By Kelli B. Grant
There’s new evidence that whether or not you’re trying to keep up with the Joneses, their fiscal fitness — and that of everyone else in your city — has an impact on yours.
This month, Men’s Health — perhaps better known for its “fattest cities in America” feature and shirtless male cover models — has graded the financial fitness of 100 American cities. The magazine examined personal bankruptcies, average credit scores, debts, late payment rates, credit usage, homes in the foreclosure process, spending on housing and average 401(k) contributions to award grades from A+ to F. Lincoln, Neb., topped the list and was one of just six to receive an A+. Dead last: Las Vegas. (The opening salvo: “Have you heard about the new high-stakes game in Vegas? It’s a gamble called ‘living there.’”)
No surprise, the list is heavily influenced by to the poor economy: the bottom 10, along with Sin City, also includes five California cities and two in Florida. It’s not a stretch to guess the housing market collapse and high unemployment rates have led consumers in those troubled areas to put more on their credit cards and less in their retirement accounts.
Men’s Health doesn’t read any significance into the grades, so we’ll offer one: How your neighbors fare financially can impact your financial health. On a direct level, for example, nearby foreclosures can tank your property value, jack up home and car insurance rates, and encourage you to invest in a pricey home security system. The most troubled cities are likely to lag behind in economic recovery and may get worse if residents flee for more secure places. That could leave already cash-strapped cities hunting for more tax revenue, perpetuating the cycle, says Richard Ebeling, an economics professor at Northwood University in Midland, Mich.
More concerning: a neighbor’s behavior can influence your attitudes, whether you know it or not. “Our communities have always given us clues on how to live,” says Kit Yarrow, professor of psychology and marketing at Golden Gate University in San Francisco. If you believe the teacher next door is spending beyond her means, it may influence you to think it’s OK to spend more, too, she says. “Knowing you live in a city with dangerous financial habits can help you decide you don’t want to be a part of that crowd, and make different financial choices.”
Pay Dirt readers, how well does your city’s grade reflect on your financial situation?