California is Among 15 Most Independent States

 California Ranks in Top 20 Of Independent States

With Independence Day right around the corner and inflation continuing to threaten Americans’ financial independence, the personal-finance website WalletHub released its report on 2024’s Most Independent States, as well as expert commentary. This report follows WalletHub’s report on the Most Patriotic States.

To determine the most self-sufficient states, WalletHub compared the 50 states based on five sources of dependency: consumer finances, the government, the job market, international trade and personal vices. You can find highlights from the report below.

Independence in California (1=Best; 25=Avg.):

Overall Rank: 15th

• 4th – Median Debt per Income
• 6th – Share of Adults Saving for Children’s College Education
• 25th – Share of Federal-, State- & Local-Government Employees
• 28th – Share of Jobs Supported by Exported Goods
• 6th – Industry Variety
• 3rd – Share of Current Adult Smokers

“As we celebrate America’s Independence Day, it’s also worth taking time to recognize the individual states that have the most independent qualities as well,” Cassandra Happe, WalletHub analyst said. “Utah and Colorado are the most independent in 2024, according to our analysis, and residents display their independence in a variety of ways, from not being reliant on state- or federally provided benefits to saving money for the future and not being addicted to gambling, alcohol or drugs.”

Utah is the most independent state in America, in part because it has an extremely low percentage of people with public assistance income or who receive SNAP or food stamps, Happe said. “In addition, Utah residents don’t rely on unemployment income, as the state has a 3% unemployment rate, one of the lowest in the country. To top things off, people in Utah are not very dependent on addictive substances, as the state has the lowest share of people who smoke or binge drink in the country.”

Expert Commentary
 
Is it fair that some states are more dependent on the Federal Government than others?

“This depends upon your perspective. Is it fair that those states that contribute the most in tax revenues to the federal government normally receive the least amount in return because of a complex revenue-sharing formula? Probably so, since it is based on a ‘liberal’ social equity formula that gives proportionately more federal dollars to those states that need it the most… Overall, revenue sharing seems like the right thing to do, with the richer states giving the needier states more money to help increase their standard of living. Revenue sharing within states also gives more state revenues to poorer cities and school districts, while the more affluent cities and school districts receive the least revenue-sharing dollars from the state.”
— Kenneth F. Warren, Ph.D. – Professor Emeritus, Saint Louis University

“It is not only fair, it is inevitable. There is no reason to think that each state (its people or its government) will or should receive exactly the same number of dollars over time from the federal government that it pays in. Virginia has a lot of military facilities, so the federal government spends more money from the Pentagon (which is in Virginia) there than it does in, say, Nebraska. Florida has a lot of retirees, so they receive relatively more Social Security and Medicare benefits. The federal income tax collects more money from the wealthy than from the poor, so states that have higher concentrations of rich people (New Jersey, Illinois, Connecticut, etc.) pay in more money while states with a lot of poverty (Mississippi, Arkansas, and so on) pay less — and receive more. Federal disaster relief goes wherever the latest disaster has happened.  It would be truly bizarre if people, needs, businesses, and state/local priorities were distributed geographically to exactly match tax payments.”
— Neil H. Buchanan – Eminent Scholar Chair in Taxation, Professor of Law; Director, Global Scholarly Initiatives, University of Florida, Levin College of Law
What tips do you have for a person who wishes to increase their financial independence? What are some first steps?

“I do not think many personal financial advisors differ very much on what one should do to increase his or her financial independence. Getting a good education is key since there is a positive correlation between achieving a higher education level and earning a higher income. The only exception to this pattern is for Ph.D.’s, who earn on average less than those receiving a master’s degree. This is because many people holding Ph.D.’s go into higher education, a field that does not pay that well. Of course, managing your finances in an intelligent way is important to help secure financial independence. This means not spending more than you can afford, which in turn means limiting purchases requiring financing. Limiting credit card debt is very important to one’s financial independence. Emergency savings should be more than your credit card debt, yet 36% of adults in America have higher credit card debt than emergency savings. Spending within one’s budget is the only rational thing to do, yet often ignored.”
— Kenneth F. Warren, Ph.D. – Professor Emeritus, Saint Louis University

“NEVER run a balance on a credit card. Use a credit union (which charges very low fees) for your banking needs. Pay down your highest-rate loans first. Max out all available contributions to retirement accounts.”
— Neil H. Buchanan – Eminent Scholar Chair in Taxation, Professor of Law; Director, Global Scholarly Initiatives, University of Florida, Levin College of Law

With only 45% of young adults being financially independent, what are some of the best ways parents can prepare their children to be financially independent in their adult life?

“Parents must serve as positive role models for their children. This means that they should embrace a strong work ethic backed by achieving a high educational level. These are ingredients of employment success. If children see their parents as successful in the workplace, it is likely that their children will recognize what it takes to achieve job success and financial independence. Parents also should not engage in destructive behavior such as drug and alcohol abuse, which often leads to job failures. Additionally, parents should not create financial dependence in their children by encouraging financial dependence. They need to show them ‘tough love’ by showing them the door so they learn to make it on their own. Overly nurturing parents will ruin their children’s ability to become strong individuals so they can provide for themselves.”
— Kenneth F. Warren, Ph.D. – Professor Emeritus, Saint Louis University

“Parents should not assume that their kids will pick up financial literacy ‘on the streets,’ as it were. Financial literacy is learned, and those who are financially illiterate will never become financially independent — or even if they inherit enough money to be independent, financial literacy will make them an easy mark for scam artists or simply bad decisions.”
— Neil H. Buchanan – Eminent Scholar Chair in Taxation, Professor of Law; Director, Global Scholarly Initiatives, University of Florida, Levin College of Law

 

For the full report, please visit:

http://wallethub.com/edu/most-independent-states/36426