Author Topic: Increasing income by....  (Read 3468 times)

Gatzbie

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Increasing income by....
« on: July 31, 2016, 08:08:14 AM »
Is this a bad idea.. what do you think about this?

Moving from a low cost of living state (Nebraska) to a high cost of living state (California) to obtain a higher salary, and somehow keeping my expenses low in order to increase my income.  Then I could move back to my low cost of living state someday if I wanted to.

I'm 21 right now and have 1 year left of college, trying to come up with ideas and a path on how I can retire as soon as possible.  I'm also trying to decide between index funds or real estate.  I would prefer index funds but supposedly the real return on them isn't going to be as great as the past (for the next decade) according to John Bogle.  If done correctly real estate can have great returns.

 If I decide to not do real estate, I would need to increase my income (and savings) to make up for the very low returns on my index funds.

use2betrix

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Re: Increasing income by....
« Reply #1 on: July 31, 2016, 08:33:43 AM »
Of course the next 10 years won't be as strong. We spent the last 8 years recovering from a crash. If you plan on retiring in a very short period, it will be determined on your income FAR more than your investments.

They are called high cost of living states for a reason. Many of the costs aren't optional, like state income tax.

What's your major? If your goal is to retire ASAP, I hope you picked something with a relatively lucrative future.

SwordGuy

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Re: Increasing income by....
« Reply #2 on: July 31, 2016, 08:35:23 AM »
Yes to the idea of relocating to a high salary area and keeping expenses very low.  It can be done.
But only by the poor and those who are not complainypants. :)

Will the stock market returns for the next decade be significantly lower than the historical average?  No one knows.
For every reason you can come up with for it to be low there's someone else who has a good reason why it will stay on track.
Personally, I think trusting to the greed, intelligence and energy of hundreds of thousands of key employees around the world is a good bet.

Yes to using real estate in addition to index funds.  Done right, it's a great way to accelerate your FIRE date.  But you have to do the research on how to do it right.  Real estate is a numbers game and an unwillingness to learn how to do the numbers is an invitation to lose your shirt.



screwit

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Re: Increasing income by....
« Reply #3 on: July 31, 2016, 08:36:14 AM »
I'd like to hear how others answer.

I had this discussion with a friend before he dreckiges to move to Switzerland.  Tripled the income, but tripled the rent,  doubled grocery costs. But could still keep the %savings he had, which in actual dollars was then tripling it.
So it depends on your situation,  on whether then income and COL balance out and on your saving discipline.

Gatzbie

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Re: Increasing income by....
« Reply #4 on: July 31, 2016, 09:30:33 AM »
Of course the next 10 years won't be as strong. We spent the last 8 years recovering from a crash. If you plan on retiring in a very short period, it will be determined on your income FAR more than your investments.

They are called high cost of living states for a reason. Many of the costs aren't optional, like state income tax.

What's your major? If your goal is to retire ASAP, I hope you picked something with a relatively lucrative future.
Exactly, that's why I'm thinking hardcore right now how I could increase my income or rate of return (real estate). Thats a very good thing to consider, optional and non-optional costs. Accounting was randomly given to me by my college through a scholarship. Normal paying major really, nothing like engineering related jobs for example.

According to bls.gov
Accountant:
starting salary for my area: 40k probably can work my way up to 60k
Financial Analyst:  44k probably work my way up to 67k
Starting my own accounting business:  Can make negative money, little money, or a lot of money, depends how well I do.
Some spots in California start at 60k and work your way up to 78k depends on area. Depends what area.
*Can make more than these ranges but I'm being conservative using 10th and 50th percentiles.

Yahoo here has this program for becoming a financial analyst with them where you work with them right after you graduate, you do rotations in California and stuff (maybe I could stay in Calfornia after I graduate if I got into this program) then this whole idea popped into my head.

Yes to the idea of relocating to a high salary area and keeping expenses very low.  It can be done.
But only by the poor and those who are not complainypants. :)

Will the stock market returns for the next decade be significantly lower than the historical average?  No one knows.
For every reason you can come up with for it to be low there's someone else who has a good reason why it will stay on track.
Personally, I think trusting to the greed, intelligence and energy of hundreds of thousands of key employees around the world is a good bet.

Yes to using real estate in addition to index funds.  Done right, it's a great way to accelerate your FIRE date.  But you have to do the research on how to do it right.  Real estate is a numbers game and an unwillingness to learn how to do the numbers is an invitation to lose your shirt.




You are right, know one knows 100%. If I can increase my income though, it can't hurt though regardless of what the returns are. Freedom is very important to me and worth the materialistic sacrifices to me.   If I can accomplish my goal without real estate, I'd prefer this route because index funds look much easier, I'm still open to real estate though.

« Last Edit: July 31, 2016, 10:12:47 AM by Gatzbie »

HotPotato

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Re: Increasing income by....
« Reply #5 on: July 31, 2016, 11:21:50 AM »
Make sure you have enough credits and get your CPA or CMA. It makes a world of difference for accountants income and marketability. If I were graduating from college all over again I'd go straight into public. I decided to go to private, have 4 years experience, CMA and half of CPA done and I make 55k. I recently switched jobs from financial analyst to accounting, there really isn't any difference in pay at my employer.

Gatzbie

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Re: Increasing income by....
« Reply #6 on: July 31, 2016, 11:35:05 AM »
Make sure you have enough credits and get your CPA or CMA. It makes a world of difference for accountants income and marketability. If I were graduating from college all over again I'd go straight into public. I decided to go to private, have 4 years experience, CMA and half of CPA done and I make 55k. I recently switched jobs from financial analyst to accounting, there really isn't any difference in pay at my employer.

I've noticed that places like Google want a certain number of years worked and want those years of experience from public accounting or from a heavy tech company. I suppose public accounting experience is more valued by some places. Oh yea they want CPA's as well, can't hurt to have it!

JLee

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Re: Increasing income by....
« Reply #7 on: July 31, 2016, 11:43:47 AM »
I moved from the Phoenix area to the NYC area (northern NJ).  Cost of living went way up, so instead of owning a house I rent a room in a house with two other people.  My entertainment/transportation spending has gone up substantially since I'm typically going into NYC weekly, but the income increase was more than enough to offset the additional expense.  I am saving much more than I was previously and am taking advantage of the awesomeness that is NYC. :)

use2betrix

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Re: Increasing income by....
« Reply #8 on: July 31, 2016, 11:51:25 AM »
You'd be far better off making 60k in Nebraska than 78k in California, in my opinion.

Gatzbie

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Re: Increasing income by....
« Reply #9 on: July 31, 2016, 12:38:18 PM »
I moved from the Phoenix area to the NYC area (northern NJ).  Cost of living went way up, so instead of owning a house I rent a room in a house with two other people.  My entertainment/transportation spending has gone up substantially since I'm typically going into NYC weekly, but the income increase was more than enough to offset the additional expense.  I am saving much more than I was previously and am taking advantage of the awesomeness that is NYC. :)

Wow, that's cool! So maybe my idea is feasible haha. That's what I want to do but in California, i'd like to walk to work (bike depending how far I am) that could save me on transportation expenses.

You'd be far better off making 60k in Nebraska than 78k in California, in my opinion.

That was just hovering my mouse over one random area in California , each area is different, one area in California 10th percentile is making 71k 50th percentile is making 133k This is what I am referring to:

http://www.bls.gov/oes/current/oes132051.htm#st

Look at the blue maps, I scroll down to the one with the more specific areas.

Overall, I think its fair to say that this is a realistic idea (cool!). Some things to look into though.... considering this would be be a case by case situation.

Things to look into to see if its worth it (feel free to throw other things in if you feel this list is missing something)

1.)What area are you leaving, and what area are you going to?
2.) Pay difference
3.) Expenses (optional and non-opional expenses) some expenses can't be avoided
4.) Are you willing to make the certain sacrifices in order to lower your optional expenses in order for this to work?
« Last Edit: July 31, 2016, 01:16:15 PM by Gatzbie »

SingleMomOnFire

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Re: Increasing income by....
« Reply #10 on: July 31, 2016, 01:50:25 PM »
Another thing to consider is the difficulty of moving things like a business or real estate.

I built a business in a high cost state. And now I'm a bit stuck. I would either need to fly back constantly for meetings or let go of my practice entirely. Which maybe you would be willing to do but I have enough fun that I don't want to.

Same thing with real estate. Will you live nearby so you can manage the property or pay a management company? If you are willing to pay a company then I suppose you could live anywhere but if not, then your real estate holdings might tie you to a location. You can always 1031 to buy a different property but the examples I've seen look like cash flow is much better over time and not as great in the beginning. Although I'm sure there are exceptions.

Gatzbie

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Re: Increasing income by....
« Reply #11 on: July 31, 2016, 03:13:42 PM »
Another thing to consider is the difficulty of moving things like a business or real estate.

I built a business in a high cost state. And now I'm a bit stuck. I would either need to fly back constantly for meetings or let go of my practice entirely. Which maybe you would be willing to do but I have enough fun that I don't want to.

Same thing with real estate. Will you live nearby so you can manage the property or pay a management company? If you are willing to pay a company then I suppose you could live anywhere but if not, then your real estate holdings might tie you to a location. You can always 1031 to buy a different property but the examples I've seen look like cash flow is much better over time and not as great in the beginning. Although I'm sure there are exceptions.

I've actually thought about this. I'd rather not manage property while living in across the country, heard its harder to manage (stuff I've read on these forums). You have to make sure the management company is doing their job plus they would take away profit (I'd rather manage myself).

So... moving to California (for ex.) get higher pay and somehow save the extra pay + index funds
Or.... Stay in Nebraska get lower pay than California, save it, + real estate

If I could somehow figure a way to save the extra pay and make it worthwhile, the first option would fit me better. (live somewhere new, higher pay, I'm willing to make materialistic sacrifices to save the extra pay, I prefer index funds due to the simplicity and passivity)

The whole point of me choosing to do real estate would be to make up for my normal salary level and the supposed predicted not so good index fund returns for the next decade. I would prefer to do index funds though because of how passive/simpler they are despite the lower than historic returns, but I can only do this if I boost my income somehow.

The situation you mentioned would be one of the things that would fall under #4
« Last Edit: July 31, 2016, 03:34:30 PM by Gatzbie »

mozar

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Re: Increasing income by....
« Reply #12 on: July 31, 2016, 05:27:02 PM »
There are all kinds of hacks for living with low costs in a HCOL area.
« Last Edit: May 10, 2018, 01:51:09 PM by mozar »

NorCal

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Re: Increasing income by....
« Reply #13 on: July 31, 2016, 05:37:29 PM »
Having started my career in a lower COL area (TN) and now living in the SF Bay Area, I think you're looking at this wrong.

You need to ask yourself a different question.  What would your income growth trajectory be in a HCOL area vs a LCOL area?

If you are looking at current income possibilities, I can almost guarantee it won't pencil out.  There are a few professions where it would, but that's the exception.

The biggest benefit to me of the HCOL area is rapid advancement in my career.  I've advanced my career at roughly twice the rate I would have in a LCOL area.  That is, my 7 years experience here are roughly equivalent to 15 years in a LCOL area.  This is what has made the HCOL worth it to me.  My income has somewhat kept pace.

The downside is that I'm still renting a small house in poor repair with a growing family.  The housing situation is tough.