Dollar and Sense–What’s Your Money Worth?
The value of a dollar is something that always seems to be fluctuating. Market trends, inflation, and other factors all play a part in determining the value of a dollar. But did you know that where you live can also be an indicator of the value of your hard-earned money? We throw around phrases like “cost of living” all the time without giving much thought to them. Certain geographic areas have larger costs of living than others. Keep reading to find out what your dollar is worth in your area.
The Purchasing Power of a Dollar Nationwide
Prices for the same things can vary significantly from one part of the country to another. Places like Mississippi, Missouri, or Ohio can stretch your money further. Meanwhile, you won’t be able to buy as much in places like New York, California, or even Colorado. In fact, Colorado is ranked number 11 in terms of more expensive areas of the country. Your hard-earned cash will not buy as much here as in neighboring states.
Value of $100 by State
The Bureau of Economic Analysis began compiling data and recently released its findings for 2014. The results are astonishing, showing nearly a $40 disparity between the most expensive region of the country (Washington D.C.) and the least expensive part of the nation (Mississippi). Essentially, you only need around $88 to purchase $100 worth of goods in Mississippi. However, you will need $118 to purchase the same amount of items in Washington D.C. Colorado lands around the $102 mark making us the 11th most expensive state in the country.
Nominal Incomes, Prices for Goods, and Other Factors
In some places, we see that things cost much more, but incomes are also higher to compensate for the higher cost-of-living. The purchasing power of your dollar takes these factors into consideration when determining how much your money can buy. For example, people in Nebraska and people in California earn approximately the same amount of money each year. Yet California’s cost of living is marginally higher than Nebraska, which means that Nebraska has a higher average income than California after adjusting for purchasing power.
Why is Purchasing Power Important?
Honestly, we need to consider the purchasing power when setting public policy. Think of things like minimum wage, public benefits, and even tax brackets. These are all denominated in dollars, yet do not take into consideration geographic differences in the value of the dollar. With different price levels in each state, the amounts are not equivalent. So people who live in more expensive areas, like New York or Washington D.C. may pay more in taxes, yet not feel particularly rich.
Most of us worry about getting the most bang for our buck. It turns out, where you live has a lot to do with how much your money will get you. That is why we can often visit other areas of the country and be significantly impacted by the purchasing power in that area. We often prepare for it when going on vacations, but we seldom consider this phenomenon when deciding on public policy on a national level.