America certainly isn't a country of savers, with the personal savings rate dwindling to 3.8 percent of personal income from about 10 percent in 1960.
But residents of some U.S. cities should find it easier to save, thanks to higher median income when compared with expenses, an analysis from Interest.com found.
The best city to find such a "savings opportunity" is Baltimore, according to the site's analysis of data from the Bureau of Labor Statistics. That's because the metro area's median after-tax income outpaces its typical expenses by more than $2,000 per month, after accounting for both essential and discretionary expenses. Coming close behind was Washington, D.C., with a savings opportunity of $1,664.
"We hear median income has been stagnant, while the cost of living in America's biggest cities has continued to go up," Interest.com Managing Editor Mike Sante said. And that prompted the site to examine the data. "To my surprise," said Sante, "in 16 of the 18 cities, we found that families should have a few thousand left over" to save each year.
Phoenix was the only city where income was lower than median expenses, at a deficit of $95 per month, while Miami had a monthly savings opportunity of just $18, or $212 per year.
The study considered the median cost of living in greater metropolitan areas. So, for New York City, which ranked 10th with a monthly savings opportunity of about $500, that doesn't include only the sky-high cost of living in Manhattan but also included lower-priced areas such as Queens and Suffolk County.
But if families in many of the country's largest cities should have hundreds left over each month, why is the personal savings rate so low? Sante said he believes consumers are increasing their spending to eat up all of their income, partly because what's considered "essential" today is far different from what people wanted in the 1960s.
"Families allow their spending to grow until it consumes every cent that they make," he said.
And because money is relatively cheap -- with mortgage and auto loans hovering at about 4 percent -- some consumers are tempted to trade up for more expensive cars and houses, he said.
The influence of advertising and home-improvement shows might also be influencing consumers to spend more than they should when buying a home, Sante said. Of course, conspicuous consumption is nothing new -- Thorstein Veblen coined the term in the 19th century to describe how an emerging middle class was spending its money.
If consumers are serious about saving, they should take a hard look at the most expensive items in their lives, which typically are their homes and cars, Sante noted. His advice: If you get a raise at work, don't trade up to a more expensive house or car. Instead, sock away that extra money. Skipping your Starbucks latte won't get you as far as being frugal on these big items, he said.
"When you get the mindset, you will take that raise and invest it in yourself," Sante added.
Here are the 18 cities Interest.com studied and their monthly savings opportunities:
1. Baltimore -- $2,021
2. Washington, D.C. -- $1,664
3. Cleveland -- $1,294
4. Chicago -- $876
5. Dallas -- $772
6. Houston -- $767
7. Minneapolis -- $740
8. Atlanta -- $674
9. San Francisco -- $553
10. New York City -- $496
11. Seattle -- $479
12. Los Angeles -- $419
13. Philadelphia -- $419
14. Detroit -- $349
15. San Diego -- $344
16. Boston -- $240
17. Miami -- $18
18. Phoenix -- -$95