Thursday, March 23, 2017

Does this solution work at scale? A question we should ask more

This is Joseph

Lawyers, guns, and Money points to this article by Emmie Martin.  It details the journey of a young woman out of student debt.  To make a long story short, it was based on three things: 1) large gifts from family, 2) a high paying job in an inexpensive area, and 3) getting lucky as a small landlord (things go much worse if tenants destroy the rental unit).

But the piece I want to consider is this one:
Back home in Joliet, Illinois, Horton took a job as an operations manager at the nonprofit her mother runs. The salary was comparable to what she made in DC, but the cost of living was drastically less.
Ignoring the family angle (her mother's nonprofit!), the idea here is well understood.  If you can keep the same salary in a less expensive city that is as good as a pay raise.  If that city happens to be the same one as childhood friends and family, that can compensate for the costs of a smaller community (less social contacts, less to do) by becoming engaged in existing social networks.  Now add a job that may well be fulfilling, and the small community can be a lot more appealing.

However, it is almost always the case that one will earn less money in a smaller city or community.  The tricks that let one actually do move to a small town with a full salary (e.g. professor jobs in college towns) almost always do miraculous things to improve personal finances.

But this isn't a solution that can work at scale.  Just like anyone can be a millionaire is not the same as everyone can be a millionaire.  So an interesting note on personal finance, if you can make it work, but it really shows how limited the options to escape a large debt really are, given how much family assistance was needed to make this plan work.

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