The Hidden Costs of City Living

Transportation can be cheaper, but these eight costs go up.

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After writing about how to save one-third of your income, I heard from many readers who had their own ideas about how to live frugally. One of the main areas of debate centered around the question of where to live. Is it more affordable to live in a city, where you can often walk to stores, work, and public transportation but pay more for housing, or outside the city, where you might need to rely more on cars?

[In Pictures: 12 Money Mistakes Almost Everyone Makes]

In my original article, I suggested city living, or at least living near public transportation, since it allows you to minimize car use. Cars, along with food and housing, often make up the bulk of people’s living costs. But as several readers pointed out, there’s one big problem with this approach: The cost of housing tends to go up dramatically the closer you live to an urban center.

“It would make more sense not to live near a major metropolitan area and then own a second car, or possibly still make-do with only one car,” wrote Don Current of Indiana. Instead, he recommended living outside the city and buying used cars with cash, to save on interest payments.

Patricia Bolgiano, 51, a production coordinator near Baltimore, also wrote in to point out that she has saved money—and improved her quality of life—since moving outside the city itself. She says her city tax rates were higher, food cost more, and homeowners and car insurance payments cost more.

Since she moved outside the city, she feels safer and farther away from violence, as well. She also says that she pays less for gas—along with insurance, taxes, and food. “Yes, living in the city is fun and convenient, but there are costs and trade-offs,” she says. She presumably pays less for her Internet connection, too, since she now uses a dial-up connection.

Here are eight hidden costs of city living:

Entertainment: When you live close to the movie theaters and live entertainment such as plays and concerts, it’s more tempting to pay to see them. In some cases, you can access the performing arts for free, but many city events require paid tickets.

Clothes: City dwellers often feel more pressure to stay stylish. That means spending more on clothes, as well as shoes, which can get worn down more quickly with all of the city walking and public transportation use.

[For more money-saving tips, visit the U.S. News Alpha Consumer blog.]

Schools and daycare: This one only applies to families with children, but paying for child care is often much more expensive in urban areas than suburban and rural ones. Families who choose to send their children to private school because they don’t like their urban school districts also face expensive tuitions.

Food: In addition to the fact that produce and other fresh food can cost more at urban grocery stores, there are also more temptations for lots of daily food expenditures, from coffee to take-out to midday snacks. When you pass five cafes on your way to work, in can be hard to keep walking without stopping in for a treat.

Exercise: This cost can go both ways, because suburban and rural dwellers might spend so much time in their cars that they feel the need to buy an at-home gym or DVDs in order to squeeze in exercise time. Urbanites, on the other hand, might walk enough to stay in shape, but they also usually have easy access to gyms, and might want to join so they can exercise free from the city smog and traffic.

Parking: Only in cities do you need to rent parking spaces for $200 a month (or higher). Of course, you might be able to avoid driving altogether, but if not, you’ll be forced to pay a higher price for the luxury.

Taxes and insurance: As Bolgiano pointed out, cities often charge higher tax rates and also insurance companies charge more to cover the additional risk of living in a high-population area, where your car might be more likely to be stolen and your home more likely to be broken into.

Housing: The price of housing is the biggest one and what pushes many city lovers farther away from downtown. There’s no getting around the fact that rent (or mortgage payments) cost significantly more in urban locations. There are a few ways to control the cost, however, such as living in as small a home as possible, or choosing an up-and-coming area over a well-established one.

If you’ve discovered other hidden costs of city living, please share them below.

Kimberly Palmer is the author of the new book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back.