Is it Impossible to Build Wealth in Your State? (Ranked)

What It Covers

The Money Guy Show ranks states by cost of living and examines whether geography determines wealth-building success. Using California versus Arkansas as case studies, Brian Preston and Bo Hansen demonstrate how income opportunities, housing costs, and personal financial decisions interact. They emphasize that disciplined saving and strategic location choices matter more than state residency alone.

Key Questions Answered

• •Cost of Living Variance: California ranks highest at 12.6% above the $56,000 national average for single adults, followed by New Jersey at 8.9% and Hawaii at 8.6%. Arkansas sits lowest at 13.5% below average, with Mississippi at 12.7% and South Dakota at 11.9% below. These differences create a 26% spread between highest and lowest cost states, significantly impacting wealth accumulation potential.
• •Income Arbitrage Strategy: California Carly earning $100,000 with $64,000 living costs has $8,000 more annual margin than Arkansas Adam earning $55,000 with $49,000 costs, despite higher expenses. High cost areas often provide career opportunities that offset location premiums. Evaluate whether your vocation justifies your geography—if income opportunities don't match cost increases, consider relocating or commuting from lower-cost adjacent areas.
• •Self-Employment Retirement Accounts: Solo 401(k) plans allow self-employed individuals to contribute up to $54,500 annually—$24,500 in salary deferrals plus approximately $30,000 in profit sharing contributions on $120,000 income. This beats SEP IRAs which only permit the profit sharing component. Solo 401(k)s require no tax filings until assets exceed $250,000, then mandate annual Form 5500 submissions to avoid severe IRS penalties.
• •Housing Payment Threshold: The 25% gross income housing limit serves as a maximum guardrail, not a target recommendation. Using gross income prevents manipulation since net varies by tax withholding, insurance elections, and retirement contributions. In high cost areas, this may reach 32% of net income. Prioritize keeping total housing costs under this ceiling while maintaining emergency reserves and retirement savings rates.
• •Rental Versus Ownership Arbitrage: Current market conditions create opportunities where renting costs less than buying in high cost areas. Landlords with pre-2020 mortgages below 4% and lower property basis can offer competitive rents while new buyers face doubled costs from higher prices and 7% interest rates. Evaluate local rent-to-buy ratios and consider renting when the math favors it, especially for retirees seeking geographic flexibility.
• •Portfolio Risk Timing: At age 31-35 with $388,000 in all-equity portfolios, establish specific triggers for diversification—whether age 40, $500,000, or $1 million in assets. Risk capacity differs from risk tolerance; portfolios under critical mass can sustain 100% equity allocation if emergency reserves cover 3-6 months of expenses. Define your de-risking timeline now to avoid reaching age 50 with multi-million dollar portfolios still fully exposed to equity volatility.