High Paying Job, Expensive Area: Does it ever make sense?

[CaliforneyWay]

Hi folks,

Background: I'm an experienced web developer with a wife and infant daughter, and we try to be Mustachian where we can.  We currently live in a Cleveland suburb, where we own a decent home.

I recently saw an ad for Triplebyte show up in my Facebook feed, and on a whim I clicked through and did their test.  Triplebyte is a tech recruiter startup that does background-blind testing and interviewing to find development talent that might otherwise be overlooked, and fast tracks that talent to final interviews at their client companies (which now include Apple, Facebook, Reddit, and Stripe, among others, as well as smaller startups).

I was a bit surprised that I passed their test and was eligible to skip the phone screen and go right to their final interview.

This is pretty cool, but AFAIK all of their clients are in either San Francisco (they were previously exclusive to Y Combinator, a startup incubator out there) or New York City.  It's a bit early to be thinking of this now, but if I do well enough on the Triplebyte interview, they will start setting me up to fly out and interview with companies in one of those two places.

There are two main issues here.  There's the purely financial issue of whether my savings power will be increased if we move to one of the most expensive areas of the country.  I'm hoping that with some enough income and the ability to find a place cheap enough, we can still do this.  I saw a thread mentioning a bunch of towns in the Bay Area that *might* be cheap enough to make sense, but I'll have to examine this more if push comes to shove.  I *really* don't like the idea that it could essentially impossible to own a house out there unless you're a millionaire.  That said, if I can FIRE from the income differential within five to ten years, and then potentially move somewhere cheaper, it still might be OK to rent, assuming getting a two or three bedroom apartment isn't similarly stupid expensive in comparison to my income.

The other issue is family.  My family is in Ontario, and my wife's family is in Pennsylvania.  Where we are currently, her family is within about a one hour drive, and mine is within about a six hour drive (start running a Cleveland Lake Erie ferry already, please!)  Obviously that won't be the case if we move to California.  New York is still within driving distance but it would be a hike (roughly seven hours).  I think whether or not this makes sense depends on the ability to get fairly frequent flights back to see family.  This, of course, adds to the potential expenses of living in the area as well.

I previously interviewed with Google in Pittsburgh and while I didn't get past the final interview there (this time), we considered the idea of keeping our home and renting it out for an extra income stream (however slight, since we still have to pay the mortgage).  Back of envelope calculations showed the numbers working out, but of course in California or New York, I'd be an even more absentee landlord, so I'd have to find a good property management company.

I'm not hugely attached to the idea of a new job at the moment; my current one is pretty good, with decent income and appears to be growing quickly.  I have some concerns, but it's not a situation where I need to leave right away.

What do you think?  I'd love to work for a company like Reddit, but not if it costs my daughter the ability to see her grandparents, and only if it lets us save more money for (early) retirement and college.  Is it possible?  Do you have any ideas about making it possible?

[Feivel2000]

Saving 50% from $40,000 is less money than saving 20% from $120,000.
So of course it's possible. You have to keep the lifestyle creep in check.

One idea I have without knowing any details would be to see this as a strictly temporary income boost and not move with the family. Instead you fly home every week or bi-weekly. Maybe you can make a deal with 3 weeks at the office and one week home office.

[mountains_o_mustaches]

Saving 50% from $40,000 is less money than saving 20% from $120,000.
So of course it's possible. You have to keep the lifestyle creep in check.

This just isn't correct.  It will take you 37 years to FIRE at a 20% savings rate, even though the dollar amount is higher, you're living off of 80% of your pay and it will take a long time to save enough money to maintain that level of spending.  The 50% at $40k is a faster way to FIRE (17 years - 20 years less!!).  The only way this might work out is if you save 20% in a HCOL area and then move to a LCOL area, but just like the above poster indicated you'd have to make sure the spending isn't lifestyle creep (i.e., fancy gadgets, cars, restaurants) and really just due to things like mortgage, taxes, cost of food / utilities in your HCOL area.  Don't let the total amount that you're saving fool you!

Review these MMM articles:
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
http://www.mrmoneymustache.com/2012/11/14/doubling-your-salary/

[Feivel2000]

Saving 50% from $40,000 is less money than saving 20% from $120,000.
So of course it's possible. You have to keep the lifestyle creep in check.

This just isn't correct.  It will take you 37 years to FIRE at a 20% savings rate, even though the dollar amount is higher, you're living off of 80% of your pay and it will take a long time to save enough money to maintain that level of spending.  The 50% at $40k is a faster way to FIRE (17 years - 20 years less!!).  The only way this might work out is if you save 20% in a HCOL area and then move to a LCOL area, but just like the above poster indicated you'd have to make sure the spending isn't lifestyle creep (i.e., fancy gadgets, cars, restaurants) and really just due to things like mortgage, taxes, cost of food / utilities in your HCOL area.  Don't let the total amount that you're saving fool you!

Review these MMM articles:
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
http://www.mrmoneymustache.com/2012/11/14/doubling-your-salary/

Why should he stay in the HCOL area? Why should his retirement budget be based on the HCOL budget?

[CaliforneyWay]

While it would be nice to retire around San Francisco, I don't think that's going to happen.  I would probably be considering somewhere further out and cheaper (or back in Ohio, although I have to say that California weather is appealing).

Actual numbers are harder to come by since I don't know if I will get a job or how much it will pay, but I make ~$85K at my current job (Cleveland), and let's say I could make at least ~$150K in California.  I can try to put together a budget and post it here if you feel it would be beneficial, but I will be running that budget in any case before figuring out whether or not to move.

[maizefolk]

You likely won't be able to increase your savings rate by taking a higher paying job in a higher cost of living area. Depending on the numbers you may be able to increase the absolute amount you save each year which could accelerate FIRE if your plan is to move back home once you hit your magic number. There used to be a forum member (since banned) who claimed to have retired at 23 after saving 80+% living in an extremely high cost of living california city.

The biggest risk is that you and/or other members of your family will end up putting down roots in the HCOL area and you'll end up much worse than you were beforehand. Only you can be a good judge of how likely that is in the case of your own family.

[schneider]

You likely won't be able to increase your savings rate by taking a higher paying job in a higher cost of living area.

Expressed as a fraction, I do agree that you are not likely to save more money. I think the willingness to retire someplace cheaper than the place you earned your money is the key to making early retirement work so for my personal calculations I think in terms of dollars saved per year. So…

Actual numbers are harder to come by since I don't know if I will get a job or how much it will pay, but I make ~$85K at my current job (Cleveland), and let's say I could make at least ~$150K in California.  I can try to put together a budget and post it here if you feel it would be beneficial, but I will be running that budget in any case before figuring out whether or not to move.

$150K in Silicon Valley buys you more than $85K in Cleveland and it is absolutely possible that you'll save more money, expressed in dollars. To expound on that a little…

Housing is quite likely to be twice as expensive or nearly so, and I guess your state income tax rate is going to be twice as high (though my gut tells me you'll get more for that tax), but none of your other expenses will be terribly different if you adhere to a frugal lifestyle. Other than housing (ha!), California is really not that expensive. (New York is a more complicated question — I believe it matters a lot more specifically where you live.)

California is a rather renter-friendly state (google around for rent control laws when the time comes) and decent rentals, as I recall, are not so hard to come by in the South Bay and East Bay, so don't be afraid to rent if it winds up looking like a better value than buying (and I suspect it will). The above is broadly true in New York as well. My wild guess is that the break-even point would probably come somewhere in the neighborhood of $120K, but that's a number I made up. Making and running a budget is the right thing to do.

Quality of life stuff is hard to figure out though. I'm sure you're going to put plane tickets into Pittsburgh or Toronto or whatever into your budget, but you are going to have to formulate your own opinions about how much you value flying across three time zones versus driving a few hours. (Paradoxically, flying from SFO to YYZ isn't so much longer than driving from Cleveland even when you factor in getting to the airport etc — though of course it's much more expensive!) I think that flying is easier than driving, but I have no idea if a small child would agree. 

Two other points to think about, one easy to quantify and one hard:

• What about your commute? California weather is amazing, but the traffic is not. Public transportation is very likely to be your best option and is really pretty good even though locals complain, but make sure you know the options. (Hm, this is an added cost too, though probably not so big in the scheme of things.)
• How would a new job help your résumé? If the answer is "a lot", you can always give it a go for a couple of years and see what happens; in the worst case you just move back to Ohio, somewhat richer and better-qualified. Obviously, that's only comparable once you have a job offer and hard even then. On the other hand, if you get an offer from one of those tech firms people have heard about, I suppose you're going to have no trouble finding work wherever you go.

TL;DR: if I were looking at those numbers, I would be happy to move to California for the somewhat-increased net savings and the the superior outdoors opportunities. But that may not speak to your values at all.

[CindyBS]

How often have you been to SF?

I have lived in OH and after spending 1 week in SF, I knew I could never live there, even though I loved the area. 

I would highly recommend spending 1 day driving in rush hour in SF before making any decision.  Then go buy some groceries and see how everything costs a lot more than in OH.  Also, remember that the weather is nice, but only 1 type of weather almost all year.  Not good if you enjoy hobbies in all seasons like cross country skiing or sledding with the kids, or swimming on a hot summer day, or crisp fall evenings with backyard clam bakes, etc. etc. 

I totally understand why the area is so popular, but if you are used to CLE prices, lack of gridlock/traffic, etc. it could be a huge difference in quality of life to move to SF.  Add to that lack of contact with grandparents.   Unlike hard numbers like retirement savings those type of things are very hard to quantify and are highly personal. 

My $.02 is to go out there and do the things that living there would entail - rush hour traffic, scout out housing options, etc. and then make some decisions.  You may find the extra money to be worth it, you may not.   

[maizefolk]

Housing is quite likely to be twice as expensive or nearly so, and I guess your state income tax rate is going to be twice as high (though my gut tells me you'll get more for that tax), but none of your other expenses will be terribly different if you adhere to a frugal lifestyle. Other than housing (ha!), California is really not that expensive.

This does not agree with my experiences, but it does depend a fair bit on lifestyle choices. My values are from the bay area which is obviously not representative of all of California.

Housing is definitely much more expensive, rent was maybe 3x what I would have paid for an equivalent apartment in the midwest, buying a house would have been at least 5x. Car insurance for the exact same car through a national insurance company dropped by half when I moved out of CA (despite the car being older and worth less at that point). Gas cost about half again what my friends in the rest of the country were paying. Finding bananas for 0.99/lb was cheap when I lived there, now, despite living somewhere where the cost of transportation from places where bananas actually grow is much more, the price has to drop below 0.49 before it seems unusual.

Now the weather is quite nice and it would be much easier to do without a car in SF than in other places I've lived which would help the savings rate a lot. But don't underestimate the difference in cost of living.

[CindyBS]

Housing is quite likely to be twice as expensive or nearly so, and I guess your state income tax rate is going to be twice as high (though my gut tells me you'll get more for that tax), but none of your other expenses will be terribly different if you adhere to a frugal lifestyle. Other than housing (ha!), California is really not that expensive.

This does not agree with my experiences, but it does depend a fair bit on lifestyle choices. My values are from the bay area which is obviously not representative of all of California.

Housing is definitely much more expensive, rent was maybe 3x what I would have paid for an equivalent apartment in the midwest, buying a house would have been at least 5x.

We stayed in a house last year in SF proper that would sell for about $150-$200K in CLE.  Zillow valued that house at $1.2 Million.  That is just 1 experience in a huge real estate market, but I agree that at minimum of 3-5X more for housing is probably more realistic in terms of housing differences.  We didn't have opportunities to maximize price savings while we were there, but I estimated grocery prices were about 30% more than in CLE. 

[Ocinfo]

It can, but based on the numbers you provided, I don't think it does for you.

Does your wife work? If not, I would not be eager to trade $85k in Ohio for $150k in the Bay Area. Even then, child care is easily $2k+ per month.

It often makes sense if you're younger, childless, single, currently unemployed, or wife also has opportunity to make a high salary (some combo of these factors).

My advice is to go through the process, get an offer (if it happens), then focus on figuring out ways to work remotely or to leverage the offer into a higher salary in Cleveland.


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[schneider]

I'm now questioning my earlier optimism. I'm not in the habit of thinking about car insurance or child care, et cetera.

I'll say this: the difference between housing twice as expensive and four times as expensive is likely the difference between coming out probably-ahead and very far behind.

Regardless, I agree with CindyBS: if the Bay Area feels like a step down in quality of life, there's no way that any realistic salary there is going to be worth it if you've got a good career in Cleveland.

[LostGirl]

Bay Area local here, it sounds like you are just testing the waters. No reason to not consider some mythical potential offer. The Bay Area is amazing and we love living here on two incomes. but everything posted is true. It's crazy expensive so you have to want to live here or it's just not worth it. If you will take advantage of the lifestyle than definitely consider. I work with people making 150 who drive 90 minutes each way for affordable housing (owning a home)
Good luck!

[badassprof]

We live in the bay area too. It is expensive true. But for both my partner and me, we can make almost 3x what we would make in the states where we grew up (Oregon and Wisconsin) in our chosen professions.  A couple things to consider:

1. You don't have to live in SF proper. It is true that it is expensive in other parts of the bay, but not as expensive in some cases. Computing can be a bear: if you can live close to a bart or transbay bus, that can help.

2. House hack. My partner bought our house in 2006. It has a two bedroom apartment we rent, which brings our mortgage down to 840 a month.The rent has steadily gone up (we are less than a mile from UC Berkeley and love dogs, so will happily rent to folks with pets, so high demand).

3.  We don't plan to retire here.that enables us to, hopefully, take the money and run.i think that is key to making the Bay Area work.

4. i have lived all over the country, and while housing is expensive, other items, like food and clothing, don't have to be. We cook from scratch, try to keep eating out infrequentky, and tend to buy mostly used clothes. I am sure some friends and colleagues would find that surprising, but these choices enable us to squirrel away close to 70%.

[badassprof]

Sorry for typos--thumbs and phone: a bad combo!

[Aelias]

My husband grew up near Cleveland, and we met in college there.  We're currently living in Boston, which is not as bad as Bay Area or NYC, but HCOL by any standard.

1) My husband's in tech, and the top benefit to living in a tech hub is job mobility.  There's security in knowing that if his current job isn't working out, he can EASILY get another one because the hiring is just insane.  We still have friends who live in Cleveland.  They tend to stay in their jobs longer not because they want to but because there are just fewer options.

2) If you move to one of those places, there are going to be significant lifestyle changes you'll have to get used to.  A lot of it seems small, but it kind of adds up. There will be a lot less driving and a lot more walking / biking / transit, and all the driving will be more aggressive. Everything is more crowded and, therefore, takes longer than you think it should.

3) The price of everything will go up, but some of it is more within your control than others. 
-Food--very much in your control. If you look around, you'll figure out where the good grocery deals and cheap, good restaurants are (hint--not-yet-fully-gentrified ethnic neighborhoods are a gold mine!)
-Entertainment--should be free! Countless free opportunities if you're resourceful.
-Housing--some flexibility, but not a lot. You're going to pay more to get less space, probably in a neighborhood that's very different and not as "nice" as where you are now. The alternative is to move to the wayyy-out suburbs--some places will let you telecommute at least part of the time.
-Childcare--hoo-boy, childcare!  We lucked out by finding a very high quality home daycare.  Otherwise, we'd be paying roughly $20K per kid per year.  No joke.
-Schools--depending on where you end up living, you might need to consider whether private school is an option.  I'm a big believer in public school, but it's comforting to know I could go private if I had to.

4) Another point on housing.  If you're in a position to buy, it's possible to get a good deal on a place that needs cosmetic work, and fix it up as you live in it.  The housing market in our neighborhood is crazy bananas--our home has almost doubled its value since we bought in late 2012.  That's not including improvements.  I think of that house as our emergency-emergency fund.  If we ever needed to, we could sell that house and move to a LCOL.  Doesn't work the other way around.

5) Travel to PA and Ontario to visit family would be hard, but not terrible.  We drive to Cleveland usually at least once a year.  Cheaper than flying (even with a hotel stay), and we get to explore attractions in PA / upstate NY.

[RyanAtTanagra]

I did this exact thing about 6 years ago.  I'm from the Cleveland area (Akron) and moved to the SF Bay.  It was absolutely a financially good decision.  It shaved about 10 years off my retirement timeline.  My cost of living doubled, but so did my salary.  So I maintained about the same 50% savings rate I had in Ohio.  If you're not planning to retire here this is huge, because it meant I was saving twice as much while planning to retire back to a lower cost of living area.  I actually hit my bare bones FI number this year (12 years before I expected to in Ohio), meaning I could theoretically move back and retire, but not ready yet.

I'd say do it if you want to be out here for other reasons.  I was moving out of Ohio for the change of scenery, it wouldn't be worth it for me to have just done it for the money, that was a bonus.  It's also only worth it if you get a BIG pay bump though, which if you're in tech, should be reasonable.  Not saying I'd recommend it, because it could have backfired, but I took a gamble and lied about my current salary when interviewing with the California company I moved out here for, because there was such a huge disparity between tech salaries in Ohio vs SF.  I never would have gotten a competitive salary if they knew how much more they were going to be paying me.

[compumike2]

(Full disclosure: I'm an engineer at Triplebyte, which is how I saw this thread. Congrats on beating the quiz [the pass rate is very low!]. If you book your 2-hour Google Hangouts interview through the generalist/full-stack track, I may be your interviewer. Long-time MMM reader but have never posted.)

1) We wrote a blog post called Does it Make Sense for Programmers to Move to the Bay Area? with some numbers behind this decision that may be interesting.

2) Personally speaking: my girlfriend and I share a nice but modest 1-br apartment in Palo Alto 5 min walk from Caltrain station that we rent for < 10% of our combined gross W2 salaries (i.e. even treating illiquid startup stock options and big-co liquid RSUs/bonuses as a hard 0). She works at a big corp, I work at a small startup (Triplebyte itself). Our savings rate is huge in absolute dollar terms and respectable in fractional terms too. HOWEVER, if/when we have kids, I do think we will consider leaving the area. The opportunities here are great, but the time commitment is very high, so I see it as making a huge dent while we have the chance.

3) We just (literally yesterday!) announced that Triplebyte is now available in NYC as well, which may be more compatible with your desire to be close to your families in PA/Ontario. Some thoughtful comments from engineers who've worked with us as well: see https://news.ycombinator.com/item?id=14798126

Hope you all don't mind me posting on here! (Happy to try to answer questions about our process.)

[cats]

Well, I live in the Bay Area with a spouse and a kid.  I think it is possible to save quite well here and live a very mustachian lifestyle.  We have 2 full-time incomes, kid is in FT daycare, our savings rate is in  excess of 70%.  For us, the big key is that we are willing to rent a fairly small apartment rather than aspiring to buy.  A modest 2 bed/1 bath near us recently sold for $1.3 million.  Paying the property tax, maintenance, and mortgage interest on that would definitely erode our savings rate.

As far as does it make sense...in the short term/accumulation phase of FIRE, I think it can.  In our case, we have 2 professionals and there are not many areas of the country where we could BOTH find high-paying jobs in our field.  Any other locations would also be HCOL metro areas, so it's not really a case of Bay Area vs. somewhere LCOL, but Bay Area vs. slightly less crazy but still HCOL area.  However, I don't think it makes sense as a long-term decision due to the craziness of the housing market (specifically if you are looking to buy).

For us, I find the big drawback to be distance from family.  Due to cost of housing, it's not really feasible to move retired grandparents in with us or even to maintain a guest room/suite so they can come for extended visits.  If they visit, they have to stay in a hotel or AirBnB.  Now that we have a kid, I find the lack of nearby family especially challenging/sad--I grew up not knowing my grandparents and I would like things to be different for my son.  Definitely a FIRE goal for us is to either move closer to grandparents or move to a location where we can afford a little extra space to facilitate extended visits.

Another thing to consider, it's not clear if your wife is a SAHM or would also be looking for a job.  While there are SAHPs in the Bay Area, I feel like there's a pretty substantial culture of 2 working parents + FT childcare or nanny.  If your wife is planning to SAHP she might find it quite isolating to be uprooted.  Just something to consider.

[Heroes821]

It's 2017, there is no reason for a skilled developer to have to move across the country to work at a company that is global (Apple, Facebook, w/e).  Working from home should be an option. VPNing with a company computer is so acceptable these days in IT.

I know a web developer that went to Google and they said he had to spend 1 year in an office, but he's like 4 months into that job and due to his family living in another state he gets to work from home with them at least 1 week a month.

[Urchina]

we live in SoCal, in a completely gorgeous year-round climate. DH moved here right out of college for work (software engineer, very specialized company/field). I moved here because of DH. Closest close family is 400 miles away.

Love the lifestyle, love the climate, but it has not made up for raising kids so far from our families. We have been able to afford great preschool (no public preschool here), having me stay at home for 5 years, and we have a great tribe of friends, but raising kids away from our families sucks. Don't do it if you don't have to. Not worth the money. If anything, move closer to family. Assuming you have reasonable relationships with them, which it sounds like you do.

Yes, you can fly to visit a couple of times a year. But you're going to HAVE to fly. You'll use most of your vacation leave going to see family. We live 5 hours from Yosemite and haven't been (ever) because with the exception of a two-week trip 4 years ago, literally ALL of our vacation time over the past 15 years has been to see family.

Just something to think about. Sounds like you have a pretty comfortable life where you are now. Chasing money won't likely improve that and may make it less good.

[john c]

If you're as good as you say you are, then you won't be making $150k.  I do some tax preparation each year, and I do tax returns for a lot of high flying tech people.  Individual contributors working at the hottest companies are making more like $400-$500k per year.  Base salary will be around $150k-$180k, but stock compensation over the last few years has been another $300k.  Run these numbers in your calculator.

I know a kid who graduated from UCLA in computer science.  His first job out of school was $120k plus stock.  This the primary reason things are so expensive around here.

So before you dismiss the idea, see what the job offers really look like.