How Your Zip Code Affects Your Cost of Living

In real estate experts will tell you that nothing matters more than location. When it comes to cost of living that couldn’t be truer.

When we’re looking for a place to live the primary cost we consider is the monthly rent or mortgage payment. While that is the largest piece of the monthly budget, there are a number of other expenses that determine the true cost of living in an area. Everything from your car insurance to your property taxes are going to be influenced by your zip code.

Here are six big ways the last five digits in your address can impact your monthly expenses:

Utility Rates

Electricity, water and gas are necessities for indoor living in the United States. As it turns out, what you pay per kilowatt-hour or per gallon largely depends on where you live. Take electric rates in Texas for example. Some areas are deregulated, giving residents the ability to choose their provider and plan. This gives you more control over the cost and the ability to shop around for low rates. However, there are regulated cities like Austin and San Antonio where that’s not the case.

The competitive rates in one area can vary significantly from their next door neighbors. If you aren’t settled on a specific region of a metro compare the electric, water and gas rates to see which one is the cheapest.

Property Taxes

This one is a little more obvious than others since each county and municipality sets their tax rates. And those rates could change from one year to the next. Typically, property taxes are a percentage of the appraised value of the home. Since homes are so expensive a tiny fraction of a percentage point can increase the cost by hundreds of dollars a year.

Figuring out what the current property taxes are for an area isn’t always straightforward. If you own your home you can check your mortgage bill to learn how much you pay in property taxes each month. You can also call the county tax appraisers office for information on the rate and how property taxes are calculated, which can also make a difference. The good news is if you own the home you can deduct the property taxes you pay to offset some of the cost.

Gas Prices

When you’re buying a car the miles per gallon is something that few people put at the top of their priority list. For commuters that’s a different story. Gas prices may not seem like a big deal until you have a lengthy commute (20+ miles each way). In a vehicle that gets 20 MPG the price per gallon would add up quick. People living in a South Carolina zip code would pay about $4.25 a day in fuel whereas someone in Hawaii would pay over $6. Over the course of a year the person in South Carolina would pay nearly $450 less to drive to work.

How convenient necessities are to your home also makes a difference. In some zip codes you have to drive miles just to reach the nearest gas station.

Food Costs

We all have to eat to live, but where we live can determine how expensive it is to stay fed. The cost of healthy, nutritious food options can be different from neighborhood to neighborhood due to a number of factors. Availability is the biggest factor. There’s growing concern in some urban areas that are known for having food deserts. These are areas where fresh produce is largely unavailable and very expensive. Needless to say, these types of situations make healthy eating much more expensive.

Insurance Rates

One of the things that an insurance company considers when they’re pricing a policy is the client’s location, especially if it’s home insurance. The company will do a thorough assessment of the immediate area surrounding the home to determine risk factors that could pose a threat. Some things, like high crime rates, increase insurance rates while others, like living near a fire department or police department, can push monthly premiums down.

Auto and health insurance are also going to vary depending on your zip code.

Education Expenses

A hidden cost of living that could significantly affect the youngest family members is the cost of education. From pre-school to college, your zip code can influence your education options. It may mean paying for a daycare when you kid is three versus enrolling them in a public pre-K program. The state you live in will also determine which universities will be the cheapest since in-state tuition is dramatically lower than out-of-state tuition. It’s just one more thing to consider if you’re thinking about relocating.