. It doesn’t take too long, and you find yourself wanting one (or all) of them…

Happens to the best of us, and if you live in the best part of town, it will likely happen to you too.

3) The Regional Mentality Factor

On the opposite end of the spectrum is what I call, “the regional mentality factor”. This is when you live in an area that believes:

  • the world is against them
  • no matter what they do, they can’t win
  • the lottery, professional sports, and drug-dealing is the only way out of poverty

Let’s be clear here. I’m a white male. I’m privileged. I have absolutely no idea what it feels like to climb the mountain of racial or social prejudice. But what I do know is that when somebody talks to me every day about why it’s not possible for me to do something, no matter how strong my will is, I’ll eventually believe the lie and give up.

So while I’d say that you don’t want to live in the best part of town because of the allure of stuff, you also don’t want to live in the worst part of town because of the mental, parasitic garbage that floods every building in sight. It’ll take down your spirits and ultimately, your chance at wealth.

Want to learn more about the effects of depressed living? Here’s a great read from Justin Wolfer with the New York Times: “Growing Up in a Bad Neighborhood Does More Harm Than We Thought

4) The House Payment Factor

This porridge is too hot, this porridge is too cold, this porridge is juuuuuust right…

When you’re searching for a place to live, you really want to find a home mortgage that hit’s the sweet spot – ideally one that’s within 25% of your monthly income on a 15-year fixed loan.

Why such a low amount?

Because you don’t want to live in a house that sucks all your money every month.

  • First off, if your payments are huge, you won’t be able to put any money away into retirement
  • Second, you’ll hand-cuff yourself from doing anything fun (you know, like going to Bora-Bora…or running with the bulls…or whatever it is that you used to want to do before you bought a massive house that sucks up all your money)
  • And third, houses appreciate at an average rate of 3%-5%…in other words, they rise with inflation and earn you absolutely nothing when it comes to buying power

So buy the house that’s moderate. One that’s in a decent area of town and is large enough for your family. Plain, simple, affordable, and a great move for your future wealth!

Related: Your House is a Terrible Investment

Wealth Comes From Where You Live: In Summary

Having a big salary is a great start to riches, but more often than not wealth comes from where you live. It’s obviously not a hard and fast rule (for all of you that are cracking your knuckles, getting ready to crush me in the comment section below), but you can’t argue against the potential impact of all the factors mentioned above (and summed up here below).

  • Cost of living
  • Keeping up with the Joneses
  • Getting mentally abused by your local friends and family
  • Signing yourself up for high house payments for a long period of time

…All of these reasons keep people from becoming wealthy every day, and they all have to do with the location of your next move.

Choose wisely, for it might just be that your wealth comes from where you live.

Battle of the Mind Housing Money


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. Everything in life is relative right? As the saying goes, happiness is making $1 more than your brother in law. 🙂

    Live in a high COL area and it’s hard to do well relatively. You could be making a fortune but if everyone else around you is doing the same then it’s hard to appear to do better.

    • Ha, love the brother-in-law saying. And yeah, live in a high cost of living area and wealth becomes extremely difficult – both in terms of saving up a nest-egg AND doing well vs. your peers. They can often be cool places to live, but are also pretty tough on your future!

  2. I had to chuckle at the example of the doctor. I had a friend who worked closely with doctors at a hospital and was invited to parties at the doctor’s homes. Many were in the most exclusive subdivision within our small city. She said that oftentimes the homes only had a few rooms furnished, and then the next year when she went back, only one additional room was furnished. This story could lead to one of two conclusions….1) The doctor was frugal and didn’t need to (or couldn’t afford to) furnish the entire house all at once, or 2)the doctor bought into an area they really couldn’t afford. Not sure which one is correct.

    • Crazy…and sad. The way people have to be so showy and flaunt what they have…and they can’t even afford furniture to fill up rooms that they don’t need… In a way, I feel sorry for them.

  3. Great points about what you surround yourself with and how it impacts your outlook and expectations. Our friends and neighbors have a much bigger impact on us than we like to think.

    I like to think of choosing a living arrangement in terms of quality of life and cost of living as the X and Y axes of a 2×2 graph. COL is the more important variable to begin with, but it’s worth considering even a big move if that reduced your regional options to low quality ones for your tastes.

    Choices about location impact a really staggering number of life variables where finances and family are often among the most important.

    • Nice comment, Robert. It’s true, COL is important, but you should also consider your neighbors and the influence they might have on you – good and bad.

  4. Thanks Derek. Great wisdom. Any advice for us over the pond? A basic, 3 bedroom family house in South East England in an average area (where I have to live for family, children etc) is only affordable (i.e. 25% of income) on a 25 year term. Still ok and worth doing?

  5. I love that you mentioned the lottery as an indicator of the ‘mental, parasitic garbage’ atmosphere in some communities. It still bothers me to see so many people spending hundreds of dollars on the canadian lotteries here in Ontario. They play fervently. They are professional gamblers…. pro’s at losing big.

    Time value. Time is a limited commodity. We can spend our time developing skill in any area of interest, or we can waste time on stuff that eats up precious time and money. I was talking recently with a gent who said “investing in the stock market is like gambling…too risky”. So I asked him how much he spends on lottery tickets each year. He told me the amount….it wasn’t huge.But it wasn’t small either. I said, well, you’re willing to throw away X amount of $ on lottery tix that are virtually impossible to win on, and you think you can’t handle the risk of the stock market? He was quiet. I told him to take the money he was spending on lottery tix and start investing slowly into the market, while doing his level best to begin to learn more about investing by reading or seminars or both.
    I am not sure that I made any difference in this gent’s life, but at least he may consider that there are other options to move forward in life other than to bet on lady luck. Peace, out. thx for the great post Derek!

    • Great comment, Carla! And great comment back to the gentleman that said investing was too risky!! Very cool!

  6. Keeping up with the Jones clan is a killer. It is how many around us live. …but my friends all wear these, that what everybody is buying now. My grandma used to ask: if everybody jumps off a cliff, will you follow just because everybody else is doing so?

    • Yup, I’ve definitely heard the phrase from my mom…and I’ll probably say it at some point in my life as a parent as well.

      We need to not only make our own choices, but we also need to be cognoscente of the future situations we’re putting ourselves in (ie. the innocent actions that lead up to the bad decision).

  7. Couldn’t agree with this more. Lifestyle creep can be hard to fight off once your income starts increasing. So why put yourself in a situation where you have to keep up with the joneses and spend to “fit in” with your surroundings. It just doesn’t make sense to me and I can’t understand why you would set yourself up for that when making such an important decision. My wife and I bought a house in the suburbs last year that is one of the better ones in the area. However, there are parts where you would get sucked into lifestyle creep and there are other parts where the COL is more reasonable and matched our values. Obviously we chose the latter, but we could easily have purchased in the former. Location is key as you mentioned and all that matters is that you are happy with your choice and can maintain the lifestyle that you want to live rather than chase the lifestyle that you wish you could have.

    Thanks for the great read!


    • Well said, Bert! I totally understand lifestyle creep. We all face it, but at the end of the day we know we’ll be happier without letting our stuff consume us. Still, it is an every day battle, especially as we earn more and more…

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