Evaluating relocation

[mobileagent]

I am wondering about how you evaluate a decision to move to a new location for better job market. I want to share how I am evaluating it from purely financial point of view, knowing that there could be many non-financial reasons why one might move to a different city.

In my current city, our annual expenses are around $50K, with a paid off home, for a luxurious lifestyle. Our annual savings are around $200K and this essentially allows us to save 4 years of living expenses every year. Even if the savings are $100K due to smaller job market, it still allows us to save 2 years worth of expenses. If we move to a place like San Francisco, our income might go up, but our expenses are likely to grow significantly. To do an apples to apples comparison, we need to buy an house that is at least 2.5 times the cost of the current house ($1M) for same size & quality. Our living expenses will go up from $50K to almost $200K for the next 15 years if we take a 15 year loan for the house. If we can save $200K a year, which is pretty hard to do in SFO, it will only give us one year of expenses saved in comparison with four years of savings where we live. When we use the multiple of annual living expenses, it seems like staying in the current place is no brainer. Do you evaluate the savings in terms of absolute dollars or multiples/percentage of annual expenses? Would you evaluate relocation differently than me? Thanks for your input.

[Uturn]

My evaluation was a bit less mathematical.  As I was getting all sweaty just lighting the grill, I asked "why the fuck do I still live here?"  I'm single, no kids, siblings have moved out of state, and I'm looking for a new job anyhow. 

Anyone in Colorado need an Information Security Engineer? 

[forummm]

If you're moving for non-financial reasons, maybe some of those will compensate you for having a less luxurious house? Unfortunately, it's a very personal set of valuations applied to many criteria, so you'll have to do the weighing yourself.

I have a similar issue coming up myself.

[mxt0133]

If you were to keep it as a purely economic exercise then it makes difficult to actually justify moving to SF unless your net salary increase actually covers the COL increase.

A few things to keep in mind about SF is property taxes are locked and do not go up significantly due to Proposition 13*.  So that is one reason property prices are higher in general the carry cost of the house is cheaper than in other states.  Also factor in that on average property increases in markets like SF and NY outpace other regional markets.

You can make the numbers work out if you do not keep the same square footage as your current place.  There a few thread here that give examples of how to control cost living even in places like SF and NY.  You just have to be creative.

In my example I moved out of a two bedroom 1000sf apartment in a suburb of NJ to a 600sf one bed room in SF for $150 more.  But our quality of life is significantly better because the city suits our lifestyle more.  We don't drive as much, we are more active, we get to enjoy free activities, instead of always going to a mall, movie or restaurant in NJ.  We put 5,000 miles on our car a year vs 15K in NJ.

I didn't even get a significant salary increase, but my work life balance improved significantly.  I didn't have to deal with commuting to NYC which can suck up 2 hours from NJ.  I also don't have be in the office 9 hours a day even if I get all my work done.  I can leave early and work from home 2-3 days a week at most companies in SF because that's how everyone is used to working.  So on an hourly basis I increased my salary by about 50% because I just don't have to put in so much time 'working'.

However in your scenario, it would be hard giving up 200k of savings a year which is buying you 4 years of freedom for every one year of work.  I would ride that gravy train until you can supplement the COL increase with your investment gains.  At a certain point the additional 200k just mean less and less to you, I would assume, as you reach your FIRE number.


*https://en.wikipedia.org/wiki/California_Proposition_13_(1978)

[mobileagent]

Thanks for the feedback. It is much easier to make decisions without considering financial consequences as a single person. However, when you have a family, finances do play a bigger role:) Right now, I haven't seen a good reason yet to move to San Fran area based on simple math of saving for freedom at a faster rate in the current city.