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Why a Low Cost of Living Should Be a Freelancer’s Highest Priority

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Freelancing is more popular than ever, and it’s only going to become more commonplace. Working remotely is convenient and accessible for millions of young professionals. And, thanks to the gig economy, more businesses are interested in hiring contractors and freelancers, rather than full-time employees. You’d think a freelancer’s highest priority would be to manage clients, but there are other things to consider. 

As a freelancer, this work model offers many benefits . You’ll have more flexibility to control where you work and when you work, and more power to choose which clients you take on. Perhaps more importantly, you’ll have no upper income ceiling—if you want to make more money, you can take on new work from new clients. 

Most freelancers work hard to optimize their finances to make as much money as possible. They find the optimal rate to charge clients, polish their business model, and improve their personal productivity to get more done every hour of every day

However, if profitability is one of your highest priorities, there’s a vital concept that many freelancers neglect: cost of living. Here’s why it should be a freelancer’s highest priority.

The Impact of Cost of Living 

Let’s start by talking about what cost of living is, and how it can impact your finances so significantly as a freelancer. First, let’s make some assumptions; first, we’ll assume that you can do the same work no matter where you are or how you live in your personal life. You can acquire clients in any state, and do all of your work remotely. 

Cost of living refers to the amount of money you need to maintain a specific standard of living, accommodating expenses like housing, taxes, food, and healthcare. Some cities are more expensive than others because housing is less accessible, taxes are higher, and basic goods tend to be costlier; these are said to be cities with a higher cost of living.

Experts have also devised a “cost of living index,” meant to compare different major cities, apples to apples. There are different systems for calculating the precise differences between areas, but the fundamental concept is always the same. 

Why Cost of Living Matters

Your cost of living is important because it essentially dictates the true value of the money you’re making. Let’s assume you make $75,000 a year. Is that a lot, or is it just decent? Well, if you’re living in San Diego, where the median salary is $76,662 and the median property value is $600,000, you aren’t doing so hot. If you’re living in LaGrange, Arkansas, where the median salary is $22,708, and you can get a house for less than $100,000, you might as well be a millionaire. 

In this way, a lower cost of living will make every dollar go further, assuming all other variables are equal. An apple is an apple, no matter what city you live in, but in San Diego, it might cost $1.50, while in LaGrange, it might cost $0.50. Added up, your grocery bill could be $50 a week, instead of $150 a week, while you’re still making the same amount of income. 

As you’ll see, this is especially important during the early stages of your career. If you can make a respectable salary in a low cost of living area, you’ll be able to save much more money than your peers. Given the power of compound interest, you can easily turn the money you save into a hefty nest egg—something you can retire on someday. 

Where Cost of Living Manifests

We’ve established that your cost of living is important, but how does that cost of living manifest? In other words, where can you see the difference in cost of living between two cities, and why are these areas important? 

Housing expenses

One of the most important considerations is the cost of housing, as well as related expenses. If you look hard enough, you can find a cheap home for sale just about anywhere, but what’s “cheap” can vary wildly from city to city.

Housing expenses, including mortgage payments, property taxes, home insurance, and/or rent, will likely take up the biggest percentage of your budget, compared to your other line items. If you can sharply reduce this, you’ll free up much more money that you can spend on other items—or invest for the future.

For example, rent in a popular big city might be $2,500 a month, even for a small, one-bedroom place. By contrast, a mortgage payment for a 3-bedroom house in a less popular area, even with insurance and taxes rolled in, could be $700 or less. 

Office expenses

As a freelancer’s highest priority, cost of living also extends to your office. Many freelancers are able to work from home, or from a local coffee shop, and if that’s the case you can ignore this point.

But, if you’re interested in setting up a formal office, or working in a shared workspace, you should know that lower cost of living areas could save you a ton of money. Ultimately, that means lower business overhead and higher profitability. 

Utilities, groceries, and other life expenses

It’s not just business expenses and housing that are affected by cost of living; overall cost of living will affect almost everything you do. In a big, popular city, you’ll pay more for groceries, your phone bill will be higher, you’ll pay more for gas in your vehicle (if you drive), and the prices at restaurants, bars, and retail shops will all be higher as well. 

Income differentials 

Keep in mind that areas with a low cost of living also have lower salaries and wages for their workers; your opportunity here lies with your status as a freelancer. Because you can make a higher salary than your local contemporaries, you’ll be able to take advantage of that difference. 

How to Reduce Your Cost of Living 

There are a few important steps you can take to lower your cost of living if you’re already getting consistent work as a freelancer. Here’s how to make a freelancer’s highest priority about spending less: 

Moving to a different neighborhood

Scope out a recent cost of living index, and compare different areas of the United States (and other countries, if you’re interested in working abroad). Is there a city nearby, or a city that sounds appealing to you with a much lower cost of living than what you’re currently facing? If so, spending the time, money, and energy to move could be worth it in the long run. 

Minimizing your space

You can also reduce your personal cost of living by downsizing your living space. Too often, people buy a bigger house than they truly need, or choose a swanky apartment over a modest one, and end up spending twice as much money on housing (or more) as is necessary.

Because housing is likely going to be your biggest expense, it’s also your most important opportunity to make cuts—so try to minimize your consumption here, and save yourself several hundred dollars a month. 

Living frugally

Lifestyle creep can get the better of you, especially as you grow older and more accustomed to lavish expenditures, but your money can go much further if you live frugally. Go out to eat less often, instead opting for fresh groceries that you cook yourself.

Choose one subscription entertainment service, rather than subscribing to many different streaming channels. Choose generic or low-cost brands over name brands if quality isn’t an issue. You’ll be amazed how much further your salary can go. 

Taking Advantage of a Lower Cost of Living 

Let’s assume you’ve been successful in reducing your cost of living, by moving, cutting costs, or both. You’re making the same salary you were before, which means you’ve got extra money—potentially hundreds, if not thousands of dollars—every month. The real key to success is making that money work for you. 

There are a few different approaches here, but they all involve taking your money and investing it. If you believe in yourself and the future of your business, you can invest the money in yourself; take classes, hire employees, or acquire assets that will help you grow the business. 

If you’re satisfied with how your business is currently operating, start saving for retirement (or the general future). If you take advantage of a retirement program like a Roth IRA when you’re young, you’ll have decades of compound interest working in your favor; combined with your thousands of dollars of yearly contributions, you’ll be amazed how fast and how far your wealth can grow.

Of course, you’ll need to invest your dollars wisely, distributing them to a wide assortment of stocks, bonds, and other assets—but that’s a topic for another article. Whatever your goals as a freelancer are, you can’t afford to neglect your future; most freelancers don’t have the benefit of an employer-sponsored retirement program, so it’s on you to plan ahead and build wealth for yourself. 

A Freelancer’s Highest Priority to Make a Good Life

As a freelancer’s highest priority, it’s important to have a good business model. You also need skills and knowledge to do your work well. Plus, it’s important to have the drive and productive tools to maximize your efficiency. Assuming all those things are in place, and you’re making decent money in your freelance business, lowering your cost of living is one of the best financial choices you can make.

Not only will it reduce the financial pressure you face on a regular basis, but if you execute your plan wisely, it could set you up for a comfortable retirement. Pay attention to what you’re spending and where you’re spending it, and if you can sharply reduce your costs while making the same income—do it.


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