As we make strides forward in our life goals, we often accrue debt in the process. Things like student loans, credit cards, and mortgage follow us into the future. No matter where we live, these things will follow us. Despite this, the places we choose to live can help us better manage our debt.
A new study conducted by Credible looked at 540,000 borrowers from all 50 U.S. states to see what they paid each month on average towards debt. The results revealed which states offer the best debt-to-income ratios. Read on to find out which ones made the cut.
Factors That Affect a State’s Ranking
There are various costs associated with any state you wish to live in. To better understand the reasoning behind these rankings, the study looked at four factors:
- Credit card debt
- Student loans
- Housing costs
- Average salary
On average, the people included in the study made $60,671 each year. They paid $207 on their credit cards, $370 on student loans, and $906 on housing each month. As we dive deeper into the results, it’s clear that the cost of living is a major factor.
Low averages on housing payments, when compared to average income and debt payments resulted in states ranking higher because people had less costs to worry about and were able to pay off debt faster.
It’s interesting to note that only 1-in-5 borrowers in the study were a homeowner. Among this group, the average housing payment went up to $1,705 which was almost double the average for all borrowers.
While the state can affect your ability to manage debt, that doesn’t mean you should shoulder the high cost of moving to relocate to a higher ranked state. Instead, you should allow your place of residence to be one of several factors in your debt management strategy.
You should create a payoff plan that allows you to work with your budget and routine. If you’re struggling as a result of high interest, you can consider refinancing with private lenders who can offer lower interest options.
The Best States to Live For Easier Debt Management
The highest ranking in the study went to Michigan. The state has a higher average income, and a low debt-to-income ratio of just 25.27%. Other top-rated states include Arkansas, Delaware, and Kentucky.
On the bottom of the list are states like Oregon, Colorado, Washington, and Hawaii. These states combine high monthly payments with a lower average income. As a result, the debt-to-income ratio is as high as 36.15% in the case of Hawaii.
Information like this is useful in making a long-term decision on where to live, but it should not be the sole factor in your decision making. Smart debt management involves a combination of knowledge like this and an understanding of your own finances.
Does debt management potential factor into your decisions on where to live? Let us know in the comments!
The is a collaborative post with Credible.