These days, it’s no secret that the cost of living is higher than most would prefer. In this blog we’re going to talk about the New Jersey cost of living in 2022, addressing the question on many of us Garden Stater’s minds: why is it so expensive to live in New Jersey?
Before we get started, you may want to check out other New Jersey finance blogs we’ve written:
A checklist for moving to Morristown, NJ from NYC
What is the average income in New Jersey?
What is the New Jersey 529 Plan and should I use it to send my kids to college?
Should you buy a New Jersey vacation home?
40 questions to ask a financial advisor in New Jersey
The New Jersey Cost of Living is…high
First let’s start with a basic definition.
What is a Cost of Living?
The cost of living is the monetary resources required to maintain your lifestyle, at its most basic level and accounting only for expenses that are necessary. This may include:
- Food
- Housing
- Clothing
- Medical care
- Taxes
- Transportation
Cost of living can be, and is, measured by an index. The US Bureau of Labor Statistics publishes the Consumer Price Index, or CPI, which tracks the cost of a representative basket of goods and services to see how it changes over time. If this is a concern of yours, we’ve commented on how inflation impacts Social Security and about I Bonds in other blogs we’ve written.
So, by universal standards, what is the cost of living in New Jersey and how expensive is New Jersey relative to other states? Let’s look at what the indexes have to say.
According to the Missouri Economic Research and Information Center, during the first quarter of 2022 the Northeastern states were some of the most expensive places to live, as compared to the Midwest or South. New Jersey was the 10th most expensive state in the country with an index of 112.9, meaning it was nearly 13 points above the national average. The New Jersey cost of living was lower than its neighbor New York’s, but more expensive than Delaware and Pennsylvania’s.
We’re not going to linger too long on the data.
Why?
Because the indices don’t necessarily capture your personal living experience.
They are just measurements, not your life.
The cost-of-living data for New Jersey may speak to the general trend that the population of the state is impacted by, but everyone has a different lifestyle. Living in New Jersey, albeit expensive, may have benefits that make it worth it relative to living somewhere else.
Your personal situation and spending habits dictate your expenses. Who knows, you may have lower overhead despite living in an expensive state such as New Jersey, just because of how you go about your daily life! Maybe you are a minimalist who consumes very little, consults with online “Buy Nothing” groups to source second hand goods, cooks meals at home, rarely travels or spends money on entertainment. That would certainly reduce your personal expenditures.
But nonetheless, on an empirical basis New Jersey is one of the more costly places to live.
(Cue the whiny violin music)
Why, why, why does New Jersey have to be so expensive?
Let’s think about why the cost of living in New Jersey is so high (supposedly).
#1 Housing
First let’s talk about housing since that is typically one of the larger expenses a person may have. The home ownership rate in New Jersey was 62.7% and a typical home in New Jersey, including condos, CO-OPs and single family residences, is valued at $461,990 as of May 2022.
#2 Taxes
New Jersey taxes are nothing to sneeze at.
According to Tax Foundation:
- The state and local tax rate is 13.2%, ranking it #45 in the country,
- The highest individual tax rate is 10.75%,
- The property tax is 2.21%, much higher than the national average.
And don’t worry – the NJ double tax is just a myth. You’re not taxed twice if you live in New Jersey and work in New York City.
Given these two factors, there is an intrinsically higher cost of living that goes along with being a resident of the Garden State.
But guess what –the average income is a lot higher as well!
There are many different ways to measure how much people in New Jersey make. If you were to look at the median household income, it comes in around $82k – which is about $15k higher than the US average.
As we’ve said before, it isn’t about how much it generally costs to live in New Jersey, or how much people generally make, on average. It is about your personal experience and how well you are able to manage your finances.
Benefits of living in New Jersey
As a financial advisor in Morristown serving clients in New Jersey and across the country, we love living here and believe there are many benefits to living in the Garden State.
- New Jersey offers the convenience of being close to New York City, while at the same time providing the comfort of a suburban environment.
- It’s a great place to raise a family – I know because I am doing just that!
- There is a public transportation system – the New Jersey Transit – to keep the cost of getting around to an affordable level.
- Healthcare and education are of high quality in this state as compared to many others.
However, just as we’ve mentioned before, everyone has different goals. It’s about what matters to you and how you want to live your life.
It’s important that no matter where you live, and how you do so, you have a financial plan that allows you to meet your goals – and that you follow it! Life is always changing and you never know what it may bring. That is why we suggest getting your finances together, having an investment plan, cash flow budget, and a strategy for meeting your life milestones whether they be sending kids to college, buying a home, or retirement.
Conclusion on the 2022 cost of living in New Jersey
We hope you’ve enjoyed our blog on the cost of living in New Jersey in 2022.
We are financial advisors in Morristown, NJ serving the local community and beyond. If you have questions about retiring in New Jersey, moving there, affording to live there, or (like us) are just plain old Bruce Springsteen fans, reach out and send us a message.
Sources
Missouri Economic Research and Information Center, Cost of Living Data Series, Composite Cost of Living Index, 2022 1st Quarter, https://meric.mo.gov/data/cost-living-data-series
Tax Foundation. Taxes in New Jersey. https://taxfoundation.org/state/new-jersey/
U.S. Federal Housing Finance Agency, All-Transactions House Price Index for New Jersey [NJSTHPI], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/NJSTHPI, July 6, 2022.
U.S. Census Bureau, Homeownership Rate for New Jersey [NJHOWN], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/NJHOWN, July 8, 2022.
Zillow, Zillow Home Value Index (ZHVI) for All Homes Including Single-Family Residences, Condos, and CO-OPs in New Jersey [NJUCSFRCONDOSMSAMID], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/NJUCSFRCONDOSMSAMID, July 8, 2022.