How do you/would you cope with a High Cost of Living Area?

[Retired To Win]

I always counsel avoiding living in a High Cost of Living Areas (HCOLA), if at all possible.  But I know that's not always possible. In fact, I myself have ended up living in HCOLAs such as New York City, Honolulu and Miami. And in none of those places was I enjoying a munificent salary.  Nevertheless, I found ways to financially cope and not be fiscally buried by the HCOLA.

If you live in an HCOLA, what strategies do you employ to defang the heavy costs of living there?  Even if you don't live in one, what do you think you would do?

My own key tactic was to find housing in a more reasonably priced subarea of the HCOLA (such as Pearl City instead of Honolulu), since housing was always the largest expense line in my budget -- and always seemed to me to be the most inflated cost item to be found in an HCOLA.  But what is your experience?

[nereo]

I've lived in several HCOL areas, and here's what I've learned.
HCOL areas are typically densely populated areas (although there are exceptions, like Santa Cruz).  Discretionary spending can be a big trap, but it's also an area where you can save lots of money - cities always have free services and events. 
Housing - often the hardest to overcome, but check out where the students live. 
Side gigs - lots of people with lots of money means there are lots of opportunities to make money doing stupidly simple tasks, like walking people's dogs.

interested in knowing what others have done.

[sisto]

I live in CA. Not is a super high COL area, but definitely still pretty high. For me I agree with the live a little further out in a suburb, that's what I do. I have an older and smaller house as well. I've completely remodeled the house to make it the way I like and I will live here when I retire. It was a bit cramped when my 2 boys lived at home, but we made it work and it's bigger than the cozy little house I grew up in. I'm still within 10 miles of my old work and my current work, planned it that way knowing I would probably move jobs. I also picked my house based on the school. I was moving from an area that had a blue ribbon school and wanted to keep that for my boys. I think I've always been a bit MMM. Always trying to maximize my ROI, the best bang for the buck.

[bryan]

Try to figure out where students or lower income service worker types live. Don't be afraid to think outside of the box.

Like on the west coast of the US, living in a van.

[Helvegen]

Most of the HCOL in my area is directly tied to real estate prices. The way I cope with it is just to stay out of that whole bubbly mess. It turns out there are plenty of reasonably priced homes here to rent that you could never buy for the rent. Wages are pretty high here, unemployment is fairly low, and there is no state income tax. Since I am not spending the 'normal' portion of the income differential on inflated housing, I am actually able to come out ahead financially as compared to the LCOLA I am from.

The long term plan is to save enough money here to buy a home in cash in a much LCOLA closer to the rest of my family.

[GodlessCommie]

I'm not convinced HCOL is always bad for your road to FIRE. In my mind, it is case by case - some people will be better off eating a paycut but paying less for housing and in taxes, and some won't.

We do plan to eventually move out of HCOL area, but for now we don't cope with it, we enjoy it.

[Chris22]

If you're in a professional-type job, living in a HCOL area is probably not a bad thing.  For one, there are likely more opportunities so if something happens at Job A it's a lot easier to switch to Job B than if you work at the only place in town.  For another, generally HCOL areas stay HCOL areas.  So you might have to spend more for a house, but then you can sell it for a lot more down the road in theory.  And you can then have the freedom to move to a LCOL area if you want, OR another HCOL area; OTOH, if you are in a LCOL area and need to move (job, etc) to a HCOL area, it's much much harder.  And third, things are usually pretty propotional.  If you make $100k, you might need to spend $30k/yr on housing, versus living in an area where you make $50k and only have to spend $15k/yr on housing.  Difference is, in both scenarios you're spending 30%, but I'd rather have 70% left over of $100k than of $50k.  Housing is really the only that REALLY scales with COL, everything else can be avoided (if restaurants in a HCOL area are too expensive, eat somewhere cheaper or at home.)

[MustacheNY]

I agree that the biggest cost differential in a HCOL area is housing.  In some HCOL living areas like NYC, you really have no need for a car as it can be a pain in the butt as much as it is a luxury.  With such a developed metro/bus system and Zip cars everywhere for those rare instances you may need a car, owning a car is really not necessary.  That eliminates a few hundred in gas, maintenance, insurance, and parking expenses.  In the Los Angeles area, a car was much more of a necessity, but still if you stuck with a older used car and got only liability insurance, the cost was not too much more than in a LCOL area.  Other than these two items, most of the expenses are pretty similar in HCOL vs. LCOL.  I have noticed that in Manhattan food prices are a bit more expensive, but in the boroughs, they can be just as cheap if not cheaper than in a LCOL area.  All of that was pretty much just to point to housing as the primary driver of cost differential.

When I was younger and single, I would just load up with roommates.  At one time about 8 years ago I was renting in one of the nicer areas of Los Angeles right on the beach in a 2-bedroom with 3 adult roommates and a little kid.  I had a bedroom to myself, while two adults and a kid had the other bedroom, and one guy slept in the living room on a fold out couch bed.  But, they were all pretty good people, and I was rarely home except to sleep.  The cost ($500/month).  After a year and a half I moved into a lovely 3-bedroom town home where I rented a nice bedroom in a beautiful neighborhood 2-blocks to the beach with two other working professionals.  Washer/Dryer, roofdeck to enjoy ocean breezes, and etc.  The cost ($700/month).  In NYC as a single guy I rented a 3-bedroom in a nice neighborhood and my bedroom had a legitimate ocean view for $700/month.  These costs are very very reasonable give the higher salaries that are available in these areas.

However, the housing challenge in a HCOL area is when one has kids.  At this point, housing costs start to get a little more difficult to offset with higher salaries.  However, I still find that making smart financial budget decisions make it more beneficial to live in a HCOL during the income generating phase due to the salary differences (depending on career).  Example.  Let's say a family with two kids with a stay at home mom hypothetically has about a 100000 job and that after taxes that equates to about 6000 a month.  Living a relatively nice lifestyle, there is no reason expenses have to exceed $1500/month and rent of $2000.  So $3500 a month.  They would be saving $2500 a month.  Now lets say that same salary is 75000 or $4400 after tax (In many cases from what I have seen it is even less) in a LCOL area.  That $1500 really should stay around the same level or maybe even increase due to greater need for cars, transportation, etc.  The rent may come down to $1000.  So expenses of $2500 a month.  Now they are only saving less than $1900 a month.

Bottom line is that making wise financial decisions is a mindset.  With the right priorities and mindset, one can live a very financially and emotionally rewarding life in either a HCOL or a LCOL area. 

[big_slacker]

Although not bay area, socal or NYC expensive I live in one the higher COL areas in WA. As others have mentioned you need to run the numbers. I was living in a low COL area before and moved here. While my rent literally doubled my salary increased 50%.

Definitely housing is spendy here and having a family (roomies not so feasible) means you'll bear it all yourself. OTOH I have a huge number of tech companies to work for within biking distance that give some serious perks that offset some of the cost, especially if you work to maximize it.

For instance Microsoft (not my employer BTW) offers free shuttle bus service from the outlying areas. They have wifi and the commute counts as working hours. You could easily live in a semi-rural area with lower housing costs, ride your bike to the pickup spot and spend less of your time in the cube maze.

And this brings up what I do, which is negotiate work from home. If you can do this and avoid the office as much as possible you're free to choose a lower COL area on the outskirts. Not every company but I'd say looking for one that does can be a big priority.

[Retired To Win]

... When I was younger and single, I would just load up with roommates.  At one time about 8 years ago I was renting in one of the nicer areas of Los Angeles right on the beach in a 2-bedroom with 3 adult roommates and a little kid.  I had a bedroom to myself, while two adults and a kid had the other bedroom, and one guy slept in the living room on a fold out couch bed.  But, they were all pretty good people, and I was rarely home except to sleep...

When I was younger and single, I was one of the roommates!  In Honolulu, I twice rented very nice bedrooms in lovely houses, with kitchen privileges, to make living in such an HCOLA affordable even for someone without high-demand technical skills.

[Helvegen]

However, the housing challenge in a HCOL area is when one has kids.   

Not housing, but related: I forgot that when I moved to a LCOLA to my now higher one, I was floored by the cost difference in daycare. Basically it is very difficult for unlicensed operators to run in this state, whereas the state I came from had pretty lax regs on this. I am paying the same now for a 9 year old's B/A/school vacation care a month as I was to have a toddler in full-time care in my LCOLA. Hell, I am about to pay more now this summer for summer care than it cost to send her to FT daycare + preschool tuition in my LCOLA! One more school year to go...

[mm1970]

Really depends on your goals in life, among other things.

We live in Coastal So Cal, definitely a HCOL area.  We managed to live frugally because we're frugal, and because my husband was in grad school.  That meant small apartments, and eventually student housing.  We had only one car for awhile and tend towards smaller cars anyway. 

The thing is, we never planned to stay, but the grad school took 7 years, and then we stayed.  I would counsel people to avoid them too, in many cases.

But in the tech world, sometimes that's what you have to do - live in Bay Area, or whatever.  And now, I love it here.

So housing is the worst, and we timed it poorly (bought in 2004, house still worth less than we paid for it).  Bought small, plan to stay here.  Bought knowing we'd both be working (because we like it!)

The thing is to try to avoid the other high cost traps.  With kids and jobs, daycare is unavoidable, but the uber high class crunchy preschools are not.  Summer camps start at $150 a week and go to $400 a week.  Guess which ones we pick?  Eating out and shopping at the farmer's market and at whole foods are what the cool kids do.  We try to limit our eating out and use a CSA and shop better.  (However my spouse does eat out more than I'd like.)

I'm happy with the life I have, but I understand it's not for everyone.  If you would prefer a bit more of a downshifted life (one parent at home with the kids) then I'd counsel against HCOL.

"Be the change" - offer up baby sitting swaps, have your friends over for dinner or for parties.  Instead of going out to dinner or concerts, my spouse and I will have lunch together, or go to free concerts.  Instead of meeting our friends for dinner on Friday nights at kid-friendly places, we get together with OTHER friends who have pot lucks in the park (yes, it means I am choosing specific friends to hang out with more).  Instead of taking the kids to the trampoline place, we meet other friends at the zoo, the park, or the beach.  Instead of having a "girl's lunch" with my friend with 3 kids, we've started meeting at the gym. 

Tonight's entertainment, instead of something that costs money, is:
1.  Grad party for the friends of the potlucks
2.  Mom's game night party <- I wish I could take credit for this.  Our toddler mom groups does occasional "mom's nights" out with dinner and drinks.  And these are expensive.  I am only likely to go 1-2 times a year.  One of the moms is having us over for a game night.  We bring drinks, snacks, games.  I personally am taking soda water and popcorn.  I can't drink and drive anyway.

[Lucky Girl]

I'll jump on the bandwagon and say we also chose to live in the outer suburbs to keep expenses down here in the Boston area.  DH's salary is so high that moving is just not rational.  I've also managed to parlay a high salary after I gained 10+ years of experience, so we are in a high accumulation phase saving 50% of income, even though our expenses, including commute, are very high.  There are no comparable jobs for either DH or myself in a LCOL. 

I do try to work from home one day a week, and DH fudges his schedule to commute at somewhat off-peak hours.  If we had found MMM years ago we would probably do it differently, but we are happy where we are and don't want to uproot the kids at this point.

[seattlecyclone]

I live in Seattle. Housing costs are high, but we live in a walkable neighborhood close enough to the city center that we don't need to drive for most things, which in turn means we don't need to own and maintain two cars. I'm not interested in living in a car-oriented suburb and increase my commute just to save some money. Coming from the Midwest originally, I find that typical salaries in my field (software engineering) are enough higher here to more than make up for higher living costs, so even with an expensive house I'm able to save and invest more dollars per year than if I had stayed in my home state.

For occupations where that isn't the case, I wouldn't necessarily recommend living here. I had some friends who moved to Western New York because the typical salary in their field is actually slightly higher there, with much lower cost of living and closer proximity to their family all at the same time.

[Langer83]

For me, the advantages of living in a HCOL area (higher salaries, virtually no transportation expenses) outweigh the disadvantages (higher housing costs). We bought a condo at the bottom of the housing bust and locked in a low interest rate, so we're fortunate in that regard. As some have mentioned, one really good option for people pursuing FIRE is to earn/save in a HCOL and then move to a LCOL area once they retire.

I saw an article recently ranking metro areas by the average income AFTER after paying for housing, and it's pretty much all the high cost/high income areas that come to mind (Silicon Valley, SF, DC, etc):
http://www.citylab.com/housing/2011/12/us-cities-with-most-spend-after-paying-housing/778/

[zinethstache]

We migrated over many years from the big city, to a smaller city north of the HCOL area where we started our marriage and careers. We bought and fixed up 3 homes and we DIY about everything. I eventually found a very well paying tech job in that smaller city and its been very good ever since (14 years now). Food is still out of this world expensive, but other living costs are reasonable. We pay a fraction of what others pay for a 4b/2ba home because it was a repo in 2001 that needed a lot of work. It took us most of the 14 years to rehab and we still have two rooms to go. I bet we will get those last two rooms done just in time to sell for FIRE which is coming up here in the next couple of years. Our home is way more than we need in FIRE

The first 10 years of our marriage was a financial challenge. We worked at making it a non-issue with our residence and employment choices.

[Retired To Win]

Most of the HCOL in my area is directly tied to real estate prices. The way I cope with it is just to stay out of that whole bubbly mess. It turns out there are plenty of reasonably priced homes here to rent that you could never buy for the rent. Wages are pretty high here, unemployment is fairly low, and there is no state income tax. Since I am not spending the 'normal' portion of the income differential on inflated housing, I am actually able to come out ahead financially as compared to the LCOLA I am from.

The long term plan is to save enough money here to buy a home in cash in a much LCOLA closer to the rest of my family.

That's another strategy that sounds like a winner: rake in the cash at the HCOLA but intend to relocate to a LCOLA once you've piled up enough moola to retire based on the LCOLA cost of living!

[kpd905]

I'd only live in a high cost of living area if the salary was proportionately higher.  I see people on Reddit complaining all the time how hard it is to live in NYC making $15/hour.  Well yeah, so move, you can find a job making that much anywhere.

[frugalecon]

We live fairly close-in in DC, but having a single vehicle is a big savings. This is possible because of fairly good mass transit. Plus, free entertainment abounds, and salaries are pretty high. In terms of saving on housing, we bought a house that needed a lot of work in a good neighborhood. I think that was the right call.

[Retired To Win]

... I find that typical salaries in my field... are enough higher here to more than make up for higher living costs, so even with an expensive house I'm able to save and invest more dollars per year than if I had stayed in my home state.

For occupations where that isn't the case, I wouldn't necessarily recommend living here...

Yes; the exception I always make to my "stay out of HCOLAs" mantra is for instances where a specialized occupation/profession yields way higher income in a particular HCOLA than anywhere else.  (That is, as long as that surplus is being banked for an eventual -- and earlier -- escape from that HCOLA.  :O)

[big_slacker]

Well, if you pay off your house/condo in the HCOLA area, assuming housing is the main expense why move? These areas do tend to be really nice places to live even if you're not a big spender. The beach is free. :)

... I find that typical salaries in my field... are enough higher here to more than make up for higher living costs, so even with an expensive house I'm able to save and invest more dollars per year than if I had stayed in my home state.

For occupations where that isn't the case, I wouldn't necessarily recommend living here...

Yes; the exception I always make to my "stay out of HCOLAs" mantra is for instances where a specialized occupation/profession yields way higher income in a particular HCOLA than anywhere else.  (That is, as long as that surplus is being banked for an eventual -- and earlier -- escape from that HCOLA.  :O)

[fishnfool]

It is a good question you ask because everyone's situation might be a little different, but housing seems to be the kicker in the HCOL equation.


If I didn't have a mortgage I can afford that makes sense (cheaper than renting), I'd be looking at moving out of my hometown. It is just too damn expensive! I work with a great group of guys and most of them are stuck in a rental market here and paying half or more of their income for housing. Some of them have had to take on second jobs to make it here.

If you can't save anything and are living check to check whats the point? There are many areas just as nice that are more affordable, but if you're still in your working years you might have to commute for work. The job market then becomes the deciding factor.

I was fortunate enough to buy a house before the tech boom in the early 2000's drove everything up and is now driving the market up again here in the bay area. While I feel bad for some of my coworkers, some of them didn't plan ahead and buy when they could have.

[Dollar Slice]

I'd only live in a high cost of living area if the salary was proportionately higher.  I see people on Reddit complaining all the time how hard it is to live in NYC making $15/hour.  Well yeah, so move, you can find a job making that much anywhere.

When I graduated in 1999 I interviewed for some jobs in Boston and NYC. The salaries offered were (IIRC) something like $18k and $20k. I couldn't believe anyone would expect you to live on that in such a HCOL area! The guy in NYC started talking about how lots of people in this position still live at home with their parents, and he himself lives in New Jersey with a 2-hour commute, etc. Insanity...

[libertarian4321]

Buy this and park it in a field somewhere:

http://www.tumbleweedhouses.com/

[arcangel911]

I moved.

[seattlecyclone]

(That is, as long as that surplus is being banked for an eventual -- and earlier -- escape from that HCOLA.  :O)

There's a reason certain places have high housing costs, and it generally has something to do with the fact that a lot of people consider them to be extremely nice places to live. If you disagree with all these people and would prefer to live in a small town somewhere, then you certainly should save up your money to "escape." I personally would rather work an extra year or two so I can keep living in this wonderful city indefinitely, rather than stopping sooner and limiting myself to cheaper areas. Everyone has different opinions on what the best place to live might be. There's no one-size-fits-all answer here.

[big_slacker]

(That is, as long as that surplus is being banked for an eventual -- and earlier -- escape from that HCOLA.  :O)

There's a reason certain places have high housing costs, and it generally has something to do with the fact that a lot of people consider them to be extremely nice places to live. If you disagree with all these people and would prefer to live in a small town somewhere, then you certainly should save up your money to "escape." I personally would rather work an extra year or two so I can keep living in this wonderful city indefinitely, rather than stopping sooner and limiting myself to cheaper areas. Everyone has different opinions on what the best place to live might be. There's no one-size-fits-all answer here.

So many people in CA are finding it too expensive and moving to TX. My brother did that, and now despite his relatively cheap mcmansion is miserable and is making plans to move back even if it means going from a 2500 sq ft place to a 2 bedroom condo.

I ALWAYS second guess where I'm living (bellevue, since you're from the area) and I always come to the conclusion that I'd rather live here in a smaller place than go elsewhere in the area to save a couple hundo a month. And I FEEL that spending, believe me. I choke on my rent check every month given what it would buy (or what I'd bank) back in tahoe where I moved from. But I feel incredibly lucky to live here, and not because of yuppie stuff but because of all the things that are available to us in such a small area.

[Retired To Win]

Well, if you pay off your house/condo in the HCOLA area, assuming housing is the main expense why move? These areas do tend to be really nice places to live even if you're not a big spender. The beach is free. :)

Well, there's a couple of factors to consider, even with a paid-off house or condo in an HCOLA.

Even with a paid off abode, there's still the issue of real estate taxes and homeowners insurance -- costs that don't ever go away.  As a real life example, in the Long Island HCOLA an acquaintance of mine paid $12,000 a year in property taxes before moving the heck out of there.  At a 4% SWR, it would take a $300,000 stash just to generate the funds needed to pay that tax.  Hell's bells, man, my entire baseline living expenses are not a whole lot more than that!

Of course, if the taxes on the house are $12K a year, that means the house is worth several hundreds of thousands of dollars.  Sure, one can stay in the HCOLA and live in that pricey house.  OR one can sell the house, move to a more reasonable cost of living area, replace the house at a fraction of the cost, and bank the difference to improve the stash and/or cut the wait to reaching FIRE.  Here, I'll present my own experience as a real life example.  We sold a house for $350,000 in one place and moved to another location where we bought an even better piece of property, an equivalent house plus several outbuildings for half of what our previous house cost us.  So we ended up with no mortgage on the new house. 

Those are just 2 of the things I should think one has to weigh versus the free beach or whatever, even with a paid off residence.

(As an aside, we actually like our new area much better.  And I realize that what constitutes a "nice area" is a matter of personal opinion... but I've lived in the HCOLAs of New York City, Honolulu, L.A. and Miami and -- except for maybe Honolulu -- I wouldn't be calling any of them particularly "really nice places to live.")

[Chris22]

(That is, as long as that surplus is being banked for an eventual -- and earlier -- escape from that HCOLA.  :O)

There's a reason certain places have high housing costs, and it generally has something to do with the fact that a lot of people consider them to be extremely nice places to live. If you disagree with all these people and would prefer to live in a small town somewhere, then you certainly should save up your money to "escape." I personally would rather work an extra year or two so I can keep living in this wonderful city indefinitely, rather than stopping sooner and limiting myself to cheaper areas. Everyone has different opinions on what the best place to live might be. There's no one-size-fits-all answer here.

I just bought a smaller, much more expensive house than my previous house.  Previous house was brand new, beautiful, open, lots of ammenities (large closets, lots of storage space, large bathrooms, spacious garage, etc).  New house is older, more cramped, much less storage, etc, but getting very nice as we renovate it).  Difference was, old house was ~50 miles from the city (and correspondingly far from our jobs) and new house is much closer to city and jobs.  As my brother in law put it "it's more expensive to live where other people also want to live." 

[MLKnits]

I'd say my big three are renting (housing prices are ridiculous here, but renting's not so bad), having a business that flourishes because of other people's COL, and living on the edge/suburb of it rather than downtown.

The last part is more business-sided; I could find a place downtown to live for roughly what I pay now, though smaller, but my office's rent would be outrageous. As it is, my office rent is pretty damn good for what we get, including free parking and a short commute. We'd never get that in the city proper.

The prices of goods and services are as high here as downtown, sometimes higher (AYCE sushi, our favourite "business expense," is about 25% more expensive out in the 'burbs), and we have to drive more than we would if we were downtown, but overall, I think we save by being out here.

[seattlecyclone]

Even with a paid off abode, there's still the issue of real estate taxes and homeowners insurance -- costs that don't ever go away.  As a real life example, in the Long Island HCOLA an acquaintance of mine paid $12,000 a year in property taxes before moving the heck out of there.  At a 4% SWR, it would take a $300,000 stash just to generate the funds needed to pay that tax.  Hell's bells, man, my entire baseline living expenses are not a whole lot more than that!

Yes, taxes and insurance are important considerations. $12k of property tax is a lot! Here in Seattle I pay about $4,000 in property tax for my house, which I find quite affordable, especially considering that we have no state income tax here. Homeowner's insurance need not be a lot more expensive either, given that the majority of difference in housing costs is due to land value, and insurance only covers the structures.

That said, you can't get around the fact that tying up a bunch of capital in an expensive house does delay FIRE. If I could retire to a house for $200k less elsewhere, that's $8,000 per year at a 4% SWR. Not insignificant. Retiring to an HCOLA is a terrible idea if time to retirement is your foremost concern. However as I said before, I would rather retire a year or two later and stay where I am rather than retire earlier in a smaller town. If we were talking about a difference of a decade instead of a year or two, I might reconsider.

Of course, if the taxes on the house are $12K a year, that means the house is worth several hundreds of thousands of dollars.  Sure, one can stay in the HCOLA and live in that pricey house.  OR one can sell the house, move to a more reasonable cost of living area, replace the house at a fraction of the cost, and bank the difference to improve the stash and/or cut the wait to reaching FIRE.  Here, I'll present my own experience as a real life example.  We sold a house for $350,000 in one place and moved to another location where we bought an even better piece of property, an equivalent house plus several outbuildings for half of what our previous house cost us.  So we ended up with no mortgage on the new house.

Again, different people have different priorities. I have no desire for "several outbuildings" and actually consider the fact that I don't have to maintain any such structures to be a positive thing. That's the same reason I much prefer a small house in the city to a large house in the suburbs. A smaller house on a smaller lot means less yard work and home maintenance, leaving more time to do the things I enjoy more. I'm glad you're happy with your rural land, but it's just not for me.

[big_slacker]

Even with a paid off abode, there's still the issue of real estate taxes and homeowners insurance -- costs that don't ever go away.  As a real life example, in the Long Island HCOLA an acquaintance of mine paid $12,000 a year in property taxes before moving the heck out of there.  At a 4% SWR, it would take a $300,000 stash just to generate the funds needed to pay that tax.  Hell's bells, man, my entire baseline living expenses are not a whole lot more than that!

(As an aside, we actually like our new area much better.  And I realize that what constitutes a "nice area" is a matter of personal opinion... but I've lived in the HCOLAs of New York City, Honolulu, L.A. and Miami and -- except for maybe Honolulu -- I wouldn't be calling any of them particularly "really nice places to live.")

I'm very glad you brought that up because my wife and I had that very same discussion last night when it came to deciding on renewing a lease that the landlord just increased (fairly I might add, surprised he didn't do it sooner) and whether we should think about buying, moving and so on.

Property taxes can KILL you in a HCOL area, especially ones with runaway 'value'. That was part of prop 13 in Cali. Also to note similar that you didn't mention are HOA dues in condos or townhomes which can pretty much be increased at any time and are sometimes downright criminal.

In many ways all of the hidden or not often considered costs of ownership make renting the way to go in HCOL areas.

FWIW when I'm talking nice places to live, from my current rental I can walk to a lake at the end of the block, woods with hiking trails at the other end, about a half mile to a permanent farm stand during harvest season, nice new library. I can be to the primo MTB spots in the area in 20 minutes, catch a bus to see baseball, soccer or football downtown, super diverse cultures and groceries and mild weather. Pretty decent, guess it'll do.

I know what you mean though, much of LA is a pit of bad traffic, smog, crappy high priced apartments, etc. NYC is pretty crap too IMO, but some people seem to love it.

OTOH I'd have no problem living in manhattan beach, la jolla a little south, parts of HI that aren't honolulu and so on. Gotta get something for your $$ or why bother? :)

[chouchouu]

Hcol can provide opportunities. For a single person it's easy to find shared accommodation where as lcol areas you will find it hard since people prefer to rent a single dwelling.

We live in Sydney, the big benefit for us is infrastructure, we can walk or take public transport, we don't own cars. When we do need a car we can rent cheaper because of the availabilty of low cost car rental. Grocery expenses are also much cheaper because of competition, I can find fruit and veg for half the price of other areas. Another thing is that property can be rented out easily on vacation. A lady in our apartment block is making so much from air bnb she rented another property just so she can rent it out. Travel is also much cheaper since more carriers fly into Sydney than other cities. I would say pretty much everything is cheaper except for rent. If you avoid the lifestyle inflation if living in a city then you can save much more when you take increased income into account.

Another thing I'll add, cities provide so much free stuff. Free concerts, free parks etc. in the last week we took our girls for the free learn to bike workshop at Sydney Park, free vivid light show at the harbour, free travel for half the week since I only used my opal card for short trips Monday to Wednesday. Free entry to the Sydney Museum. Today we're taking them to a free interactive playground at Hyde Park barracks and its mid winter, there's much more going on in the summer.

[Squirrel away]

London is one of the most expensive places in the world but I'm banking that my house is going to make me more money if we stay here until we retire. We were thinking of moving house to a cheaper area but we thought we would stay and hope that we can hopefully relocate to a less expensive area after we are FI.

[golden1]

I cope with living in the Boston area by a) buying a starter home that needed/still needs lots of love and not "upgrading" a few years later b) in a more affordable town that isn't at the top of the school district ratings c) and the town has dual tax rates which keeps my property taxes low but town services high.   So, unlike most of my peers, my mortgage is manageable.  I also lucked out because I bought before the huge run up in house prices in the early 2000s, and I happened to pick a town that is gentrifying, so not only has my house doubled in value, but the school have vastly improved. 

Everyone around here is always chasing the cream of the crop towns like Lexington, Weston, Sudbury, Newton etc.... and they are very lovely, but you will be paying $800K for an old ranch. 

[Vilgan]

(That is, as long as that surplus is being banked for an eventual -- and earlier -- escape from that HCOLA.  :O)

There's a reason certain places have high housing costs, and it generally has something to do with the fact that a lot of people consider them to be extremely nice places to live. If you disagree with all these people and would prefer to live in a small town somewhere, then you certainly should save up your money to "escape." I personally would rather work an extra year or two so I can keep living in this wonderful city indefinitely, rather than stopping sooner and limiting myself to cheaper areas. Everyone has different opinions on what the best place to live might be. There's no one-size-fits-all answer here.

I agree with this 100%. When I first started thinking about early retirement, I was excited about how cheap houses were elsewhere. However, after the initial excitement faded we decided we would both rather work longer and stay in Seattle than retire elsewhere. Finding something as walkable as where we live in Seattle would be very hard to do: we can go down to 0 vehicles pretty easy (the 1 vehicle we share gets little use and is a luxury), paradise is right out the front door, and there are a LOT of really great things about living in Seattle rather than somewhere cheaper. We are potentially going to live 40+ years after retiring, so working another year or two to stay in our favorite place seems worthwhile.

[Bob W]

I am always astounded at the cost of housing in HCOL areas.    It is huge!   I live in a LCOL area.  Low pay, but my 3000 sq ft, 3 acre house is valued at just 230K.   

So yeah,  if I had to live in a HCOL area I would definitely focus on the housing aspect and do whatever needed to beat that down. 

A compromise would be living in a city with all the city amenities such as Springfield MO.   My daughter lives there.   Her apartment rent is $400 for a 2 bed.  Jobs are plentiful for the skilled and Government types.   It is the home of Jack Henry Corporation which is the leading banking software company. 

There are probably 30,000 university students there.

My guess is the average MMM reader could find a job in these LCOL Midwest cities with a relatively high income?   

Truthfully,  other than family and pay rate I don't see the attraction in HCOL areas.   Lot's of people, traffic,  crime, expensive --- yick.    Were it me I would be saving as much as possible to plan for an exit to low stress,  LCOL small town living.   

[mm1970]

I am always astounded at the cost of housing in HCOL areas.    It is huge!   I live in a LCOL area.  Low pay, but my 3000 sq ft, 3 acre house is valued at just 230K.   

So yeah,  if I had to live in a HCOL area I would definitely focus on the housing aspect and do whatever needed to beat that down. 

A compromise would be living in a city with all the city amenities such as Springfield MO.   My daughter lives there.   Her apartment rent is $400 for a 2 bed.  Jobs are plentiful for the skilled and Government types.   It is the home of Jack Henry Corporation which is the leading banking software company. 

There are probably 30,000 university students there.

My guess is the average MMM reader could find a job in these LCOL Midwest cities with a relatively high income?   

Truthfully,  other than family and pay rate I don't see the attraction in HCOL areas.   Lot's of people, traffic,  crime, expensive --- yick.    Were it me I would be saving as much as possible to plan for an exit to low stress,  LCOL small town living.

Weather.

[GodlessCommie]

Truthfully,  other than family and pay rate I don't see the attraction in HCOL areas.   Lot's of people, traffic,  crime, expensive --- yick.    Were it me I would be saving as much as possible to plan for an exit to low stress,  LCOL small town living.

I don't see anything wrong with lots of educated, open-minded, well-traveled people. Not that they don't exist in LCOL - but they do tend to concentrate in HCOL, and push property prices up. Stress is inside, not outside. The best way to manage it is - MMM 101 - live close to work. In HCOL it most likely means renting.

Please don't take it as a personal attack, we all have a right to live as we want - but a 3000 sq ft, 3 acre house is not something that is a universal goal, and may be very well in the realm of punch-in-the-face, over-the-top-consumerism, and general anti-mustachianism. Even if it is $230K.

[celticmyst08]

The biggest increased expense from moving to a small town to Seattle was the rent. It more than doubled. My car insurance premium inreased by about $50. Other than that, my other expenses are pretty constant and sometimes cheaper. Groceries have gone down since I have a lot more options here and can shop at places like ethnic markets for better deals. There is an unlimited amount of free or nearly free entertainment, and many inexpensive restaurants (especially if you like pho).

I would say that all in all, our expenses increased by ~$600/month. However, our salaries have increased more than that, and we have much better earning potential here.

Plus, it's f-ing gorgeous. I love the PNW and don't ever want to leave. We'll probably move further from the city eventually, but we're very happy at the moment.

[Retired To Win]

... Retiring to an HCOLA is a terrible idea if time to retirement is your foremost concern. However as I said before, I would rather retire a year or two later and stay where I am rather than retire earlier in a smaller town. If we were talking about a difference of a decade instead of a year or two, I might reconsider... I'm glad you're happy with your rural land, but it's just not for me.

It's just a legitimate difference in what 2 persons value: living environment vs time to FIRE.  In my case -- even though I actually preferred my new lower cost of living location -- staying in the costlier area to retire would have, at minimum, kept $150K "locked up" in the more expensive house and thereby added 5 years plus-or-minus to my FIRE date (not even considering higher property taxes AND local sales taxes).  I chose the 5 years.  But, like I said, it's a choice... not a right/wrong kind of situation.

[capital]

I presently cope with a high cost of living area (NYC) by having a high salary.

Also by living a New York lifestyle by living in a modest apartment without a car, rather than attempting to live a suburban lifestyle in the city.

If I wanted to retire early in the NYC area, I would target either living in a beautiful low-cost area at the edge of the metropolitan area, such as Beacon, NY, or stay in my rent-stabilized apartment and find part-time contract work to subsidize the additional cost of a modest city lifestyle, and keep my eyes peeled for an HDFC income-restricted coop.

[fucash]

I live with decently high rent. Living in Australia, the biggest discrepancy in cost of living seems to be housing prices (either buying or renting).

I deal with living in a higher rent area by having no car and walking to work/cycling to and from places on the weekend.

This covers the ongoing cost of the cheapest public transport and/or car expenses.

[EricL]

I'll second MustacheNY about the car.  Going without one means saving on car payments, insurance, tickets, maintenance, cleaning, and repairs.  Plus annoying car related problems like parking, fender benders, etc.  In densely enough populated areas even a bike is excessive except for exercise.  From there you can go to other saving schemes mentioned and kill expenses by way of 1000 cuts.

[Dicey]

I'm posting to follow the thread so I can read all the comments closely to glean new ideas, but here are a few things that worked for me in L.A. and the SF Bay Area.

1. Paid market price for a 2BR West LA apt. with a roommate. Stayed when RM #1 moved out, raised the rent and moved RM #2 in. Lather, rinse, repeat for ten years. By the end the rent split was probably 30% me and 70% RM. I was a great tenant so LL raised the rent far less than the law allowed (the lease was by then in my name only), so RM's share was still fairly priced, just more than mine :-)

2. Got a job (in fact, more than one) that included a company car and expenses. Yeah, they're harder to find now, but they're still out there. Didn't pay for car, gas, maintenance or insurance for the majority of my working years.

3. Accepted a temporary position in SF to cover for a rep who was on an extended maternity leave. Company paid all expenses plus a per diem. I convinced the company to pay for a beautiful Victorian in Noe Valley which was less expensive and far cooler than a hotel. I grocery shopped and cooked all of my meals in my temporary home. I banked every single paycheck and half of the per diem for three and a half months. Dumped it all in the Down Payment Fund.

4. Couldn't afford anything in LA, so bought my first fixer house in a lower COLA where I grew up (Riverside). Fixed it up and rented it out while living in same WLA apartment.

5. Moved to NorCal, became a roommate until I figured out where I wanted to live. Tried out at least three communities as a roommate before buying a tiny condo on a short sale during a market dip, way back before the turn of the century.

6. Couldn't afford my book habit so I started volunteering at the library book sales. It literally changed my life. I haven't paid more than $1 for a book since. I have made lots of new friends and put down strong roots in my community.

[okonumiyaki]

I live in a HCOL - Hong Kong.  Like others I cope by having a salary that justifies my being here, and save >50% of it.  The net savings are much better than being in a LCOL.  For retirement, we will probably end up in Indonesia, where my wife is from, which is a LCOL.

[Noodle]

I recently went back to the rural area where I grew up, and what surprised me as an adult which I hadn't noticed as a kid was that although housing (and I'm sure taxes) were less than the big city where I am now, other things were more expensive or not available. No public transportation, for instance. No Costco, Trader Joe's or Aldi's. Groceries which to many of us are staples (things like quinoa, for instance) were considered gourmet ingredients and priced accordingly. A lot less competition in many areas of business, so merchants can set their prices wherever. Goods have to be trucked in a long distance and marked up to compensate. Fewer car dealerships, so less choice of used or new vehicles. For medical care, you will drive long distances for specialists. The library was much smaller, so you'd have to supplement more out of your own pocket. In the end it would still probably be a net gain given the housing costs, but not as much as it looks like at first. Luckily the Internet has made access to goods easier (the closest bookstore was three hours away when I was growing up, and it was just a B Dalton in a mall) and like-minded people as well.

A smaller, non-coastal city (like Springfield, mentioned above) might be the sweet spot for many. My parents are in that kind of community after many years of rural living and like it very much.

[zinnie]

I presently cope with a high cost of living area (NYC) by having a high salary.

Also by living a New York lifestyle by living in a modest apartment without a car, rather than attempting to live a suburban lifestyle in the city.

If I wanted to retire early in the NYC area, I would target either living in a beautiful low-cost area at the edge of the metropolitan area, such as Beacon, NY, or stay in my rent-stabilized apartment and find part-time contract work to subsidize the additional cost of a modest city lifestyle, and keep my eyes peeled for an HDFC income-restricted coop.

Yeah, this is what I was going to say. My salary is high, I am in the middle of an urban area so I don't have to drive my car unless I want to. Bought into the housing market when it was low with a lot down so the monthly payment is crazy low, and I live in a place that caps how much property taxes can increase every year. As long as I don't spend too much on bars and restaurants, life feels pretty cheap. And the high COL guarantees a good salary as well as other options if this job should go away...

[Retired To Win]

I live in a HCOL - Hong Kong.  Like others I cope by having a salary that justifies my being here, and save >50% of it.  The net savings are much better than being in a LCOL.  For retirement, we will probably end up in Indonesia, where my wife is from, which is a LCOL.

And you should probably be able to make that an early retirement.  Yes sir, the high salary strategy is great if you're in a profession that makes it possible.  Good for you.

[brooklynmoney]

I live in a HCOL - Hong Kong.  Like others I cope by having a salary that justifies my being here, and save >50% of it.  The net savings are much better than being in a LCOL.  For retirement, we will probably end up in Indonesia, where my wife is from, which is a LCOL.

Ditto! I live and work in NYC and SF. There's A LOT of $ to be made and saved. I always feel so blessed with good fortune that I've been able to secure these amazing jobs, but then I realize compared to others I work with (bankers, CEOs, techies who cashed out from the biggies etc.) I am relatively average/middle class.