Its biggest industries are energy and agriculture, the population of its most populous city is just over 130,000 residents and the average high temperature in January and February is below freezing. North Dakota also happens to be the easiest state in which to save money in America.
That is the finding of a recent data analysis by USA Today Blueprint, which compared how well the residents of all 50 states (plus the District of Columbia) fared on nine metrics of their financial health to see where it’s easiest to save.
Iowa, South Dakota, Kansas and Wisconsin round out the top five states. Despite beautiful weather and scenic beaches, Hawaii, California and Florida are the most difficult states in which to save.
Everyone wants a high-paying job, and no one likes to pay exorbitant housing prices. But often those two goals conflict, leaving you feeling stressed no matter which end of the spectrum you occupy.
The point of this study is to identify those states that make this tradeoff easier on its residents; the right balance of healthy economics and low cost of living.
In order to compile that list, we looked at nine different metrics and assigned each a different weight:
- Debt-to-income ratio (20%).
- Percent of renters spending more than 50% of income on rent (15%).
- Percent of households having difficulty paying regular expenses (15%).
- Median household income (12.5%).
- Cost of living index (12.5%).
- Gross median rent (10%).
- Average housing costs for those with a mortgage (7.5%).
- Income tax (5%).
- Average housing costs for those without a mortgage (2.5%).
Sources: Federal Reserve Bank of New York Consumer Credit Panel/Equifax, Bureau of Labor Statistics, 2022 ACS, ACS Pulse (March 2023), MERIC Q2 2023, Forbes Advisor Income Tax Calculator.
Half of the weighting, then, is based on residents in a given state being able to afford the basics of life without amassing too much debt.
Contrary to conventional wisdom, you don’t need to make a ton of money in order to be able to save. None of the top 10 states in our ranking finish in the top half of the nation in terms of median annual income:
- North Dakota: 26th
- Iowa: 32nd
- South Dakota: 30th
- Kansas: 35th
- Wisconsin: 28th
- Nebraska: 31st
- Ohio: 40th
- Oklahoma: 46th
- Arkansas: 48th
- Missouri: 42nd
In fact, the typical household in North Dakota (the easiest state in which to save) makes roughly $20,000 less than the average family in Hawaii (the hardest state in which to save).
It’s just that the money you do make goes a lot further in some states than others.
North Dakota, for instance, ranked 4th in debt-to-income ratio, 2nd in percent of renters spending more than half of their income on rent and 2nd in percent of residents having difficulty paying regular expenses. Iowa finished 6th, 15th and 9th in the same categories.
Even residents of Mississippi, which have the lowest household income, have an easier time saving (26th) than Massachusettsans (33rd), even though Bay Staters have the 4th highest annual income.
The common theme among the 10 hardest states in which to save is red ink. Here’s where each finished in terms of debt-to-income ratio:
- Hawaii: 51st
- California: 41st
- Florida: 40th
- Maryland: 49th
- Nevada: 44th
- Colorado: 45th
- Arizona: 48th
- Oregon: 39th
- New Jersey: 31st
- New York: 2nd
Note: Our ranking includes the District of Columbia, which is why Hawaii finished 51st instead of 50th.
The lone exception was New York, though Empire State residents shouldn’t cheer too quickly: Almost 28% of its residents put more than half of their income toward rent.
Each of the hardest states in which to save, moreover, finished in the bottom half when it came to cost of living and rent.
That is to say, it just costs a lot to live there, and even a high salary doesn’t compensate. Three of the bottom four states (Hawaii, California and Maryland) also finished in the top six in terms of income.
Cost of living by state
While it helps to have a cheap cost of living in order to save, it isn’t sufficient.
Take Georgia. The Peach State has the 5th lowest cost of living, yet ranks 31st in our overall ranking, in large part because its residents tend to take on too much debt and put too much of their income towards rent and other household necessities.
Besides Georgia and Mississippi, though, most states that scored well on affordability also performed well in our ranking.
Oklahoma and Kansas, for instance, are the 2nd and 3rd cheapest places to live, and finished 8th and 4th in our ranking, respectively.
Income by state
A big paycheck doesn’t guarantee you the ability to save, especially if everyone around you earns a big paycheck too.
Take the District of Columbia, which is a money-earning machine. Its residents have the highest median income, lowest debt-to-income ratio and smallest percentage of families who have difficulty paying their regular expenses.
That means D.C. finished in the top spot in three of our categories, with a combined weighting of 47.5% in our ranking.
And yet it finished just 15th overall in our rankings. Why?
The District is also one of the most expensive places to live in America and charges one of the highest tax rates to boot.
Most of the other states with top incomes performed even worse. New Jersey finished 43rd overall, despite its residents earning more than everyone except D.C. The story is similar with regards to Maryland, California and Hawaii.
Sadly, high income states also tend to be incredibly expensive to live in.
How to save more if you live in a high-cost state
The ability to establish, and maintain, emergency savings has been an especially important goal over the past few years as rising prices have often outpaced wage gains. This is true even if you live in a state that scored poorly in our rankings.
The good news is that with a bit of planning, and discipline, you can still reach your financial goals.
Make yields work for you
This is the best time for savers in decades thanks to the Federal Reserve jacking up interest rates to moderate sky-high inflation. You can now find yields on savings accounts north of 5%, which is a great depot for your rainy-day fund.
Likewise, certificates of deposit (CDs) are also yielding in excess of 5%, which would have been unthinkable before COVID-19. In a twist, shorter-term maturities (think less than two years) are yielding more than longer-term options. (It’s usually reversed because a bank has to pay you a premium to lock up your savings for longer.)
“CD yields have ticked up recently,” said University of Central Florida economist Sean Snaith, “and that will stay in effect until the Fed cuts interest rates, which I don’t forecast happening until 2025.”
While you should take advantage of the highest yields possible, don’t ignore longer-term CDs either. Eventually, the Fed will lower interest rates, and at that time, longer-term CD yields are likely to fall, as well, and therefore no longer be available to you.
Consider, then, a protracted CD ladder, made up of maturities between 12 months and five years. This way, you’ll hedge against changes in the interest rate environment, while earning a solid yield on your savings.
Pay off credit card debt
At the same time, though, life’s hard on borrowers, especially those carrying credit card debt. The average interest rate on credit cards carrying a balance was 22.77% in the third quarter of 2023, up nearly six percentage points from 2019.
Fortunately, there is no shortage of tips and tricks available to pay down credit card debt.
If you’ve never set up a budget, you can enlist the 50/30/20 rule and adjust your spending until you’re within those guardrails. Use our budget calculator to help you get going.
You can attack the account with the highest interest rate first (the so-called debt avalanche method) or the account with the lowest balance (debt snowballing).
You can move your debt to a new credit card with a long period of 0% interest on transfers (an aptly named balance transfer card) and pay it off before the interest kicks back in. You can opt for a personal loan to consolidate your debt into one easy payment.
If you’re behind the eight ball, and completely out of ideas, you can work with a counselor to devise a debt management plan.
Save your raises
One reason people find themselves in debt and without sufficient savings is because of a concept known as lifestyle creep; the more you earn, the more you spend. While you would have bought a $25,000 car three promotions ago, you now opt for something a bit fancier now.
This can cause everything to go haywire. Not only will you take on more debt to afford your lifestyle, but you won’t be able to save enough to maintain your standard of living in retirement.
One remedy to this is a strategy popularized by financial planner Michael Kitces: Save half your raises, preferably in the form of higher contributions into your 401(k).
This method forces you to learn to live on less, while increasing what you have saved. Moreover, it helps lessen the work your savings has to do once you stop working.
That is, a retirement account (or emergency fund) is meant to replace spending. If there is less spending to replace, then you’ll more easily hit your savings goals.
However you attempt to improve your financial position, it’s important to keep positive. Remember that you are in control of your future, and with some work, you can increase your savings over time, no matter what state you live in.