Budgeting can be pretty hard—especially on a measly income. And some places, it’s nearly impossible to live a full life on your income alone—so you’re likely to slip into debt to pay the bills. Though it’s not ideal, for many it’s just the way it is. But in other places, it’s much, much easier—like in San Jose, California. Despite having one of the highest costs of living in the country, people in San Jose are more likely to “live within their means,” and keep their debt to a relative low in comparison to their income, according to a new study by LendingTree.
According to the study, residents of San Jose have the least amount of non-mortgage debt of people living in the U.S.’s 50 biggest metro areas. San Jose residents carry around $18K in debt, whereas the typical millennial carries $23K.
Fewer people also have student loans to pay off in San Jose. Though student loans usually account for around 40 percent of millennials’ loan balances, it only accounts for 24.1 percent of debt in San Jose. Though that sounds like the dream, they do have exorbitantly high mortgage debt balance—107 percent of income versus the 86.5 percent average. They can thank a crazy-hot housing market and incredibly high home values.
For the study, researchers at LendingTree scoured more than 85,000 anonymized credit reports from MyLendingTree, the company’s free credit monitoring service. They then calculated the average number of credit inquiries over the past two years, percent revolving credit utilization, and percent non-housing debt and mortgage debt relative to the area’s average household income. They assigned each metric a score, weighted the answers for a final grade, then ranked the 50 largest metropolitan areas from highest score (easiest for staying in budget) to lowest (hardest to stay within budget).
Surprisingly, the study found that places with higher costs of living had the best stats of people living within their means. One reason for this may be that the cost of straying outside of a budget may be higher—therefore people live more frugally. Another reason may be that they are more financially literate because of higher education attainment.
However, the more plausible reason is that incomes in these areas are also generally higher and that residents are able to add more generous wiggle room in their budgets. It may not be that people who live in San Jose know to budget better, but instead that people generally have to budget less because they have more money. The median household income is $114,411, compared to a national median of $61,372. To be fair, the cost of living is 49 percent higher than the national average, according to PayScale.com. But the salaries in Silicon Valley are usually a bit higher, too, and they have a very low unemployment rate—only 2.5 percent compared to the national rate of 3.6 percent.
This stands in great contrast to places like Las Vegas, Nevada; Riverside, California; or San Antonio, Texas—places the study named as the hardest to stay on budget. Because of high unemployment in Las Vegas, fast home inflation relative to wage growth in Riverside, and high vehicle costs in San Antonio, residents of these regions are more likely to supplement their incomes with credit cards—resulting in a higher than average amount of non-housing debt and revolving credit utilization.
Now, this study doesn’t mean you should pack up and move to San Jose—just to be aware of how economic climate greatly affects how people are able to pay the bills each month. Also it’s probably nice to know that if you live somewhere where people struggle with debt, your financial discipline isn’t the problem. However, there still may be a couple of things to make budgeting a bit easier—LendingTree suggests looking at your debt and consolidating and refinancing, if possible. Also it may pay to look over your budget and credit report monthly—analyzing it regularly will allow you to better track your day-to-day spending and find any costs you can cut.
Curious to see the rest of the cities where residents live within their means? Check out the full study on LendingTree.