The world is changing and America is no different and it feels like we are turning a corner that cannot be reversed.
The income disparity in the US has always been extreme, but what is happening now is a spread that might not be able to be overcome. I’m not talking about the billionaire class or the 1% or politics as those have been discussed by far more educated people that I am.
I’m referring to the cost of living across the US. There really are 3 Americas right now and it feels next to impossible to move up from one to the other. Let me explain.
3 levels of America –
3rd world America – Deep south and rural north. Examples include: Rural Mississippi, North Dakota (not cities), native reservations.
2nd world America – Rural areas of 1st world states, populated areas in less desirable climates. Examples include: midwest metros, Raleigh NC, Des Moines IA, Albq NM.
1st world America – Big cities and states in great climates. Examples include: Colorado, all the west coast, most of the east coast, Chicago.
These have existed in three different levels for my entire life, but the disparity has gotten huge. Six years ago the FIRE Family moved from a 2nd world America to the 1st. We moved from Davenport, IA to Estes Park, CO. At the time we sold our home in Iowa for $150,000 – exactly what we paid for it 3 years earlier and purchased a major fixer upper in EP, CO for $300,000.
At first glance those numbers don’t seem too bad since it’s double the price for a much more desirable location. I’ll concede that six years ago that was a doable trade and transition. The problems come in what has happened in those six years. The house we sold in Iowa is still worth basically what we sold it for. Our first house in Estes we sold one year ago for $475,000. We could have done some more work to it and gotten the value well over $500k.
The price we sold our first Estes home for was higher than we could have even afforded. That means in the six years since we first came to Estes we are lucky we came when we did, because as of today it would have been near impossible for us to afford that move. This is happening all over the country across all the different levels of America listed. Values of homes and cost of living in 1st world America continue to rise while the lower tiers are staying relatively flat and in the case of the 3rd world are actually decreasing.
As with all things it is important to identify the problems and do your best to maximize the situation. In this case the move is to find some beautiful land and homes right on the edge of the 2nd and 3rd world and purchase a manor when the same money in the 1st world America buys you a 1 bedroom condo.
If you find yourself trapped in 3rd world America or even the lower tiers of the 2nd world it is getting more and more difficult to transition to the top tier and if you are planning on it then move fast. Every year you let go by is going to become more expensive and restrictive. I was a full blown adult during the 2008 housing crisis and while it is obvious we are living in a real estate bubble right now I do not believe that bubble will burst especially hard in the 1st world America. There is just too much money at the top and these areas are extremely desirable. Demand drives up prices and good weather and recreation is not going out of style.
I expect in my lifetime we will see America divided in a more formal manner. If you’ve spent any time traveling this country as I have you’ll know that there really are multiple Americas and the disconnect has never been greater. The best we can do is take these observations and do the best we can for our future. For the FIRE Family this means we are planning to become self sufficient and use our income/savings from the 1st world to buy a massive property in the 3rd world with the intention of homesteading. While that goal is pretty unique the lesson is still there for others to learn. Wealth inequality is not just a 1% vs the rest equation. There are quite a few different problems that are arising from this issue and it’s important that we all stay educated and informed.