Those Of You In a HCOLA - What's Your Financial Plan

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FIBoston
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Those Of You In a HCOLA - What's Your Financial Plan

Post by FIBoston » Wed Jul 19, 2017 1:15 pm

I love reading these forums and seeing other people's stories. One thing I find though is that a lot of people talk about maxing their retirement accounts and doing taxable investing on the side with a salary in the 60 - 80k range. This always throws me off because I could never do it on that money. Then comes the rub - their living expenses are really low, usually because they are living in a low cost of living area.

So, here's what I want to know: for those of you living in a HCOL area (Bay Area, Boston, NYC, LA etc.) what does your financial plan look like? How have you balanced saving for the long term with saving for more immediate goals (house, vacation, cars etc)? What salary level allowed you to begin maxing retirement accounts? Have you generally found that your salaries have kept up with living expenses or do you feel yourselves being priced out?

I'll start with mine:

Married mid 20's filing jointly

Income 1: $41000 (gross)
Income 2: $70000 (gross)
Monthly Income: $9250 (gross)

Monthly Savings:
401k 1 - $1500
401k 2 - $1500
Taxable - $100
Short term goals - $1000
Total: $4100

Expenses:
Rent - $1350 (30 miles outside the city)
Utilities - $135
Groceries - $500
Transportation (Car payment, insurance, fuel) - $525
Entertainment - $250
Personal Spending - $100
Charity - $80
Total - $2940

We're lucky in that we live near public transportation and only need one car to get around. We also are on a family cell phone plan where our monthly bills are covered. We've only just been able to start maxing out our 401k's too after clearing the last of my student debt. I would say that we've worked extremely hard to get to the point where we are with our budget, but there's an enormous amount of luck here (born to good parents who payed for most of college and help with emergency purchases in early adulthood, found an excellent landlady with a paid off mortgage who isn't trying to make large amounts of money off us, working for companies who choose to provide strong benefits packages). My overarching worry is that a lot of the HCOL areas are difficult places to live while leading financially sound lives and I think there is a crisis brewing for the future when the penny drops (if anybody has a penny left to drop).

Anyway, I'm curious how other people feel. What are you doing with your money? What are those around you doing with theirs? Do you think that in the long term these cities are creating an unsustainable reality or do you think that they can go like this forever (forever being a relative word of course)?

mac808
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by mac808 » Wed Jul 19, 2017 1:42 pm

Those seem like low/starter salaries for a HCOL area and you said you were mid 20s so indeed you are just starting out. You can only cut expenses so much. I would focus on getting income up through any opportunities available to you (more training, job hopping, side hustles). Those opportunities are what you are paying for in a HCOL area. I don't know what fields you are in but it wouldn't surprise me if you could each double your salaries within 3-5 years.

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InKirkWeTrust
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by InKirkWeTrust » Wed Jul 19, 2017 1:57 pm

First off I think you should have some perspective. You are doing great! You have a tremendous household income, no debt, and are saving 4k a month! If you can maintain this you will be better off than 9 out of 10 American families. So don't worry about keeping up with those who save 20k a month.

I live in the Bay Area, and like you the only way to save is to squeeze your household budget till there's nothing left. Our household income will probably be just north of 100k this year. We put roughly $2500 towards my student debt each month. After rent - $1650 for a studio, groceries, and bills, we spend about $100 a month on entertainment, eating out, and shopping. That's it. I would love to invest more (or anything) but I am choosing to put everything towards the student loans first. If I had things my way, I'd send 50% of my paycheck to Vanguard each month. Damn student loans! :x

As for how to manage other goals, my plan is to move to a LCOL area. I grew up in the Midwest, and I just don't see how I can have the same standard of living out here. I want my kids to be able to run around in a big backyard, and here that'll set you back a million dollars. My plan is to save up about 30-50k in cash after my debt is paid off, then move to the Midwest and buy a house. My friends from back home make half as much as I do and live much easier. If you are from a HCOL area and your family is there, that makes moving a much harder decision. But for me it's a no-brainer.

I've thought a lot about whether SF real estate is sustainable, and I think it is. I recently graduated from a master's program and 4/5 people ended up in SF, DC, or NY. Other than Chicago, Boston, maybe some others, there just aren't that many cities that attract young, educated people. So for every person like me who moves to SF for a few years, then moves away, there will be 5 more to take my place. As long as the jobs are here, people will come.
Control the controllables

Jags4186
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Jags4186 » Wed Jul 19, 2017 1:58 pm

OP,

The reality is many people with lots of savings (surprise!) don't spend that much money. Most people with lots of fancy toys or big houses etc. etc. simply spend most of their money. Are there people who make big bucks and are young? Of course but it's a lot less than what you see represented on Bogleheads. Remember this is a self selected forum of people who are interested in accumulating money and investing it. People who have no money to invest aren't looking for investment advice--at least not the type found on this forum.

Regarding the HCOL areas... I think for the most part living in a HCOLA only makes financial sense if the goal is eventually to transplant to a LCOLA. There could be many other reasons to live there beyond finances, but unless you have the big time job I don't think extra income makes up for the increased living expenses for most people with "normal" jobs.

bigred77
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by bigred77 » Wed Jul 19, 2017 2:36 pm

I think the big thing to me in HCOL locations (while young) is that you just have to accept you likely can't buy a dream house in your 20s (or maybe even 30s) unless you have family help or hit a lottery ticket (equity compensation, huge bonus, etc.) Not that you can't live in a nice place, just that you may have to live with smaller square footage, rent instead of buy, or commute for longer. This can also mean starting families later (in your 30s) as is more common in those areas than much of the Midwest and/or South.

That's the big trade off. In certain industries I think it's worth it (tech in the bay area or finance in NYC). If you can work anywhere, I think you need to ask yourself if you are willing to make those sacrifices if you aren't directly benefiting from the local job market.

Max retirement accounts, save for your cars/houses (just accept this may be a longer timeline) and enjoy the amenities that make those areas HCOL locations in the first place (weather, beaches, mountains, culture, arts, excitement, what have you).

Thesaints
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Thesaints » Wed Jul 19, 2017 2:38 pm

bigred77 wrote:?.. enjoy the amenities that make those areas HCOL locations in the first place (weather, beaches, mountains, culture, arts, excitement, what have you).
You may add "compensations" to the list

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Elsebet
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Elsebet » Wed Jul 19, 2017 2:46 pm

We live east of Seattle. It's not on your list but it's definitely an HCOL area due to housing. We got extremely lucky when we were house shopping in 2014 and landed a reasonably priced fixer-upper close to our jobs. If we were looking now we would probably be out of luck.

Our income combined is about 120k with my salary at a megacorp providing most of that + benefits. We used to make about 160k but after a year-long layoff my husband's income went down by more than half.

I only max my 401k. My husband works for a tiny company and he only puts in enough to get the match for his 401k. I'm putting in about half the max for my Roth IRA, but when my husband was making more I maxed that too. "Make hay when the sun shines."

The mortgage/HELOC/property tax/insurance payment is our largest expense @ 2100/month. Our property taxes have been steadily climbing every year, outpacing my tiny raises, so I feel like I am going backwards a bit. We are paying $1000/month towards the truck I bought last year, intending on paying it off in 2019. That's the only other non-mortgage debt and we have no kids so our expenses are pretty low.

I would say I definitely feel poor here compared to when we lived in Ohio and made less money. I could try to find a job elsewhere in the area but my commute would likely increase and it's already aggravating enough with the terrible drivers here.

The bright side is that conservatively our home value is 200k over our mortgage (and 400k over using Zillow's silly value) and we are making improvements every year as finances allow. If that at least remains steady we should be able to pay cash for a place in a LCOL area once we decide to move.

new2bogle
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by new2bogle » Wed Jul 19, 2017 2:54 pm

I used to live in the bay area and my household income was easily 1.5x yours. My financial plan was to move out and I did.

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bligh
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by bligh » Wed Jul 19, 2017 2:58 pm

I live in a HCOLA area I don't plan to live here long term. I count the higher taxes, higher living costs, traffic, pollution and other annoyances associated with living here as a price I am paying to be close to where the jobs are. Once I no longer need to be within commuting distance of these employers, I don't need to be paying the price in any of those forms. This pursuit drives me to be more frugal than I would otherwise be.

pasadena
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by pasadena » Wed Jul 19, 2017 3:22 pm

I live in LA. My personal situation is quite different from yours, though. I'm older (early 40's), so I do earn quite a bit more, and single. But if you want a datapoint, here's mine.

Income : a bit under $140k. Take home pay is ~$5,600 (after taxes, HSA, health insurance, 401(k))

401(k) : Maxed Out
HSA : Maxed out

Monthly Savings :

Backdoor Roth IRA : $460
Emergency Fund : $240
Downpayment (mix of cash and brokerage) : ~$1,200 to $1,600 depending on overtime

Rent : $2,200
Other monthly expenses (all included) : $1,200 - sometimes that's a bit hard, but I find it works for me.
I live within walking distance of work, so very very low gas expenses.

My plan....... in the short / middle term, I don't know anymore, due to impending big changes (either relocation or a new job) within the next couple of years. I'm not overly fond of LA, and while I was originally planning on buying a home here, I don't really plan to anymore - the price / quality ratio is completely out of whack.
On the other hand, if I lived in a lower COL area, my income would probably be much less than it is here.

My real long-term goal is to have a paid-off home by the time I retire. So I'm saving money, as much as I can while being comfortable. Either I find myself in a situation where I can buy a nice home with a reasonable mortgage and a 20%+ DP, or I'll buy one for cash when I retire (probably in my home country).

You're young, and that's a big reason why you struggle with maxing everything out. It can take a few years to get there. The important thing is to actually get there. Your very best course of action now is to make sure your incomes increase as much as you can get them to over the course of the next 20 years. That means working hard, getting promoted, furthering education, job hopping. Keep your expenses low and avoid life style inflation. Living in an area where the economy is strong ultimately helps with that.
I lived in my country's capital for years when I first started working, which allowed me to have a strong job experience and good base salary. When I finally decided to leave and move to another part of the country for a better quality of life, this allowed me to find a job easily AND keep a fairly high salary. Had I moved right after graduation, my salary would have been way lower after those years.

I considered the ~10 years I spent working in Paris an investment in my career and future self. That experience is the gift that keeps giving.

fishmonger
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by fishmonger » Wed Jul 19, 2017 3:48 pm

In a nutshell, I think you're doing fantastic. I'm in a good place, but I can't fathom where I would be if both my wife and I were maxing out our 401k in our mid 20s.

However, I agree with other posters that if you aren't there to make a large income (and a similar job doesn't exist elsewhere) HCOL areas simply don't make sense. I lived in Boston for 4 years and loved it, but do not miss it whatsoever

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simplesimon
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by simplesimon » Wed Jul 19, 2017 3:57 pm

My choices are 1) to be house poor and live close to the city, 2) not house poor but have a really long commute, or 3) move to a LCOL area and try to make the same amount of money.

The Boglehead choice is clear, but it just depends on your priorities. I know lots of people who do 1) and 2) and a handful of people who did 3). There are pros and cons to everything. People have said to me that maxing a 401K is a luxury, but to a Boglehead its as much a luxury as a car or house is, or any other expense a person saves for. People have different priorities.

Rest assured you have a good savings rate and should reassess in five years. By then you'll have invested almost $200k in retirement savings, $6k in taxable, and $60k in cash. Alternatively, say you cut your 401K savings in half, you'll have almost $100k invested and maybe $120k cash. What are your priorities (see a theme?) Your car will likely be paid off so you'll have about another $500 in cash flow. I would spend most of your energy focusing on increasing your income by being really good at your job and networking. I almost doubled my compensation in four years by doing this.

If these macro trends are somehow unsustainable and there is a correction, you'll be in a great position to take advantage of buying opportunities. If this becomes a new normal, then you did as much as you could and will have to evaluate your priorities.

Renting makes a ton of sense in HCOL areas, financially.

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unclescrooge
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by unclescrooge » Wed Jul 19, 2017 4:11 pm

irishnick23 wrote:
Anyway, I'm curious how other people feel. What are you doing with your money? What are those around you doing with theirs? Do you think that in the long term these cities are creating an unsustainable reality or do you think that they can go like this forever (forever being a relative word of course)?
I live in Los Angeles.

You are on the right path.

In general, marrying the right person is key. Someone who shares your understanding of saving, investing and work ethic.

You're saving a large portion of your income. That's great. You're already on the right track. Keep it up.

In 12-15 years, you'll be able to buy your dream home.
Don't be discouraged. 15 years will fly by sooner then you think.

I'm early 40s. I spent too much time in college, was lousy at finding high paying jobs, but excellent at saving and investing. The investing returns more than compensated for mediocre income from jobs.

Engineer250
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Engineer250 » Wed Jul 19, 2017 4:20 pm

Elsebet wrote:We live east of Seattle. It's not on your list but it's definitely an HCOL area due to housing. We got extremely lucky when we were house shopping in 2014 and landed a reasonably priced fixer-upper close to our jobs. If we were looking now we would probably be out of luck.

Our income combined is about 120k with my salary at a megacorp providing most of that + benefits. We used to make about 160k but after a year-long layoff my husband's income went down by more than half.
These numbers agree with my personal experience. Making about $100k household income now and unable to max anything out (doing a little bit of everything). Hope to be making around $150k household income at least in about a year. Pay off student loans should take less than a year, and then I think we'll have no problem maxing everything out as well as getting to the exciting point where it's worth it to have a taxable account. That might seem obvious that $50k more income would allow an increase in savings, but I think the sort of "head above water" level is different in HCOL areas.
Elsebet wrote:The bright side is that conservatively our home value is 200k over our mortgage (and 400k over using Zillow's silly value) and we are making improvements every year as finances allow. If that at least remains steady we should be able to pay cash for a place in a LCOL area once we decide to move.
Ain't that the truth, Zillow thinks my small house is worth an absurd amount. I just can't comprehend it. However, I was able to re-fi, get a lower rate, and kill the PMI as a result. Equity is only worth it if we leave the state.

To everyone talking about "making the choice" of living in a HCOL area must work in pretty flexible industries. In my current city, if I get laid off there are actually other companies here in my same industry that I could go work for. If I went to middle of Indiana, well frankly there's only one company there and if I got laid off from that we'd have to sell the house and move and start all over somewhere else. There are plenty of parts of the country where they just have no need for engineers with my specialty. I suppose if you work in "sales" or "retail" you can move anywhere. If you have a tech-related career that limits your options. And if you and your spouse have tech related careers, you have to coordinate that to an area that can employ you both. And then you have to decide whether snow and freezing temperatures for part of the year or unbearable humidity for part of the year are worth saving more money. Also some of us were born in these HCOL areas and have lots of family and friends here, they are as much home and community for us as home is home for anyone else.
Where the tides of fortune take us, no man can know.

BW1985
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by BW1985 » Wed Jul 19, 2017 4:32 pm

InKirkWeTrust wrote: As for how to manage other goals, my plan is to move to a LCOL area. I grew up in the Midwest, and I just don't see how I can have the same standard of living out here. I want my kids to be able to run around in a big backyard, and here that'll set you back a million dollars. My plan is to save up about 30-50k in cash after my debt is paid off, then move to the Midwest and buy a house. My friends from back home make half as much as I do and live much easier. If you are from a HCOL area and your family is there, that makes moving a much harder decision. But for me it's a no-brainer.
+1. I lived outside NYC for some years after college, rented as cheaply as I could, steadily rose my income then moved back to the Midwest and bought a house.

Maxing 401k at your income is feasible. I did it making $60k in HCOLA.. I didn't have any debt though.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

BuffaloBill21
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by BuffaloBill21 » Wed Jul 19, 2017 5:35 pm

Boston here (about 8 miles outside the city), also late 20's, MFS (PSLF program):

Income 1: 55K Gross
Income 2: 83K Gross
Monthly Gross: 11.5K

Monthly Savings:
401K: 780 (before employer match)
401K: 1,500 (before employer match)
Taxable: $1,600
Cash: 0-400 (if we have extra cash we are investing it, emergency fund would last us at least 12 months, more likely 18 if we streamlined expenses), what I am going to start to do is start bleeding our emergency account by about 500 per month and invest that with our taxable, the goal is to increase taxable to the point where it can withstand a 50% loss and still be 18 months of expenses.

To answer your specific questions: Financial plan: My goal is to get as much into the market as fast as possible and let time/compounding take over. We are also trying our absolute hardest to avoid lifestyle creep, we invest nearly all of our raises. In terms of long term vs. intermediate it's about finding a balance. We save quite a bit so we don't feel bad if we want to take an expensive vacation like we did this year. Our salaries are rising wayyyy beyond inflation. We started really low salary wise, it was about 4 years ago we were making somewhere in the neighborhood of 35K and 27K (piecing together multiple jobs). So, we have more than doubled since then.

I am worried for when kids enter the picture, daycare is very expensive and will chew up a majority of our cash flow. Until that time, keep investing as much as we can.

annielouise
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by annielouise » Wed Jul 19, 2017 5:54 pm

How does one know if they live in a HCOL area? For example, our house costs $2500 a month, and will still be $1000+ when mortgage is paid off next year. (2000 sq ft)

Jags4186
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Jags4186 » Wed Jul 19, 2017 5:55 pm

annielouise wrote:How does one know if they live in a HCOL area? For example, our house costs $2500 a month, and will still be $1000+ when mortgage is paid off next year. (2000 sq ft)
There are $1,000,000 houses everywhere. Your payment doesn't mean anything.

WarChest
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by WarChest » Wed Jul 19, 2017 6:12 pm

You are doing a great job and your head is in the right place. I think at this point your goal should be to try to increase your earnings while keeping your spending as flat as possible. Others are right, after family, the biggest reason people are in HCOL areas is employment opportunity. I'm in LA, started making $75k shortly after college and now am comfortably north of $500k/year (and we spend under $100k/year). I pay over 2x in taxes (state and fed) what I spend...My income doubled over the past 4 years. Think of your 20s as a time to lay the foundation, establish the right habits, avoid costly long term commitments and get ready to be really crushing it in your 30s. Most of my friends who can afford to think of buying are now just starting to buy property and many are in their early to mid 30s. So rent, sock away cash, and you will possibly get lucky with RE timing by sheer luck, I know I did.

Don't be a miser and do live a little, but don't be surprised if all your friends and peers start buying nicer things and living "much better" than you. We had friends leasing a $600/month BMW while my wife drove a 10+ year old civic (which she loved), while we had a 7 figure net worth. Go figure. Read the millionaire next door. My friends would be shocked if they knew my numbers...

Lastly, if you have a lower cost of living place that you would like to live and can find decent employment in, then yeah, go. I think too many people live in HCOL areas and kill themselves with stress, commutes, etc and it really isn't worth it.

Slacker
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Slacker » Wed Jul 19, 2017 6:25 pm

irishnick23 wrote:
Expenses:
Rent - $1350 (30 miles outside the city)
Utilities - $135
Groceries - $500
Transportation (Car payment, insurance, fuel) - $525
Entertainment - $250
Personal Spending - $100
Charity - $80
Total - $2940
Very affordable rent for a HCOL area. Like a few others mentioned, work on increasing income as you are unlikely to lower your expenses (much more then they are now). At best you can look forward to paying off your vehicle to reduce expenses.

I live in a LCOL area and pay $1450 / month in rent (though our housing probably isn't comparable).

annielouise
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by annielouise » Wed Jul 19, 2017 7:56 pm

Jags4186 wrote:
annielouise wrote:How does one know if they live in a HCOL area? For example, our house costs $2500 a month, and will still be $1000+ when mortgage is paid off next year. (2000 sq ft)
There are $1,000,000 houses everywhere. Your payment doesn't mean anything.
Ha Ha! As if!

Jags4186
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Jags4186 » Wed Jul 19, 2017 8:11 pm

annielouise wrote:
Jags4186 wrote:
annielouise wrote:How does one know if they live in a HCOL area? For example, our house costs $2500 a month, and will still be $1000+ when mortgage is paid off next year. (2000 sq ft)
There are $1,000,000 houses everywhere. Your payment doesn't mean anything.
Ha Ha! As if!
Try this

http://www.relocationessentials.com/aff ... y/col.aspx

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rob
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by rob » Wed Jul 19, 2017 8:21 pm

irishnick23 wrote:xxx This always throws me off because I could never do it on that money. Then comes the rub - their living expenses are really low, usually because they are living in a low cost of living area. xxx
I'm in one of those on your HCOL list - Bottom line is that sometimes we don't "max" everything out. Some years are good and some have higher expenses. Don't let this board get you down... the sub-set of people here are not representative :shock:
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

Ron Ronnerson
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Ron Ronnerson » Wed Jul 19, 2017 8:44 pm

You’re doing great if you’re saving $4k out of $9k per month and are only in your mid-20s. The thing to watch for is not adjusting your lifestyle up too much as you get pay raises in the years ahead. That can occur easily if you don't watch it.

We live in the Bay Area and are in our early 40s with a combined income of $150k. During our 30s, our combined income hovered just above $100k for most of the years. We don’t max out retirement space but save a decent percentage of our income. Our approach has been to keep costs low, and have found this is possible even in a VHCOL area. The main reason for this approach is that any increased income is taxed rather heavily in our case and would also require us to put in more hours at work. So, by finding inexpensive alternatives, we have set up a life where we have a lot of time together as a family.

Basically, we’ve found things don’t have to cost as much as many people would assume. For example:
Daycare = grandma
Transportation: wife works from home 80% of the time and I carpool in my Corolla to work the 9 months of the year that school is in session. I kept my last car for 15 years. My wife bought her last car for $5k, put 100k miles on it, and then sold it for $2k. She likes to show me up.
Electric Bill: open and close windows
Life Insurance: Got super-preferred rate coverage by getting into good shape
Clothes: Got wardrobe for almost nothing by using coupons and keep them until they begin to fall apart
Phones: Use a basic plan at an AT&T MVNO
Restaurants: Share Subway sandwich with wife and 3 year old daughter. $6 feeds a family of three. Cook at home. Fancy meal out is $30 at a Chinese restaurant. Don’t order drinks, appetizers, dessert.
Health Insurance: Provided by wife’s work
Mortgage: $1800/month mortgage for a 4 bedroom/4 bathroom townhouse in a great neighborhood with amazing schools in the Bay Area – we got lucky by buying in 2009 when the economy took a downturn and rented out a room for a while.
Car Maintenance: Found an inexpensive and reliable garage to do the work
Entertainment: We negotiate annually with the cable company and have all the TV channels. Last year, I called a 2nd time and renegotiated the rate down further. We don’t go out much these days as we have a three-year old.
Vacations: Paid for by credit card companies through bonuses. We go to Hawaii every two years, Vegas annually (family visit), and places like Disneyland every so often. We did international travel before the kid was born.

We spend very little on our kid too. I took my daughter to visit grandma this morning. Then we went to the park. We came home for snacks. Then we went to the library for story time. Next she took a nap. Then we went to the pool. Nothing cost anything. Since she’s so inexpensive, I could spend the day with her rather than put her in daycare (with grandma for free) while I teach summer school or tutor. I could still go earn that extra income but then I’d have to pay tax and be away from my kid.

I’m a teacher and my wife works for a small business. I work 180 days a year. My wife works 6 hour days from home. We have a lot of time off in a VHCOL area because we’ve found ways to keep costs low. We have everything we could possibly want and are content with what we do have. This results in a lot of free time. That’s our basic approach.

Your expenses are already low. You have that in your favor. Don’t let them get out of control as your pay increases and you’ll be golden.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by littlebird » Wed Jul 19, 2017 9:07 pm

Thesaints wrote:
bigred77 wrote:?.. enjoy the amenities that make those areas HCOL locations in the first place (weather, beaches, mountains, culture, arts, excitement, what have you).
You may add "compensations" to the list
All of the above. And then retire as early as possible to a LCOL area.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by FIBoston » Wed Jul 19, 2017 9:57 pm

annielouise wrote:How does one know if they live in a HCOL area? For example, our house costs $2500 a month, and will still be $1000+ when mortgage is paid off next year. (2000 sq ft)
Assuming a down payment of 20%, a monthly payment in my area would get you approx. 1300 sq ft in a town with average schools and nowhere near the water or public transpo. I'd say that HCOL

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by FIBoston » Wed Jul 19, 2017 10:00 pm

Slacker wrote:
irishnick23 wrote:
Expenses:
Rent - $1350 (30 miles outside the city)
Utilities - $135
Groceries - $500
Transportation (Car payment, insurance, fuel) - $525
Entertainment - $250
Personal Spending - $100
Charity - $80
Total - $2940
Very affordable rent for a HCOL area. Like a few others mentioned, work on increasing income as you are unlikely to lower your expenses (much more then they are now). At best you can look forward to paying off your vehicle to reduce expenses.

I live in a LCOL area and pay $1450 / month in rent (though our housing probably isn't comparable).
Yes we lucked out with rent. Were paying roughly $500 less than what we would pay for a similar apartment in my town. Luckily our landlady finished paying off the mortgage on this building 10 years ago so she can afford to be generous with the rent

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Watty » Wed Jul 19, 2017 11:13 pm

irishnick23 wrote:So, here's what I want to know: for those of you living in a HCOL area (Bay Area, Boston, NYC, LA etc.) what does your financial plan look like?
I'm retired now but I lived in the Bay Area when I was in my 20's and that area has always been expensive. When I was ready to buy my first house I moved to an area where housing cost maybe a fifth of what it cost in the Bay Area.

The taxes in the area I moved to were much lower than the Bay Area too.

When I moved I was actually able to get a job with my same salary, but if I had changed jobs in the Bay Area I would have likely gotten a modest bump in pay. I've moved since then too. It is just anecdotal but from what I have seen unless you are in some special niche or in upper management the regional pay differences are not as large as you might think and not nearly enough to pay for high cost of housing.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Calygos » Wed Jul 19, 2017 11:23 pm

I'm on the east side of the lake from Seattle and even being single with a low six-figure salary, there's no way I could afford anything decent within an hour's commute of my job in Bellevue, and to hell with that 405 traffic. Even rent in this area is stupid. I really like my job, though if I could ever land a job at Google, I'd be set. Otherwise, maybe I'll move somewhere more affordable despite liking this area (other than the traffic and population density). I wonder how the Northeast is?

Aside from that, I max my 401k and Roth IRA and contribute to a taxable account monthly and that's about it. No other real savings goals.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by unclescrooge » Thu Jul 20, 2017 12:04 am

Ron Ronnerson wrote:You’re doing great if you’re saving $4k out of $9k per month and are only in your mid-20s. The thing to watch for is not adjusting your lifestyle up too much as you get pay raises in the years ahead. That can occur easily if you don't watch it.

We live in the Bay Area and are in our early 40s with a combined income of $150k. During our 30s, our combined income hovered just above $100k for most of the years. We don’t max out retirement space but save a decent percentage of our income. Our approach has been to keep costs low, and have found this is possible even in a VHCOL area. The main reason for this approach is that any increased income is taxed rather heavily in our case and would also require us to put in more hours at work. So, by finding inexpensive alternatives, we have set up a life where we have a lot of time together as a family.

Basically, we’ve found things don’t have to cost as much as many people would assume. For example:
Daycare = grandma
Transportation: wife works from home 80% of the time and I carpool in my Corolla to work the 9 months of the year that school is in session. I kept my last car for 15 years. My wife bought her last car for $5k, put 100k miles on it, and then sold it for $2k. She likes to show me up.
Electric Bill: open and close windows
Life Insurance: Got super-preferred rate coverage by getting into good shape
Clothes: Got wardrobe for almost nothing by using coupons and keep them until they begin to fall apart
Phones: Use a basic plan at an AT&T MVNO
Restaurants: Share Subway sandwich with wife and 3 year old daughter. $6 feeds a family of three. Cook at home. Fancy meal out is $30 at a Chinese restaurant. Don’t order drinks, appetizers, dessert.
Health Insurance: Provided by wife’s work
Mortgage: $1800/month mortgage for a 4 bedroom/4 bathroom townhouse in a great neighborhood with amazing schools in the Bay Area – we got lucky by buying in 2009 when the economy took a downturn and rented out a room for a while.
Car Maintenance: Found an inexpensive and reliable garage to do the work
Entertainment: We negotiate annually with the cable company and have all the TV channels. Last year, I called a 2nd time and renegotiated the rate down further. We don’t go out much these days as we have a three-year old.
Vacations: Paid for by credit card companies through bonuses. We go to Hawaii every two years, Vegas annually (family visit), and places like Disneyland every so often. We did international travel before the kid was born.

We spend very little on our kid too. I took my daughter to visit grandma this morning. Then we went to the park. We came home for snacks. Then we went to the library for story time. Next she took a nap. Then we went to the pool. Nothing cost anything. Since she’s so inexpensive, I could spend the day with her rather than put her in daycare (with grandma for free) while I teach summer school or tutor. I could still go earn that extra income but then I’d have to pay tax and be away from my kid.

I’m a teacher and my wife works for a small business. I work 180 days a year. My wife works 6 hour days from home. We have a lot of time off in a VHCOL area because we’ve found ways to keep costs low. We have everything we could possibly want and are content with what we do have. This results in a lot of free time. That’s our basic approach.

Your expenses are already low. You have that in your favor. Don’t let them get out of control as your pay increases and you’ll be golden.
The one thing money can't buy is time. You seem to have it all figured out. :beer

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Jazztonight » Thu Jul 20, 2017 1:12 am

I live in a HCOLA, the SF Bay Area. I never made that much money, and when I did I spent it on my kids' college and my mortgage. My 2 kids were out of college in 8 years. DW and I had a 15 year mortgage, which we paid off in (you guessed it) 15 years.

Then all of a sudden, my income was my own! That's when I started to save and invest.

Now, years later, I'm retired and still living in the same East Bay city and loving where I live. I never had any desire to move away. Between SS and my RMD, I have enough to live, travel, and lead a good life.

People do manage to live comfortably in HCOL areas. Your lifestyle often determines how well you live. Myself, I lead a Bogleheads life: 2001 Camry, modest travels, neighborhood restaurants, library books, etc.
"What does not destroy me, makes me stronger." Nietzsche

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by 18_bank_accounts » Thu Jul 20, 2017 1:14 am

Moved from Boston to the Bay Area 5 years ago. Even though that was 10 years into a software engineering career, I've doubled my salary in those 5 years.

Plan is to pay off the mortgage 10 years early and save enough for college for two kids and then retire right as they are getting out of the house. It really helps that we started saving 15% consistently back when we were just 22. Plus we had a $200k payout from my first job's stock options.

The mortgage, retirement savings, the nanny and college savings are such a large percentage of our budget now. All the rest is "only" $64k a year. We can easily save 33x that due to the high income. I plan to retire and stay in the HCOLA.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Ron Ronnerson » Thu Jul 20, 2017 1:20 am

unclescrooge wrote:
Ron Ronnerson wrote:You’re doing great if you’re saving $4k out of $9k per month and are only in your mid-20s. The thing to watch for is not adjusting your lifestyle up too much as you get pay raises in the years ahead. That can occur easily if you don't watch it.

We live in the Bay Area and are in our early 40s with a combined income of $150k. During our 30s, our combined income hovered just above $100k for most of the years. We don’t max out retirement space but save a decent percentage of our income. Our approach has been to keep costs low, and have found this is possible even in a VHCOL area. The main reason for this approach is that any increased income is taxed rather heavily in our case and would also require us to put in more hours at work. So, by finding inexpensive alternatives, we have set up a life where we have a lot of time together as a family.

Basically, we’ve found things don’t have to cost as much as many people would assume. For example:
Daycare = grandma
Transportation: wife works from home 80% of the time and I carpool in my Corolla to work the 9 months of the year that school is in session. I kept my last car for 15 years. My wife bought her last car for $5k, put 100k miles on it, and then sold it for $2k. She likes to show me up.
Electric Bill: open and close windows
Life Insurance: Got super-preferred rate coverage by getting into good shape
Clothes: Got wardrobe for almost nothing by using coupons and keep them until they begin to fall apart
Phones: Use a basic plan at an AT&T MVNO
Restaurants: Share Subway sandwich with wife and 3 year old daughter. $6 feeds a family of three. Cook at home. Fancy meal out is $30 at a Chinese restaurant. Don’t order drinks, appetizers, dessert.
Health Insurance: Provided by wife’s work
Mortgage: $1800/month mortgage for a 4 bedroom/4 bathroom townhouse in a great neighborhood with amazing schools in the Bay Area – we got lucky by buying in 2009 when the economy took a downturn and rented out a room for a while.
Car Maintenance: Found an inexpensive and reliable garage to do the work
Entertainment: We negotiate annually with the cable company and have all the TV channels. Last year, I called a 2nd time and renegotiated the rate down further. We don’t go out much these days as we have a three-year old.
Vacations: Paid for by credit card companies through bonuses. We go to Hawaii every two years, Vegas annually (family visit), and places like Disneyland every so often. We did international travel before the kid was born.

We spend very little on our kid too. I took my daughter to visit grandma this morning. Then we went to the park. We came home for snacks. Then we went to the library for story time. Next she took a nap. Then we went to the pool. Nothing cost anything. Since she’s so inexpensive, I could spend the day with her rather than put her in daycare (with grandma for free) while I teach summer school or tutor. I could still go earn that extra income but then I’d have to pay tax and be away from my kid.

I’m a teacher and my wife works for a small business. I work 180 days a year. My wife works 6 hour days from home. We have a lot of time off in a VHCOL area because we’ve found ways to keep costs low. We have everything we could possibly want and are content with what we do have. This results in a lot of free time. That’s our basic approach.

Your expenses are already low. You have that in your favor. Don’t let them get out of control as your pay increases and you’ll be golden.
The one thing money can't buy is time. You seem to have it all figured out. :beer
Thanks, UncleScrooge, but I definitely wouldn't say I have everything figured out. I lost my father at a relatively young age so I do appreciate the importance of time. He was often busy working and didn't seem to have a lot of time to spare. Then it was too late. I suppose we're all a product of our experiences as I'm driven not to repeat the same pattern the next generation. The best things in life are free (or relatively inexpensive) anyway. We just need the time to enjoy them.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by AntsOnTheMarch » Thu Jul 20, 2017 3:35 am

My wife and I moved out of a HCOL area 22 years ago (NYC to be exact). Here are some thoughts.

- We observed early on that a HCOL living area plus working in a field where income does not keep pace with that area is a longterm poverty trap. Saw it with many people in NYC in the 1980s—when NYC was supposedly still affordable. Many lived a nice lifestyle but could not save because rent (mostly) ate huge chunk of paycheck and home purchase was out of reach. Sharing an apartment with a bunch of roommates gets really old in your 30s.

- Be careful how you compare yourself against your peers. For a while, I thought we were doing something wrong. Others seemed to handle the HCOL/lower salary thing better. I discovered that some were just living in debt and quite a few others were barely working but had trust funds of various amounts. In HCOL area, a trust fund baby can seem middle class or scraping by but there is solid base of income supporting a lifestyle that would seem lavish to normal people. I imagine that there must be a similar effect in Silicon Valley where some rather young people may have cashed in on stock options.

- We decided we had to get out of NYC and our method was self-employment — using the this new discovery called the internet to make it happen (this was mid-1990s).

- But...it's not all a bed of roses. Being where the jobs and action are has many advantages (both professionally and personally). I mean, sure it would be great to live in NYC, have regular access to clients for face-to-face meetings, drop by a world class museum on a whim, etc. But not if the price is to live under the stress of relative poverty.

- I suspect that there is some sort of formula (art, not science) which determines the likelihood of succeeding in HCOL area over a lifetime based on your field work plus human capital potential. Once you get over a certain hump in human capital, HCOL is just a number. At that point, you're living a rarified life. I think that there's a 20% chance on the aggregate that any one person can get into that group.
The American dream? Top 20% pulling away from the rest, study finds | US news | The Guardian
https://www.theguardian.com/us-news/201 ... lass-study

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Dan3141 » Thu Jul 20, 2017 4:06 am

We live in SF Bay area. Few quick thoughts. If quality of life is the most important to you then probably places like the bay are not on the list of places to live. If on the other hand you want do/achieve/make money then this is the place to be. The way to think about income in the bay is very simple. Whatever you make, somebody else is making 10x doing the same thing better. So become the one that does it better.
80k is decent starting income, in 5 years you are at 150k, in 10 years at 800k, in 20 years making few mil a year.
For those of us who went with this attitude bay/NYC are amazing places to live and we would not trade it for anything else.

T

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by simplesimon » Thu Jul 20, 2017 6:12 am

Engineer250 wrote:To everyone talking about "making the choice" of living in a HCOL area must work in pretty flexible industries. In my current city, if I get laid off there are actually other companies here in my same industry that I could go work for. If I went to middle of Indiana, well frankly there's only one company there and if I got laid off from that we'd have to sell the house and move and start all over somewhere else. There are plenty of parts of the country where they just have no need for engineers with my specialty. I suppose if you work in "sales" or "retail" you can move anywhere. If you have a tech-related career that limits your options. And if you and your spouse have tech related careers, you have to coordinate that to an area that can employ you both. And then you have to decide whether snow and freezing temperatures for part of the year or unbearable humidity for part of the year are worth saving more money. Also some of us were born in these HCOL areas and have lots of family and friends here, they are as much home and community for us as home is home for anyone else.
Most people do not work in a specialized field. Moving to a LCOL area doesn't necessarily mean moving from a coastal city to the midwest. In my case, it's moving 1.5 hours away where housing costs drop significantly.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by jharkin » Thu Jul 20, 2017 6:53 am

maxing their retirement accounts and doing taxable investing on the side with a salary in the 60 - 80k range.
Assume one is single and take the high end of the range. They pay their own health insurance (assume a generously low 2k for a subsidized employer plan) and have moderate state tax (5%). I estimated the tax with an online calculator assuming the 401k and health premium are both fed and state tax exempt.

Gross income 80,000
401k (18000)
health insurance (2000)
FICA / M (6100)
State tax (3000)
Federal tax (8100)
-------------
Net paycheck 42,800
Roth IRA (5500)
-------------
Take home 37,300

Tricky to live in HCOL area on 37k of take home money if you own a home or have any student/car debt. If you are paying $1500/mo in rent there goes half, and the costs for a car/insurance/gas will eat up another third of whats left. Then you have to pay utilities and eat.

The other thing I dont 100% agree with is that 80k is a "starter salary" in a HCOL area. Yes it is in certain tech fields, but not everyone in the valley and Boston is a programmer at Google or a research chemist at Pfizer. These areas still have teachers, nurses, police, fire, accountants, RE agents, retail employees, etc.


OP -
My 'plan' living in moderate/HCOL was that I just couldn't max all this out in my 20s. I started in software right before the internet crash and in those early 2000 years tech people where not starting at 6 figure salaries - assuming you could find a job. So we did what we could - save at least to the 401k match, throw some money in Roth on good years where there was extra, drive older cars and do what we could to pay down college debt. Its only now in my 40s on double income that I can start considering the savings rates you are referring to.

Remember that the stories you read on here are the 1% of the 1%. As was said above most people you see out in the real world living the high life are doing so by not saving for the future.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Watty » Thu Jul 20, 2017 7:11 am

Dan3141 wrote:The way to think about income in the bay is very simple. Whatever you make, somebody else is making 10x doing the same thing better. So become the one that does it better.
80k is decent starting income, in 5 years you are at 150k, in 10 years at 800k, in 20 years making few mil a year.
In most fields that just is not possible or at least not realistic.

For example teaching. With a quick google search it looks like a teachers salary in the Bay Area tops out in the low $100k range with an advanced degree. No matter how good they are no teacher is going to make $800K.

One of the things that amazes me when people are posting about the Bay Area is how many areas there have terrible schools. One of the reasons for this is that getting good teachers there is a problems since even if the pay is high compared to the rest of the country it is hard for a reacher to afford to live in the Bay Area unless they have a spouse that makes a high income.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Engineer250 » Thu Jul 20, 2017 9:20 am

simplesimon wrote:
Engineer250 wrote:To everyone talking about "making the choice" of living in a HCOL area must work in pretty flexible industries. In my current city, if I get laid off there are actually other companies here in my same industry that I could go work for. If I went to middle of Indiana, well frankly there's only one company there and if I got laid off from that we'd have to sell the house and move and start all over somewhere else. There are plenty of parts of the country where they just have no need for engineers with my specialty. I suppose if you work in "sales" or "retail" you can move anywhere. If you have a tech-related career that limits your options. And if you and your spouse have tech related careers, you have to coordinate that to an area that can employ you both. And then you have to decide whether snow and freezing temperatures for part of the year or unbearable humidity for part of the year are worth saving more money. Also some of us were born in these HCOL areas and have lots of family and friends here, they are as much home and community for us as home is home for anyone else.
Most people do not work in a specialized field. Moving to a LCOL area doesn't necessarily mean moving from a coastal city to the midwest. In my case, it's moving 1.5 hours away where housing costs drop significantly.
Does that mean you commute 1.5 hours each way or did you find a job 1.5 hours away?
Where the tides of fortune take us, no man can know.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by jharkin » Thu Jul 20, 2017 9:32 am

Watty wrote:
Dan3141 wrote:The way to think about income in the bay is very simple. Whatever you make, somebody else is making 10x doing the same thing better. So become the one that does it better.
80k is decent starting income, in 5 years you are at 150k, in 10 years at 800k, in 20 years making few mil a year.
In most fields that just is not possible or at least not realistic.

For example teaching. With a quick google search it looks like a teachers salary in the Bay Area tops out in the low $100k range with an advanced degree. No matter how good they are no teacher is going to make $800K.

One of the things that amazes me when people are posting about the Bay Area is how many areas there have terrible schools. One of the reasons for this is that getting good teachers there is a problems since even if the pay is high compared to the rest of the country it is hard for a reacher to afford to live in the Bay Area unless they have a spouse that makes a high income.
The trajectory in bold is the definition of the 0.1%. So to claim its reasonable or attainable for average people is of course absurd.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by simplesimon » Thu Jul 20, 2017 9:49 am

Engineer250 wrote:
simplesimon wrote:
Engineer250 wrote:To everyone talking about "making the choice" of living in a HCOL area must work in pretty flexible industries. In my current city, if I get laid off there are actually other companies here in my same industry that I could go work for. If I went to middle of Indiana, well frankly there's only one company there and if I got laid off from that we'd have to sell the house and move and start all over somewhere else. There are plenty of parts of the country where they just have no need for engineers with my specialty. I suppose if you work in "sales" or "retail" you can move anywhere. If you have a tech-related career that limits your options. And if you and your spouse have tech related careers, you have to coordinate that to an area that can employ you both. And then you have to decide whether snow and freezing temperatures for part of the year or unbearable humidity for part of the year are worth saving more money. Also some of us were born in these HCOL areas and have lots of family and friends here, they are as much home and community for us as home is home for anyone else.
Most people do not work in a specialized field. Moving to a LCOL area doesn't necessarily mean moving from a coastal city to the midwest. In my case, it's moving 1.5 hours away where housing costs drop significantly.
Does that mean you commute 1.5 hours each way or did you find a job 1.5 hours away?
I haven't pulled the trigger on the move yet, but I would be transferring to a different office to cut my commute. If a recession hits and I lose my job, I may very well have to do the 1.5 hour commute if that's where the jobs are while mining the local market, but that's the trade-off one must be willing to accept.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by jlcnuke » Thu Jul 20, 2017 10:15 am

mac808 wrote:Those seem like low/starter salaries for a HCOL area and you said you were mid 20s so indeed you are just starting out. You can only cut expenses so much. I would focus on getting income up through any opportunities available to you (more training, job hopping, side hustles). Those opportunities are what you are paying for in a HCOL area. I don't know what fields you are in but it wouldn't surprise me if you could each double your salaries within 3-5 years.
Median income in Boston metro area $78,800

Median income in NYC $50,711

etc.

I think a lot of people with higher incomes don't realize what the average people are actually making in these HCOL areas. It's a lot less than many assume.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by mmmodem » Thu Jul 20, 2017 10:28 am

Interesting topic. I love hearing what people do on "meager" salaries. Up until 2 years ago, we lived in Milpitas, which is Silicon Valley depending on who you ask. DW was laid off a few years before so we had been "surviving" on my mid 80k salary for a couple of years. I put the "meager" and "surviving" as sarcasm that we doing just fine and in no way was it rough. Below is how we budgeted.

Salary: $85k
*Max out His 401k
Max out Her Roth IRA
Max out His Roth IRA
Remaining take home pay per month: ~$3200

We took care of the known monthly cost needs first:
Mortgage: $1282
Property Tax: $400
HOA: $18
Home Insurance: $40
Car Insurance (2 cars): $100
Internet: $50
Gas & Electric: $70
Water & Trash: $100
His Life Insurance: $21
Her Life Insurance: $19
Cell Phone: $100
Total: = ~$2200

This left roughly ~$1000 to spend per month on variable costs like groceries, gasoline, doctor's visits & entertainment. It was simple to budget $250 a week for this spending. It wasn't easy, but it wasn't difficult either. We weren't living like paupers but we certainly didn't do much shopping or traveling

We were a family of 4
Hand me downs for everything: toys, car seats, clothes
We told friends and families no bday or xmas gifts except for children (We're still doing this despite DW going back to work!)
2 cheap 4 cyl paid off economy cars = low fuel costs
Affordable state schools = no student loans at all for either of us
Relatively healthy, no recurring medical bills
Road trip vacations to San Diego and stayed free with relatives
Driving ski trips to Lake Tahoe with family to save on hotel costs, 2WD with chains works just fine up a snowy mountain, no need to rent expensive SUV
Free museum and attraction passes from the local library
Mostly eat in, I think we ate out at a restaurant once a month

*The plan was to decrease my 401k to cover in case we go over. We never did or it averaged out the next month. We also had a healthy emergency fund built up prior to DW's layoff.

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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by Engineer250 » Thu Jul 20, 2017 10:29 am

simplesimon wrote:
Engineer250 wrote:
simplesimon wrote:
Engineer250 wrote:To everyone talking about "making the choice" of living in a HCOL area must work in pretty flexible industries. In my current city, if I get laid off there are actually other companies here in my same industry that I could go work for. If I went to middle of Indiana, well frankly there's only one company there and if I got laid off from that we'd have to sell the house and move and start all over somewhere else. There are plenty of parts of the country where they just have no need for engineers with my specialty. I suppose if you work in "sales" or "retail" you can move anywhere. If you have a tech-related career that limits your options. And if you and your spouse have tech related careers, you have to coordinate that to an area that can employ you both. And then you have to decide whether snow and freezing temperatures for part of the year or unbearable humidity for part of the year are worth saving more money. Also some of us were born in these HCOL areas and have lots of family and friends here, they are as much home and community for us as home is home for anyone else.
Most people do not work in a specialized field. Moving to a LCOL area doesn't necessarily mean moving from a coastal city to the midwest. In my case, it's moving 1.5 hours away where housing costs drop significantly.
Does that mean you commute 1.5 hours each way or did you find a job 1.5 hours away?
I haven't pulled the trigger on the move yet, but I would be transferring to a different office to cut my commute. If a recession hits and I lose my job, I may very well have to do the 1.5 hour commute if that's where the jobs are while mining the local market, but that's the trade-off one must be willing to accept.
I think it's a reasonable trade-off to make in your case, but there isn't something similarly available to me. I'm changing jobs and my hour long commute will become a half hour. I went the other direction a few years ago and even in a job working less hours the longer commute was really a huge decrease to my quality of life. 1.5 hours away puts me in the ocean, the desert, or an even bigger HCOL area.

I agree most people don't work in a specialized field. An accountant or a lawyer or a doctor could easily move from place to place. I don't think people would consider my field "specialized" and indeed I could work in other industries. But there still needs to be some industrial/manufacturing component for someone to hire a mechanical engineer, and those just aren't in EveryTown, USA.
Where the tides of fortune take us, no man can know.

ArmchairArchitect
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by ArmchairArchitect » Thu Jul 20, 2017 10:57 am

Go with a MCOL city (eg. Philadelphia). MCOL cities are the perfect balance of income, costs, and city offerings.

LCOLs don't usually offer much in the way of jobs/wages or cultural things to do (eg. restaurant scene, music scene, etc.).

ny_knicks
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by ny_knicks » Thu Jul 20, 2017 6:03 pm

Just moved with girlfriend from what I thought was a LCOL area where we were paying $1500 in rent to a HCOL area where we are paying $3500. That is for a 1 bedroom 800 sqrft apartment. Chose not to sacrifice safety and prioritized a short commute. We were able to get rid of both cars saving a net of about $800 a month in commuting costs which helps offset some of the increased rent.

I knew housing was going to be crazy but what shocked me about moving here was the grocery bill. Prices are insane. Local super market has chicken for $12/lb! Talking with people that live here many just choose to eat out as it is often on par with cooking for yourself. We found that shopping online for groceries and having them delivered was actually significantly cheaper than going to the local grocery store (Amazon Fresh, PeaPod, FreshDirect). While still more expensive than where we previously lived, they were at least reasonable.

Utilities were another punch to the gut. We were on vacation for the first month. No one was in the apartment or using any electricity. Only thing running was the refrigerator. Imagine my shock when the electric bill came out to be just over $100. I'm guessing this month after running the AC while we are home it will jump significantly. Estimating close to $250 just for electricity w/ another $50+ for gas/water. Not sure we can do much to lower this other than turn off the AC once some cooler weather hits.

Monthly expenses will probably jump from around $3400 to $6000 from the move. Certainly not cheap living in the big city.

From a financial standpoint we will need at least a year to figure out if we are coming out ahead. Taxes are a big concern. City/State/Fed/FICA all want a larger piece of those higher salaries. Hopefully we can max the tax-advantaged spaces to lower this burden. That coupled w/ the higher expenses might mean would could have done better elsewhere from a dollars and cents standpoint. But like you we are young (mid 20s) and playing the long game in taking the best opportunities available to advance our careers/education.

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unclescrooge
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by unclescrooge » Fri Jul 21, 2017 12:24 pm

Ron Ronnerson wrote:
unclescrooge wrote:
Ron Ronnerson wrote:You’re doing great if you’re saving $4k out of $9k per month and are only in your mid-20s. The thing to watch for is not adjusting your lifestyle up too much as you get pay raises in the years ahead. That can occur easily if you don't watch it.

We live in the Bay Area and are in our early 40s with a combined income of $150k. During our 30s, our combined income hovered just above $100k for most of the years. We don’t max out retirement space but save a decent percentage of our income. Our approach has been to keep costs low, and have found this is possible even in a VHCOL area. The main reason for this approach is that any increased income is taxed rather heavily in our case and would also require us to put in more hours at work. So, by finding inexpensive alternatives, we have set up a life where we have a lot of time together as a family.

Basically, we’ve found things don’t have to cost as much as many people would assume. For example:
Daycare = grandma
Transportation: wife works from home 80% of the time and I carpool in my Corolla to work the 9 months of the year that school is in session. I kept my last car for 15 years. My wife bought her last car for $5k, put 100k miles on it, and then sold it for $2k. She likes to show me up.
Electric Bill: open and close windows
Life Insurance: Got super-preferred rate coverage by getting into good shape
Clothes: Got wardrobe for almost nothing by using coupons and keep them until they begin to fall apart
Phones: Use a basic plan at an AT&T MVNO
Restaurants: Share Subway sandwich with wife and 3 year old daughter. $6 feeds a family of three. Cook at home. Fancy meal out is $30 at a Chinese restaurant. Don’t order drinks, appetizers, dessert.
Health Insurance: Provided by wife’s work
Mortgage: $1800/month mortgage for a 4 bedroom/4 bathroom townhouse in a great neighborhood with amazing schools in the Bay Area – we got lucky by buying in 2009 when the economy took a downturn and rented out a room for a while.
Car Maintenance: Found an inexpensive and reliable garage to do the work
Entertainment: We negotiate annually with the cable company and have all the TV channels. Last year, I called a 2nd time and renegotiated the rate down further. We don’t go out much these days as we have a three-year old.
Vacations: Paid for by credit card companies through bonuses. We go to Hawaii every two years, Vegas annually (family visit), and places like Disneyland every so often. We did international travel before the kid was born.

We spend very little on our kid too. I took my daughter to visit grandma this morning. Then we went to the park. We came home for snacks. Then we went to the library for story time. Next she took a nap. Then we went to the pool. Nothing cost anything. Since she’s so inexpensive, I could spend the day with her rather than put her in daycare (with grandma for free) while I teach summer school or tutor. I could still go earn that extra income but then I’d have to pay tax and be away from my kid.

I’m a teacher and my wife works for a small business. I work 180 days a year. My wife works 6 hour days from home. We have a lot of time off in a VHCOL area because we’ve found ways to keep costs low. We have everything we could possibly want and are content with what we do have. This results in a lot of free time. That’s our basic approach.

Your expenses are already low. You have that in your favor. Don’t let them get out of control as your pay increases and you’ll be golden.
The one thing money can't buy is time. You seem to have it all figured out. :beer
Thanks, UncleScrooge, but I definitely wouldn't say I have everything figured out. I lost my father at a relatively young age so I do appreciate the importance of time. He was often busy working and didn't seem to have a lot of time to spare. Then it was too late. I suppose we're all a product of our experiences as I'm driven not to repeat the same pattern the next generation. The best things in life are free (or relatively inexpensive) anyway. We just need the time to enjoy them.
While I didn't lose my father at a young age, I know exactly how you feel.

I didn't know my dad as much as I should have. He was busy working hard when I was in my teens, working 65 hours a week for as long as I remember. Then I went off to college and moved away after that. Then he died suddenly the day before we had a 2 week trip planned. I had seen him for 3-4 years, and really felt cheated out of my time with him.

Like you, this has also impacted my outlook. Hopefully, I can overcome those deficiencies with my kids.

TravelforFun
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by TravelforFun » Fri Jul 21, 2017 12:40 pm

Some of the posters including the OP who are still young, and are not putting money in a Roth IRA. Why? :oops: :oops: :oops:

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InKirkWeTrust
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by InKirkWeTrust » Fri Jul 21, 2017 1:52 pm

TravelforFun wrote:Some of the posters including the OP who are still young, and are not putting money in a Roth IRA. Why? :oops: :oops: :oops:
To pay off debt first.
Control the controllables

TravelforFun
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Re: Those Of You In a HCOLA - What's Your Financial Plan

Post by TravelforFun » Fri Jul 21, 2017 2:03 pm

InKirkWeTrust wrote:
TravelforFun wrote:Some of the posters including the OP who are still young, and are not putting money in a Roth IRA. Why? :oops: :oops: :oops:
To pay off debt first.
But they're maxing out on their 401k.

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