Which States Have the Most Financially Responsible People?

During the economic reshuffling occurring during the coronavirus recession, many people are asking themselves whether the professional and personal benefits of living in the most expensive areas of America are really worth it. Many people who are now free to work remotely are considering moving to other areas of the country, where their dollars might stretch further and achieve more financial security.

So which states have the strongest cultures of financial responsibility? Where exactly would you move if you wanted to live in an area where the general culture encouraged more financial responsibility than the norm?

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To answer this question, we need to evaluate what financial responsibility really means, in a way that can be extracted from data sets.

In this article

    What does financial responsibility mean when comparing states?

    We researched and compared financially responsible states by per-capita debt, median household income, and cost of living. A financially responsible state would have a low per-capita debt as compared to median household income, coupled with a reasonable cost of living.

    Comparing states by per-capita debt

    According to the New York Federal Reserve, the average per-capita household debt in the United States is $51,580.  For reference, the five states with the lowest per-capita household debt were West Virginia, Mississippi, Arkansas, Kentucky, and Oklahoma, while the five states with the highest per-capita debt were Hawaii, Colorado, California, Maryland, and Washington.

    Comparing states by cost of living

    The Missouri Economic Research and Information Center measures cost of living across America, which is set at a value of 100. For reference, the five states with the lowest cost of living are Mississippi, Kansas, Oklahoma, New Mexico, and Arkansas, while the five states with the highest cost of living are Hawaii, New York, California, Oregon, and Massachusetts.

    Comparing states by median household income

    According to the Kaiser Family Foundation, the median annual household income is $60,336.  The five states with the highest median annual household income were Maryland, New Jersey, Hawaii, Massachusetts, and Connecticut, with the lowest five being West Virginia, Mississippi, Arkansas, Louisiana, and New Mexico.

    States by debt-to-income ratio

    One way to compare states in terms of the financial responsibility of their citizens is to look at the debt-to-income ratio in that state. In what states did people hold a low proportion of household debt compared to others? Those states would be ones where the population generally avoids and minimizes consumer debt compared to others.  To calculate this, we simply divided household debt by median household income in each state.

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    States with the lowest debt-to-income ratio

    • Kansas, 67%
    • Oklahoma, 68%
    • Iowa, 69%
    • West Virginia, 70%
    • Nebraska, 70%
    • Wisconsin, 71%
    • North Dakota, 71%
    • Kentucky, 72%
    • Ohio, 73%
    • Indiana, 73%

    States with the highest debt-to-income ratio

    • Colorado, 107%
    • California, 103%
    • Arizona, 96%
    • Washington, 96%
    • Oregon, 95% 
    • Nevada, 95% 
    • Idaho, 95%
    • Hawaii, 95% 
    • Virginia, 92% 
    • Utah, 91%

    The states with the highest average debt-to-income ratio were almost exclusively Pacific Coast and Mountain West states, while states with lower debt-to-income ratios were mostly in the Midwest.

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    What’s in the middle? The two median states were New York and Connecticut, both at 79%. Both states have a high income level and a high debt level.

    States by cost of living

    One factor that might skew this information is the cost of living in various states. If a state has a high cost of living, then even if the debt-to-income ratio is good, your dollars won’t go very far.

    One simple way to approach this question is to simply multiply each state’s cost of living index by its household debt-to-income ratio. Ideally, states with a low cost of living ratio are better to live in financially, as are states with a low household debt-to-income ratio. 

    The lower the number, the easier it is to live in that state, financially. Let’s call this the financial household health index.

    States with the best financial household health index

    The state that performed the best overall in our financial household health index was Oklahoma, with an index of 59.4. Oklahoma was followed by:

    • Oklahoma, 59.4
    • Kansas, 60.0
    • Iowa, 62.7
    • Michigan, 62.9
    • Mississippi, 63.5
    • Nebraska, 63.9
    • West Virginia, 63.9
    • Arkansas, 64.5
    • Indiana, 65.5
    • Kentucky, 65.6

    Again, the top states were dominated by the Midwest and Great Plains, with a few states from the South popping in as well.

    States with the worst financial household health index

    The state that performed the worst overall in our financial household health index was Hawaii, with an index of 183.4. Hawaii’s cost of living is astronomical compared to other states, which carried it to the top here even though it was down the list in terms of debt-to-income ratio. 

    • Hawaii, 183.4
    • California, 156.3
    • Oregon, 127.9
    • Maryland, 114.6
    • Colorado, 113.3
    • Massachusetts, 111.4
    • New York, 109.2
    • Washington, 106.4
    • Nevada, 103.3
    • Alaska, 101.0

    The states among the worst in terms of financial household health index were mostly coastal states.

    The two states in the middle? Minnesota (82.2) and New Hampshire (83.9) were right in the center of the list.

    Is it time to move?

    These numbers indicate that in a very general sense, if you want to live in communities where people are more likely to be financially responsible than average, strongly consider the Midwest and Great Plains, with the South as a third option.

    That doesn’t mean this should be the only metric by which you choose where to live, but only a useful thing to consider while choosing a place to settle for the long term. 

    You will obviously want to seek out places to live that match up well with other things you value. Look for areas that suit your lifestyle, your climate preferences and general culture needs.

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    Within each of those states, you’ll find a wide variety of cultures and communities. You’ll find different areas with different rates of crime. In some states, you’ll find surprisingly different climates in different parts of the state For example Chicago, Illinois, feels like a completely different climate than the southern tip of the state, and there’s a huge difference between southern Iowa and northern Iowa. 

    While these numbers paint only a broad picture of the financial conditions of households in the state, you will encounter financially responsible people all over the country. These statistics only point to an overall broad trend in that you’re likely to find it easier to find friends and a community that acts in a financially responsible pattern in some areas rather than others.

    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Trent Hamm

    Founder & Columnist

    Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to Interest.com, PersonalLoans.org, and elsewhere.