Best and worst cities for money management
Many Americans admit that they struggle with their money management skills. In fact, 45% of adults grade those skills a C or lower, according to a National Foundation for Credit Counseling survey.
As it turns out, many people who either excel at or have trouble with money skills live in the same place, according to WalletHub’s 2021 Best and Worst Cities at Money Management, which ranked the money management skills of people in more than 2,500 cities.
Each city was measured on 10 financial factors, including various debt to income ratios, median credit score, late payments, bankruptcy, and foreclosure rate.
“These are the important areas that paint a pretty complete picture of people’s financial behavior and habits,” WalletHub analyst Jill Gonzalez said.
The best and the worst
Certain common factors separate cities at the top of the list from those on the bottom. The top cities have low debt levels, especially when it comes to credit card debt, Gonzalez said.
The very top city, Cupertino, California, for example, has a credit card debt to income ratio of (DTI) of just 1.68%. That means that the average resident only has 1.68% worth of their monthly income in credit card debt. Having a lower debt-to-income ratio (DIT) overall is a good sign because it signals you’re able to pay your bills on time and meet other financial goals.
These top cities also have wealthier, more financially established residents, helping those who live there meet financial obligations easier.
“More affluent communities tended to rank better,” Gonzalez said, “typically with an older population further along in their career.”
The cities at the bottom, meanwhile, tend to include people carrying a lot of debt who also have low credit scores and more frequent late debt payments, Gonzalez said.
“The cities with high debt levels also have them pretty evenly across the board — credit card, mortgage, student loans, car loans,” she said.
Debt collection protections may also play a role.Three of the bottom cities are in Georgia, a state which has an F-grade for its business-friendly debt collection laws, according to the National Consumer Law Center based. Louisiana, which is home to the remaining two lowest-ranking cities, also has an F. California, meanwhile, which has three of the top five cities, has an A rating.
Top 5 cities
Cupertino, California
Median credit score: 769
Credit card debt to income ratio: 1.68%
Mortgage debt to income ratio: 353%
Car loan debt to income ratio: 9.13%
Student loan debt to income ratio: 14.12%
Average number of late payments: 0.93
Scarsdale, New York
Median credit score: 786
Credit card debt to income ratio: 2.46%
Mortgage debt to income ratio: 210.86%
Car loan debt to income ratio: 5.33%
Student loan debt to income ratio: 11.19%
Average number of late payments: 1.05
Saratoga, California
Median credit score: 784
Credit card debt to income ratio: 2.20%
Mortgage debt to income ratio: 210.86%
Car loan debt to income ratio: 9.69%
Student loan debt to income ratio: 13.06%
Average number of late payments: 0.68
Los Altos, California
Median credit score: 784
Credit card debt to income ratio: 2.47%
Mortgage debt to income ratio: 364.91%
Car loan debt to income ratio: 8.97%
Student loan debt to income ratio: 12.83%
Average number of late payments: 0.44
Lexington, Massachusetts
Median credit score: 781
Credit card debt to income ratio: 2.73%
Mortgage debt to income ratio: 293.61%
Car loan debt to income ratio: 9.62%
Student loan debt to income ratio: 16.38%
Average number of late payments: 0.58
Bottom 5 cities
College Park, Georgia
Median credit score: 583
Credit card debt to income ratio: 7.04%
Mortgage debt to income ratio: 333.71%
Car loan debt to income ratio: 45.61%
Student loan debt to income ratio: 82.50%
Average number of late payments: 8.22
Ruston, Louisiana
Median credit score: 650
Credit card debt to income ratio: 7.44%
Mortgage debt to income ratio: 474.37%
Car loan debt to income ratio: 57.75%
Student loan debt to income ratio: 117.06%
Average number of late payments: 7.01
Bastrop, Louisiana
Median credit score: 624
Credit card debt to income ratio: 7.94%
Mortgage debt to income ratio: 356.90%
Car loan debt to income ratio: 72.58%
Student loan debt to income ratio: 89.21%
Average number of late payments: 4.73
Lithonia, Georgia
Median credit score: 595
Credit card debt to income ratio: 7.84%
Mortgage debt to income ratio: 344.46%
Car loan debt to income ratio: 53.49%
Student loan debt to income ratio: 96.10%
Average number of late payments: 9.47
Fairburn, Georgia
Median credit score: 622
Credit card debt to income ratio: 7.52%
Mortgage debt to income ratio: 428.66%
Car loan debt to income ratio: 51.29%
Student loan debt to income ratio: 99.37%
Average number of late payments: 8.64
Money management tips
If you don’t make much money, but you still have expensive obligations like a house, car or student loans, it can be a struggle to keep on top of your finances. But there are ways to sharpen your money management skills and hopefully give your financial situation a boost.
Make a budget and stick to it: A budget is your roadmap to spending and saving. A good basic budget guideline is the 50/30/20 rule. That rule suggests you spend 50% of your income on needs like housing, food, and healthcare; 30% on wants like gifts, vacations, and entertainment; and 20% toward debt and savings.
Keep your debt-to-income ratio low: Experts recommend having a DTI of 35% or less, which means that your monthly debt makes up 35% or less of your total monthly income. That should hopefully leave enough money left for saving and spending after you pay your bills.
Pay down credit card debt: Not only will paying off credit card debt help lower your DTI, but you’ll be unloading high-interest debt. The average credit card interest rate is 14.58% for existing credit cards. That’s a steep price to pay if you wind up carrying over a balance from month to month. That rate also often soars higher if you miss a payment.
Gonzalez recommended two methods for paying off credit card debt: the snowball or avalanche approaches. With the debt snowball method, you pay off your smallest credit card debt first and then move on to your next smallest debt. With the debt avalanche method, you pay off your debts in order of highest interest rate to lowest.
These steps can also help improve your credit score, which lenders use to decide whether to loan you money, and if so, at what interest rate. People with better credit scores usually get much better interest rates.
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