Author Topic: What is the cost leaving difference between Midwest and SF for a mustachian?  (Read 4990 times)

genghis

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I work as a quant in a Midwest Bank. I have a wonderful wife and 1 yr old son that relies on my salary. I am thinking in move to SF for a job opportunity. I am wondering how much I need to make in SF to break even in my current situation. Let's assume that I make 100k base salary plus 15% bonus. Using the CNN cost of living calculator, 100k in the Midwest is equivalent to 178k in SF or 149k in Oakland CA. I believe this number is inflated to a mustachian since our biggest expense is saving. I save well above 50% of my taking home and max out all tax advantage accounts. Let's assume that I need 35k in the Midwest; Plugging 35k in the calculator tells me that I need 52k in Oakland CA or 62k in SF. So, I would need 17k in Oakland and 27k in SF to break even. Therefore, I may conclude that if I receive a offer of base salary above 127k, it would be financially savvy to move.  Notice that I didnt account for tax for simplification.
Extra information, I currently live in a duplex that I paid 130k last year and it is worth now 169k in Zillow. I know I will need to rent in SF. My home is 10 miles from my work and I drive to work everyday. I tried to commute by bike (11m) but it is quite hard due to traffic. So, if I move to SF, I probably will sell one car and commute by train.

Cathy

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As you have surmised, cost of living calculators are useless for people who save most of their income, and of only marginal utility for everybody else.

Most likely you will find that the only significant difference in expenses between the "midwest" and San Fransisco (or the peninsula) is the cost of housing. This is why I prefer the term "cost of housing" over the more popular phrase "cost of living". It's true that the cost of housing also influences everything else (since, for example, businesses need to pay for their premises), but for reasonable spenders, those differences are more imagined than real.

That said, the difference in housing could be very significant. If anything, your calculations probably severely understate the difference. Instead of using a calculator, you should just look at what rent actually costs in the areas where you might want to live. A two bedroom apartment costs $4,500 per month or more in some areas, while something similar in "the midwest" might be $1,500, suggesting a $36,000 difference per year after-tax (and taxes are presumably very significant for a "quant"). Of course, there are also cheaper options available depending on what you are willing to accept and where you want to live. Some places in the bay area are actually fairly cheap, although they might not translate into a reasonable commute for you. That's why you need to look at where you actually want to live -- specifically -- and how much rent will cost there. Don't use some calculator; use actual rental listings.
« Last Edit: September 30, 2015, 09:58:00 PM by Cathy »

tvan

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Yep rent is absurd in SF vs the Midwest. Also be aware fuel and utilities are much higher.

Pretty much everything is higher here. Probably why Costco is nuts (crowded all the time).

I took a 29% raise to move from the Midwest to Orange County. I think it was basically break even or a little loss. However I LOVE the weather.

LAGuy

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If you're making 100k now in the Midwest, I can tell you unequivocally that moving to SF for 127k is not even going to be close to worth it from a financial standpoint. The others already mentioned housing costs. Taxes alone are going to eat up a huge portion of that increase (you'll be deep into the 9.3% CA income tax bracket - and if you've got investments in taxable accounts throwing off capital gains, CA taxes that as regular income as well).

Also, I hope the Oakland idea was just an example. Oakland is like the murder capital of California. But you've got the right idea; something in the East Bay is where you're most likely to find "affordable" housing. Consider something like Walnut Creek, but it'll be a good sized commute. You've also got the right idea looking at BART for transportation. All the bridges make getting around an utter nightmare.

You also need to consider education for you child. Public schools here might not cut it, so that's another expense. Personally, I think that calculator is about right on. I wouldn't pick up and move across the country if I was in your shoes for anything less then an extra 80K. Even then I'd be mulling it over pretty strongly.

ClaycordJCA

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Long time East Bay resident here. To illustrate the cost differential between SF and the Midwest,   1 bedroom apartment in Walnut Creek (30+ minute train ride to San Francisco) will cost $2,000+ a month. Plus $11 a day for BART and $3 if you have to park. That apartment in SF will go for $3500 if you can find it. Your auto insurance will be more expensive, as will gas, taxes, etc.  the COL calculators factor in expenses, not savings rates. Savings are on top of expenses. Before accepting a job, come out and take a good look. The cost of living here is why many leave when it is time to retire and "No Californian" signs are appearing on Oregon for sale signs.

Kroaler

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Whats a "no Callifornian" sign mean? Those people not get along or something? JW . lol

LAGuy

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Whats a "no Callifornian" sign mean? Those people not get along or something? JW . lol

They were getting posted on some Realtor signs in Oregon. Essentially, they blame us "rich" California home equity refugees for bidding up home prices and gentrifying their communities.


norabird

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If the job opportunity really amps up your career in a way that staying wouldn't, it might be worth it. Are you guys happy where you are, have a good network, or are you ready for a change? How does the Mrs feel about moving? Those are the three key things I would consider.

genghis

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Thank you everyone for all the answers.  I am just thinking about the move and what would take me to move. I am currently in the interview process, and I already said that I need 10% increase salary plus cost of living adjustment. I think Cathy nail it. Changing my mindset from cost of living to cost of housing would be better to negotiate a salary.

Left

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Do you have to move right away? Once I get savings up myself, I plan to buy a house out there, rent it out and pay it down while living in Midwest. After 5 or so years of both rent and myself paying on mortgage, the housing shouldn't be too bad. And interest rates are still low too

But you are in a more immediate time frame?

genghis

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I am not in any specific time frame. There isn't anything hold me in my current location or anything to make me move to SF. I have never been to SF. 

RosieTR

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Wow, you are looking at so much more than just costs/$. Moving even for a nice rise in pay, to a place you have never been and don't know if spouse is on board is a *very big deal*. I'm not saying you would hate it. But you have to consider all the things you and spouse like, and the things you don't. If you like the midwest vibe/community, have family and friends close by and don't mind the weather, you may be shooting yourself in the foot to move. If you are kinda meh on your current location, or one/both of you always had a hankering to live on the west coast or in SF or whatever and the job works out then maybe try it out.
We moved for pretty much just a job (and the fact it was February when we visited) to Phoenix from northern Colorado. There were few no ways this was not a mistake. We got stuck there for 3 years before we were able to move back, and happy to spend whatever money it took (which was a LOT). YMMV but be warned about the seduction of what sounds good on paper and feels like crap in reality.

Old Man Mase

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As someone already suggested, go check out the city.  If/when you get the offer, see what the city has to offer and what the actual conditions are like.  I live in the Midwest too and have been to SF a few times - as you might imagine the weather and city atmosphere are amazing!  However, housing costs can be a killer. 

I interviewed for a job out there some time ago and realized that, even though the difference in salary would be over a 25% increase in nominal terms, we would never be able to maintain a decent savings rate and lifestyle unless we heavily sacrificed location and/or housing quality.  If you're ok with higher housing/gas/taxes, go for it.  However, if you're somewhat area-agnostic it likely won't be worth it from a financial standpoint unless there is a significant increase in salary accompanying the move. 

Ricky

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There's no amount of money anyone in SF could pay me to leave a $100k salary in the Midwest. SF is alright, but it's just a mess right now and too many people want to live there. My advice is don't give into the hype. The Midwest is pretty great in my opinion (I live on the East). If I were moving to the west coast, I much prefer Portland with better nature opportunities nearby or somewhere closer to LA where you actually get decent weather all the time. SF as a city is way too overhyped. But, as others have said, if it could potentially ramp up your career then it may be worth it. But I doubt the differences in pay will make up for IMO worse quality of life and ever-increasing cost of living. Even food is way pricier in NorCal.

tvan

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I'll add more here since I just made this move (and only 5 months later we are considering moving back).

For $1500 in the Midwest we owned a 1600 sq foot ranch home in a great neighborhood with a great yard.

In California we rent a 700 sq foot 1 bedroom apartment in a complex that's literally at its capacity. There are two windows. It costs $2020 a month.


john c

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Look at housing in a part of the city where you want to live.  By that, I mean safety on the street and schools for your kid.  $4000/month is a dirty hippy pad in a crappy part of town.  Fine for a single guy, but would you wife want to lug a kid around dirty streets and aggressive homeless people?  Also, forget having a car if you rent in the city.  Parking is a minimum of $350/month. 

Also, look at the schools.  They are ridiculously bad, except for the magnet schools, which are some of the best in the nation. 

Finally, figure in the state income tax.  It's quite progressive, and tops out at 13%, on top of Federal tax.

You could live in the East Bay, but the commute to the city is horrendous, 30+ minutes on BART, plus commute to the station, and then from the station to your office.  It'll probably be more than an hour each way.

In a previous thread where a guy took a job on the Peninsula, my advice to the guy was that unless you're making $300k or more, renege on the job offer and stay where you are.  If you have the cash, the SF Bay Area is paradise.  Wonderful weather, beautiful scenery, plenty of culture and entertainment, world class schools and universities, and short commutes.  If you're on the wrong side of the divide, it's hell on earth.  HORRIBLE schools, high taxes, long commutes, extremely high cost of living.  Unless you moved here in 1988 and bought a place, you need to make $$$ to do okay here.

People from other parts of the country have NO IDEA how expensive it is.  It's closer to Manhattan prices.  Nothing else in the country compares to how hard it is for regular professional folks to live here, if you have a family.

Goldielocks

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My surprises moving to california,

cost of housing ...you can go smaller than now, but confirm costs, cutting down by 50% floor area and 75% yard area is easy, but still rent was more.

You need a very careful plan about transportation.  How will kids get to activities, your work, etc.  No one seems to drive cars over 5 years old in many family areas....  East bay transit may not be great, etc.  Distances are long.

Water, sewer, garbage, etc were all separate from rental and cost us a surprising amount.  If you buy, property taxes are amazingly high because that little townhouse cost so much...

Kids activities and recreation are a lot more.  Eg gymnastics or swimming or piano lessons. Not a lot of civic funding.  There was even a fee for library card.

Parking is $6 every time you go to a state park, etc.

Groceries 10% more, or greater.  Electricity a lot more.

School fees and startup a lot more.  We were asked for $200 per kid PAC fee because some art and athletic programs needed funding.

Kids clothes were much  cheaper, no boots and winter coats needed.  Lots of cheap consignment furniture for high quality goods.

Cycling is awesome.  Weather is fantastic. We cut to one car easily.

The low cost activities we did were not common for white crowd.. Eg picnics, some hikes, camping. We were often the only white people there, where in the Midwest, everyone mixes up more, in my opinion. This is nit a problem, but the language barrier made me shy to try to make friends.  So many new neighborhood friends always asking for us to join on money activities...  Go to water park instead of free pool, that sort of thing.

Joining scouts was a godsend for finding down to earth like minded people.
« Last Edit: October 03, 2015, 11:48:59 AM by goldielocks »

genghis

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Thank you all for the replying. I would like to mention that I know there are many other factors to consider to move besides money but the purpose of this threat was to find out how much I need to break even in SF as compare to midwest. I agree with Cathy and I should be thinking of cost of housing. In this way, I can easily quantify.

I quick update. I had a second round of phone interview. It went very well. Tomorrow, I will have another phone interview. I thought it was weird that the company will not have in person interview.

Things at my actual work is looking better. I am in an high visibility project and I will learn quite a bit in the process. However, I believe that I will learn more if I move to SF company.

If I got the position, I will write about with details of pro and cons in moving.

ysette9

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There are a lot of good things to think about here but I will add in my opinions all the same.

There are a ton of good reasons to move to the bay area but an extra $20-30K a year is not one of them. I agree with others that you should come for a visit and see what you think. Good reasons to move in my mind include:

  • The weather
  • More and diverse career opportunities, including the ability to truly have a dual-career household without moving
  • Having your kids grow up in a rich, diverse culture so they learn and appreciate that there are many different types of people in life
  • Great food from all around the world
  • The chance for your kids to grow up bi-lingual thanks to public dual-immersion programs (Spanish, Chinese)
  • Biking/hiking/surfing 12 months out of the year
  • The great outdoors is an extension of your backyard - have I mentioned the weather yet? ;)
  • .. and so forth
Good luck with your interviews and I'll look forward to your pro/con list to come. :)

RyanAtTanagra

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To give an anecdotal example, I moved from Ohio to SF 4 years ago and consider myself (mostly) frugal.

Cost of living in Ohio:
$1000/month ($350/mo was rent)

Cost of living in SF:
$2500/month ($1500/mo is rent)

But I'm in SF proper, you could find rent for half that elsewhere if you're ok with roommates.  I don't know if it would be a good move with only a 10% increase in salary, unless they really do a proper COL increase as well, which would probably be about right.

mm1970

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If you're making 100k now in the Midwest, I can tell you unequivocally that moving to SF for 127k is not even going to be close to worth it from a financial standpoint. The others already mentioned housing costs. Taxes alone are going to eat up a huge portion of that increase (you'll be deep into the 9.3% CA income tax bracket - and if you've got investments in taxable accounts throwing off capital gains, CA taxes that as regular income as well).

Also, I hope the Oakland idea was just an example. Oakland is like the murder capital of California. But you've got the right idea; something in the East Bay is where you're most likely to find "affordable" housing. Consider something like Walnut Creek, but it'll be a good sized commute. You've also got the right idea looking at BART for transportation. All the bridges make getting around an utter nightmare.

You also need to consider education for you child. Public schools here might not cut it, so that's another expense. Personally, I think that calculator is about right on. I wouldn't pick up and move across the country if I was in your shoes for anything less then an extra 80K. Even then I'd be mulling it over pretty strongly.
Pretty  much this right there. I was going to say that the calculator seemed spot on to me.

I don't live in the Bay Area, but I have friends who do.  Most of them are lucky enough to own homes that they bought 10 years ago.

Even at that, rent is going to be ginormous.  Even a quick google tells me that a 2BR apartment in Mountain View is going to be $3500 to $5k a month. I picked Mountain View because I've got friends who live there.  Traffic is awful so that needs to be considered too.

So, how much is your "housing" now and how much will it be?  That's the biggest factor.

Also, food.  You'd think that it would be cheaper because we grow it here, but it's not.  (Note: I live in Santa Barbara, which is also crazy expensive, but the last few years have taken Bay Area much past us.  Then again, we have high costs without the salaries to match.)  Fact is that "overhead" is so high that food costs are also high. 
State income tax is easily at 9.3%
Sales tax isn't cheap either.
I can't speak to water/trash/electric/gas because we are cheap and ours aren't high.

I've considered it.  I mean, by moving we could easily increase our incomes by a total of $100k per year.  2/3 of that would be eaten up by housing and taxes.  And the rest?  Well, commuting.