Bay Area budget for $350k family income

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mervinj7
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Bay Area budget for $350k family income

Post by mervinj7 » Wed Sep 11, 2019 9:40 pm

There was a post today by Sam Dogen, the financial samurai, on expenses breakdown for a family of four making $350k a year trying to live a "typical" middle class life in a VHCOL coastal city.

https://www.cnbc.com/2019/09/11/you-nee ... s-why.html

In my opinion, it's surprisingly accurate and a good reference post for the bi-weekly moving to Bay Area posts. Did he miss anything?

EDIT: As many others have pointed, there are some glaring mistakes/exaggerations in the budget:
  • An itemized deduction of $36.4k should have been used instead of the standard deduction of $24k.
  • Daycare/preschool numbers are fairly accurate but kids grow up. If they go to public school after Pre-K, then this expense disappears after ~5 years. That's an immediate increase of ~$50k in savings/year.
  • $12k in a 529 per year should count as savings, not expenses.
  • HSA and Dependent Care FSAs can be used to reduce taxable income further
  • Entertainment and Vacations seem relatively high for a supposedly "middle-class" life.
Last edited by mervinj7 on Thu Sep 12, 2019 11:24 am, edited 1 time in total.

HEDGEFUNDIE
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Re: Bay Area budget for $350k family income

Post by HEDGEFUNDIE » Wed Sep 11, 2019 9:52 pm

I don’t know what kind of “vetting” the “thousands of people” did but it only took me a few minutes to find some glaring errors.

Between the mortgage interest, property tax, and charity, this fictional family has $36k of itemized deductions. Why are they taking the $24k standard deduction instead?

Also, most employers offer HSA ($7k) and Dependent Care FSA ($5k) plans to bring down the taxable income even further.

Where is the 401k match?

Put all these together and there is probably $20-30k in annual net income they are not accounting for.

I’m getting a little tired of these cry-for-me-I-make-multiples-of-the-median-household-income-and-I’m feeling-strapped stories.
Last edited by HEDGEFUNDIE on Wed Sep 11, 2019 10:48 pm, edited 2 times in total.

schooner
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Re: Bay Area budget for $350k family income

Post by schooner » Wed Sep 11, 2019 9:56 pm

HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:52 pm
I don’t know what kind of “vetting” the “thousands of people” did but it only took me a few minutes to find some glaring errors.

Between the mortgage interest, property tax, and charity, this fictional family has $36k of itemized deductions. Why are they taking the $24k standard deduction instead?

Also, most employers offer HSA and Dependent Care FSA plans to bring down the taxable income even further.

Where is the 401k match?

I’m getting a little tired of these cry-for-me-I-make-multiples-of-the-median-household-income-and-I’m feeling-strapped stories.
State and Local Tax (SALT) deduction is limited to $10k under the new tax law.

HEDGEFUNDIE
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Re: Bay Area budget for $350k family income

Post by HEDGEFUNDIE » Wed Sep 11, 2019 9:59 pm

schooner wrote:
Wed Sep 11, 2019 9:56 pm
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:52 pm
I don’t know what kind of “vetting” the “thousands of people” did but it only took me a few minutes to find some glaring errors.

Between the mortgage interest, property tax, and charity, this fictional family has $36k of itemized deductions. Why are they taking the $24k standard deduction instead?

Also, most employers offer HSA and Dependent Care FSA plans to bring down the taxable income even further.

Where is the 401k match?

I’m getting a little tired of these cry-for-me-I-make-multiples-of-the-median-household-income-and-I’m feeling-strapped stories.
State and Local Tax (SALT) deduction is limited to $10k under the new tax law.
Already taken into account.

schooner
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Re: Bay Area budget for $350k family income

Post by schooner » Wed Sep 11, 2019 10:03 pm

HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:59 pm
schooner wrote:
Wed Sep 11, 2019 9:56 pm
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:52 pm
I don’t know what kind of “vetting” the “thousands of people” did but it only took me a few minutes to find some glaring errors.

Between the mortgage interest, property tax, and charity, this fictional family has $36k of itemized deductions. Why are they taking the $24k standard deduction instead?

Also, most employers offer HSA and Dependent Care FSA plans to bring down the taxable income even further.

Where is the 401k match?

I’m getting a little tired of these cry-for-me-I-make-multiples-of-the-median-household-income-and-I’m feeling-strapped stories.
State and Local Tax (SALT) deduction is limited to $10k under the new tax law.
Already taken into account.
How did you get that? Are we looking at the same numbers?

Agree on your general sentiment btw!

HEDGEFUNDIE
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Re: Bay Area budget for $350k family income

Post by HEDGEFUNDIE » Wed Sep 11, 2019 10:08 pm

schooner wrote:
Wed Sep 11, 2019 10:03 pm
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:59 pm
schooner wrote:
Wed Sep 11, 2019 9:56 pm
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:52 pm
I don’t know what kind of “vetting” the “thousands of people” did but it only took me a few minutes to find some glaring errors.

Between the mortgage interest, property tax, and charity, this fictional family has $36k of itemized deductions. Why are they taking the $24k standard deduction instead?

Also, most employers offer HSA and Dependent Care FSA plans to bring down the taxable income even further.

Where is the 401k match?

I’m getting a little tired of these cry-for-me-I-make-multiples-of-the-median-household-income-and-I’m feeling-strapped stories.
State and Local Tax (SALT) deduction is limited to $10k under the new tax law.
Already taken into account.
How did you get that? Are we looking at the same numbers?

Agree on your general sentiment btw!
$1,900 mortgage interest * 12 +
$10,000 SALT +
$3,600 charity
=
$36,400

muffins14
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Re: Bay Area budget for $350k family income

Post by muffins14 » Wed Sep 11, 2019 10:16 pm

Really boggles my mind that $4500 a month is what someone considers reasonable for daycare/preschool

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willthrill81
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Re: Bay Area budget for $350k family income

Post by willthrill81 » Wed Sep 11, 2019 10:21 pm

muffins14 wrote:
Wed Sep 11, 2019 10:16 pm
Really boggles my mind that $4500 a month is what someone considers reasonable for daycare/preschool
:shock:

That means they're spending almost the U.S. median household income just on childcare. :oops:

I agree entirely with Hedgefundie's sentiment. Nothing remotely resembling anything that could potentially be misconstrued as sympathy.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Topic Author
mervinj7
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Re: Bay Area budget for $350k family income

Post by mervinj7 » Wed Sep 11, 2019 10:29 pm

muffins14 wrote:
Wed Sep 11, 2019 10:16 pm
Really boggles my mind that $4500 a month is what someone considers reasonable for daycare/preschool
That's around what we pay for two kids, one in daycare and the other in preschool.

njdealguy
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Re: Bay Area budget for $350k family income

Post by njdealguy » Wed Sep 11, 2019 10:34 pm

Post this same article link on MMM and will get shred to pieces there hehe.

Seems like a lot of bloated expenses such as over 2k on food, 400 for clothes, and whoa 4.5k for childcare expenses for 2 kids? Can imagine in this case a full time nanny can be had for maybe half that amount to care for both kids.

My spouse and I also earn approximately that amount ($20k less to be exact) and don't spend anywhere near most of the categories listed living in central NJ except perhaps spending twice the listed amount on vacations though.

schooner
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Re: Bay Area budget for $350k family income

Post by schooner » Wed Sep 11, 2019 10:34 pm

HEDGEFUNDIE wrote:
Wed Sep 11, 2019 10:08 pm
schooner wrote:
Wed Sep 11, 2019 10:03 pm
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:59 pm
schooner wrote:
Wed Sep 11, 2019 9:56 pm
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:52 pm
I don’t know what kind of “vetting” the “thousands of people” did but it only took me a few minutes to find some glaring errors.

Between the mortgage interest, property tax, and charity, this fictional family has $36k of itemized deductions. Why are they taking the $24k standard deduction instead?

Also, most employers offer HSA and Dependent Care FSA plans to bring down the taxable income even further.

Where is the 401k match?

I’m getting a little tired of these cry-for-me-I-make-multiples-of-the-median-household-income-and-I’m feeling-strapped stories.
State and Local Tax (SALT) deduction is limited to $10k under the new tax law.
Already taken into account.
How did you get that? Are we looking at the same numbers?

Agree on your general sentiment btw!
$1,900 mortgage interest * 12 +
$10,000 SALT +
$3,600 charity
=
$36,400
Yeah, so there a few other factors you need to consider:

1) Itemize Deduction Limitation - I think it kicks in around $300k for MFJ.

2) Limits on Mortgage Deduction - New tax law caps mortgage amounts, so it depends on when they purchased the house.

Taxes ;-)

Edit: 1 would not apply anymore, oops
Last edited by schooner on Wed Sep 11, 2019 10:40 pm, edited 1 time in total.

HEDGEFUNDIE
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Re: Bay Area budget for $350k family income

Post by HEDGEFUNDIE » Wed Sep 11, 2019 10:40 pm

schooner wrote:
Wed Sep 11, 2019 10:34 pm
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 10:08 pm
schooner wrote:
Wed Sep 11, 2019 10:03 pm
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:59 pm
schooner wrote:
Wed Sep 11, 2019 9:56 pm


State and Local Tax (SALT) deduction is limited to $10k under the new tax law.
Already taken into account.
How did you get that? Are we looking at the same numbers?

Agree on your general sentiment btw!
$1,900 mortgage interest * 12 +
$10,000 SALT +
$3,600 charity
=
$36,400
Yeah, so there a few other factors you need to consider:

1) Itemize Deduction Limitation - I think it kicks in around $300k for MFJ.

2) Limits on Mortgage Deduction - New tax law caps mortgage amounts, so it depends on when they purchased the house.

Taxes ;-)
#1 was repealed with the new tax law.

#2 is already taken into account. $1,900 monthly interest at 4% represents a $570k mortgage, well under the $750k cap if the house was purchased after the new tax law.

Taxes ;-)

schooner
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Re: Bay Area budget for $350k family income

Post by schooner » Wed Sep 11, 2019 10:42 pm

HEDGEFUNDIE wrote:
Wed Sep 11, 2019 10:40 pm
schooner wrote:
Wed Sep 11, 2019 10:34 pm
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 10:08 pm
schooner wrote:
Wed Sep 11, 2019 10:03 pm
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:59 pm


Already taken into account.
How did you get that? Are we looking at the same numbers?

Agree on your general sentiment btw!
$1,900 mortgage interest * 12 +
$10,000 SALT +
$3,600 charity
=
$36,400
Yeah, so there a few other factors you need to consider:

1) Itemize Deduction Limitation - I think it kicks in around $300k for MFJ.

2) Limits on Mortgage Deduction - New tax law caps mortgage amounts, so it depends on when they purchased the house.

Taxes ;-)
#1 was repealed with the new tax law.

#2 is already taken into account. $1,900 monthly interest at 4% represents a $570k mortgage, well under the $750k cap if the house was purchased after the new tax law.

Taxes ;-)
Ha, got me on the first one, it obviously has never, ever applied to me :-)

davidsorensen32
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Re: Bay Area budget for $350k family income

Post by davidsorensen32 » Thu Sep 12, 2019 12:05 am

I am amazed at how many people get impressed by reading either completely obvious or completely inaccurate stuff - which this blog regurgitates regularly. Here are some real numbers

Savings:
2x 401(k) = $38,000
2 x 401(k) match = $12,000 (probably more, just being conservative)
2 x backdoor Roth = $12,000
HSA = $7,000
520 ($500 per month) = $6,000

Total savings = $75,000 per year. I know at least 40 people in the Bay Area who are saving much more - all on a combined salary of $350,000 or less.

It is sad that people read completely inaccurate stuff written by random strangers on the internet and think it is true. It is not true.
HEDGEFUNDIE wrote:
Wed Sep 11, 2019 9:52 pm
I don’t know what kind of “vetting” the “thousands of people” did but it only took me a few minutes to find some glaring errors.

Between the mortgage interest, property tax, and charity, this fictional family has $36k of itemized deductions. Why are they taking the $24k standard deduction instead?

Also, most employers offer HSA ($7k) and Dependent Care FSA ($5k) plans to bring down the taxable income even further.

Where is the 401k match?

Put all these together and there is probably $20-30k in annual net income they are not accounting for.

I’m getting a little tired of these cry-for-me-I-make-multiples-of-the-median-household-income-and-I’m feeling-strapped stories.

Starfish
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Re: Bay Area budget for $350k family income

Post by Starfish » Thu Sep 12, 2019 2:17 am

HSA for people with 2 small kids? Seriously?
Why is 401k quoted everywhere? Is not that common to have a large 401k match.
Backdoor Roth is not some kind of additional income.
Of course FS exaggerates, he always does, that is his thing. But the idea remains: BA is very expensive and what if seems like a high income is not that high.
His worst exaggeration is writing about pre-school expenses like they are for life. 50k a year free up when the kids get older.

HEDGEFUNDIE
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Re: Bay Area budget for $350k family income

Post by HEDGEFUNDIE » Thu Sep 12, 2019 2:22 am

Starfish wrote:
Thu Sep 12, 2019 2:17 am
HSA for people with 2 small kids? Seriously?
Why is 401k quoted everywhere? Is not that common to have a large 401k match.
Backdoor Roth is not some kind of additional income.
Of course FS exaggerates, he always does, that is his thing. But the idea remains: BA is very expensive and what if seems like a high income is not that high.
His worst exaggeration is writing about pre-school expenses like they are for life. 50k a year free up when the kids get older.
HSA is almost always the better option, especially if you are likely to hit the OOP max

Starfish
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Re: Bay Area budget for $350k family income

Post by Starfish » Thu Sep 12, 2019 2:22 am

njdealguy wrote:
Wed Sep 11, 2019 10:34 pm
Post this same article link on MMM and will get shred to pieces there hehe.

Seems like a lot of bloated expenses such as over 2k on food, 400 for clothes, and whoa 4.5k for childcare expenses for 2 kids? Can imagine in this case a full time nanny can be had for maybe half that amount to care for both kids.
2-2.5k per kid for childcare is normal price in BA.
A nanny is 25$/h for 2 kids. Multiply to 50h/month and you end up with more. Plus pre-school is much better for kids.

Starfish
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Re: Bay Area budget for $350k family income

Post by Starfish » Thu Sep 12, 2019 2:23 am

HEDGEFUNDIE wrote:
Thu Sep 12, 2019 2:22 am
Starfish wrote:
Thu Sep 12, 2019 2:17 am
HSA for people with 2 small kids? Seriously?
Why is 401k quoted everywhere? Is not that common to have a large 401k match.
Backdoor Roth is not some kind of additional income.
Of course FS exaggerates, he always does, that is his thing. But the idea remains: BA is very expensive and what if seems like a high income is not that high.
His worst exaggeration is writing about pre-school expenses like they are for life. 50k a year free up when the kids get older.
HSA is almost always the better option, especially if you are likely to hit the OOP max
I went through this exercise. It was a bad idea.

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Raybo
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Re: Bay Area budget for $350k family income

Post by Raybo » Thu Sep 12, 2019 2:37 am

I am always amazed at how much bashing the SF Bay Area gets on this forum. Yes, housing is expensive. Yes, it is a liberal place. But, if one can swing it, it is a great place to live. Aside from housing, food is not expensive, all kinds of cuisines are available from non-pricey restaurants, world-famous sights are everywhere, and public transit is widespread.

This article is yet another example. How can people who earn so much money have a tight budget? Well, lots of people want to live here and lots of people in the Bay Area make this kind of money. They bid up the cost of certain services. Isn't this just what economics says should happen? Why all the tsking?
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

gougou
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Re: Bay Area budget for $350k family income

Post by gougou » Thu Sep 12, 2019 3:11 am

What if we compare it to a budget for a LCOL city? The only difference is that housing is much cheaper. Let's say the LCOL budget has a $300K house with $3k/yr property tax and $13k/yr mortgage. Bay area budget has $22k/yr property tax and $47k/yr mortgage. The LCOL budget saved $53k on housing.

Conclusion: you can barely survive with $223K - $53K = $180K after tax income in a LCOL city. Sounds about right to me.

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unclescrooge
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Re: Bay Area budget for $350k family income

Post by unclescrooge » Thu Sep 12, 2019 4:55 am

Raybo wrote:
Thu Sep 12, 2019 2:37 am
I am always amazed at how much bashing the SF Bay Area gets on this forum. Yes, housing is expensive. Yes, it is a liberal place. But, if one can swing it, it is a great place to live. Aside from housing, food is not expensive, all kinds of cuisines are available from non-pricey restaurants, world-famous sights are everywhere, and public transit is widespread.

This article is yet another example. How can people who earn so much money have a tight budget? Well, lots of people want to live here and lots of people in the Bay Area make this kind of money. They bid up the cost of certain services. Isn't this just what economics says should happen? Why all the tsking?
The Bay Area, and California in general, is expensive because it's is worth it.

I decided at the age of 8, while on a family holiday across the US, that I would move here.

It's hard to fathom for most people, and the competitive nature for housing, jobs, and even schools makes it hard for many people to survive, let alone thrive.

But if you can cut it, it's a wonderful place to live.

But I get really happy when I see threads like this where everyone is bashing California... it's getting overcrowded and we don't need more people competing for services! Hopefully these threads will dissuade a few more people from moving in. :mrgreen:

ARoseByAnyOtherName
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Re: Bay Area budget for $350k family income

Post by ARoseByAnyOtherName » Thu Sep 12, 2019 5:16 am

Starfish wrote:
Thu Sep 12, 2019 2:23 am
HEDGEFUNDIE wrote:
Thu Sep 12, 2019 2:22 am
Starfish wrote:
Thu Sep 12, 2019 2:17 am
HSA for people with 2 small kids? Seriously?
Why is 401k quoted everywhere? Is not that common to have a large 401k match.
Backdoor Roth is not some kind of additional income.
Of course FS exaggerates, he always does, that is his thing. But the idea remains: BA is very expensive and what if seems like a high income is not that high.
His worst exaggeration is writing about pre-school expenses like they are for life. 50k a year free up when the kids get older.
HSA is almost always the better option, especially if you are likely to hit the OOP max
I went through this exercise. It was a bad idea.
Me too. Same situation and in my case the numbers for the available HSA just don't work out.

Ryanlion8506
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Re: Bay Area budget for $350k family income

Post by Ryanlion8506 » Thu Sep 12, 2019 5:34 am

unclescrooge wrote:
Thu Sep 12, 2019 4:55 am
Raybo wrote:
Thu Sep 12, 2019 2:37 am
I am always amazed at how much bashing the SF Bay Area gets on this forum. Yes, housing is expensive. Yes, it is a liberal place. But, if one can swing it, it is a great place to live. Aside from housing, food is not expensive, all kinds of cuisines are available from non-pricey restaurants, world-famous sights are everywhere, and public transit is widespread.

This article is yet another example. How can people who earn so much money have a tight budget? Well, lots of people want to live here and lots of people in the Bay Area make this kind of money. They bid up the cost of certain services. Isn't this just what economics says should happen? Why all the tsking?
The Bay Area, and California in general, is expensive because it's is worth it.

I decided at the age of 8, while on a family holiday across the US, that I would move here.

It's hard to fathom for most people, and the competitive nature for housing, jobs, and even schools makes it hard for many people to survive, let alone thrive.

But if you can cut it, it's a wonderful place to live.

But I get really happy when I see threads like this where everyone is bashing California... it's getting overcrowded and we don't need more people competing for services! Hopefully these threads will dissuade a few more people from moving in. :mrgreen:
I don’t think everyone is bashing California, it’s more people get tired of hearing about whoa is me, it’s too expensive. I don’t feel sorry for anyone living there, especially folks making 350k plus because it’s called move. If you can make 350k there, you most likely have transferable skills to relocate to much LCOL area with no earthquakes, reasonable housing, etc... . Also, how are you getting overcrowded? Many of your people have moved to my city and caused our housing and traffic to become horrible. Please stay in California! Lol

HockeyFan99
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Re: Bay Area budget for $350k family income

Post by HockeyFan99 » Thu Sep 12, 2019 6:15 am

Starfish wrote:
Thu Sep 12, 2019 2:22 am
njdealguy wrote:
Wed Sep 11, 2019 10:34 pm
Post this same article link on MMM and will get shred to pieces there hehe.

Seems like a lot of bloated expenses such as over 2k on food, 400 for clothes, and whoa 4.5k for childcare expenses for 2 kids? Can imagine in this case a full time nanny can be had for maybe half that amount to care for both kids.
2-2.5k per kid for childcare is normal price in BA.
A nanny is 25$/h for 2 kids. Multiply to 50h/month and you end up with more. Plus pre-school is much better for kids.
That’s actually low for our VHCOL. You can find cheaper but only if you go unlicensed or a significant reverse commute to get them there.

Nanny could be cheaper but only if you pay under the table, which is a whole different conversation that I won’t start here but, for many, not an option.

Point about day care not being a forever expense, however, is correct. There are good and free public school options starting at age 5 even in VHCOL places.
"I'm spending a year dead for tax reasons." - Hotblack Desiato

brianH
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Re: Bay Area budget for $350k family income

Post by brianH » Thu Sep 12, 2019 8:36 am

If $350K is barely cutting it, then how is the median household income for San Fransisco $102K? Half of the population of the city is getting by on an amount that is less than 1/3 of the outrageous claim in this article.

The issue here is clearly one of defining the term "middle-class lifestyle". The hypothetical family is living an upper-class lifestyle, but trying to 'convince themselves' that they are middle-class. $4200/year for a baby, $6000/y for 'entertainment' ($500/m buys a lot of Netflix), and $8000/y for vacations is not what anyone would consider middle-class.

sawhorse
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Re: Bay Area budget for $350k family income

Post by sawhorse » Thu Sep 12, 2019 8:47 am

brianH wrote:
Thu Sep 12, 2019 8:36 am
The issue here is clearly one of defining the term "middle-class lifestyle". The hypothetical family is living an upper-class lifestyle, but trying to 'convince themselves' that they are middle-class. $4200/year for a baby, $6000/y for 'entertainment' ($500/m buys a lot of Netflix), and $8000/y for vacations is not what anyone would consider middle-class.
The same issue pops up a lot on this board. People claiming to be earning middle class money and living a middle class lifestyle when in fact they are earning more and living more lavishly. In fact on this board a lot of people living above an middle class lifestyle claim to be living below middle class.

I've seen people claim that driving a 3-5 year old Honda Accord is being frugal. I've even heard the claim that a buying new Subaru Forester is being frugal. Give me a break!

Lifestyle creep is real.

stoptothink
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Re: Bay Area budget for $350k family income

Post by stoptothink » Thu Sep 12, 2019 8:53 am

sawhorse wrote:
Thu Sep 12, 2019 8:47 am
brianH wrote:
Thu Sep 12, 2019 8:36 am
The issue here is clearly one of defining the term "middle-class lifestyle". The hypothetical family is living an upper-class lifestyle, but trying to 'convince themselves' that they are middle-class. $4200/year for a baby, $6000/y for 'entertainment' ($500/m buys a lot of Netflix), and $8000/y for vacations is not what anyone would consider middle-class.
The same issue pops up a lot on this board. People claiming to be earning middle class money and living a middle class lifestyle when in fact they are earning more and living more lavishly. In fact on this board a lot of people living above an middle class lifestyle claim to be living below middle class.

I've seen people claim that driving a 3-5 year old Honda Accord is being frugal. I've even heard the claim that a buying new Subaru Forester is being frugal. Give me a break!

Lifestyle creep is real.
Why does anybody even read these click-bait articles? We're an upper middle-class family of 4 by pretty much any standard and this hypothetical family spends literally 5x what we do on food, vacations, and entertainment. There are members of this board whose families live a great (real middle-class) life in the Bay with 1/3 the income (calling RonRonnerson).

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willthrill81
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Re: Bay Area budget for $350k family income

Post by willthrill81 » Thu Sep 12, 2019 9:09 am

unclescrooge wrote:
Thu Sep 12, 2019 4:55 am
The Bay Area, and California in general, is expensive because it's is worth it to some people.
Fixed for ya! :wink:
brianH wrote:
Thu Sep 12, 2019 8:36 am
If $350K is barely cutting it, then how is the median household income for San Fransisco $102K? Half of the population of the city is getting by on an amount that is less than 1/3 of the outrageous claim in this article.

The issue here is clearly one of defining the term "middle-class lifestyle". The hypothetical family is living an upper-class lifestyle, but trying to 'convince themselves' that they are middle-class. $4200/year for a baby, $6000/y for 'entertainment' ($500/m buys a lot of Netflix), and $8000/y for vacations is not what anyone would consider middle-class.
As stoptothink pointed out, these people are absolutely upper middle class. The middle class isn't saving over 20% of their gross income, spending over $50k on childcare, and spending $25k on food.

[OT comment removed by admin LadyGeek] very few people are comfortable calling themselves even upper middle class, much less 'wealthy'.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

MarkRoulo
Posts: 143
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Re: Bay Area budget for $350k family income

Post by MarkRoulo » Thu Sep 12, 2019 9:18 am

brianH wrote:
Thu Sep 12, 2019 8:36 am
If $350K is barely cutting it, then how is the median household income for San Fransisco $102K? Half of the population of the city is getting by on an amount that is less than 1/3 of the outrageous claim in this article.
Two things to keep in mind for the SF Bay Area.

*) If you bought your house a few decades ago, then your housing costs can be much lower than someone who bought recently. To pick a city in the area that I know, ~20 years ago a nice 1,600 square foot house might go for $400K. Today, maybe $2M. But the folks who purchased 20 years ago are still paying for $400K of housing, not $2M. Or maybe even less if they've paid off their house. The SF Bay Area is expensive even without housing, but maybe 30% more than the median for the US (I'm guessing here). With housing is a whole 'nuther story.

*) Once the kids are a bit grown up, your child care costs can come down a lot if you use the local public schools.

I'm intending to retire in the SF Bay Area and my budget is much less than 1/3 of $350K.

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unclescrooge
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Re: Bay Area budget for $350k family income

Post by unclescrooge » Thu Sep 12, 2019 9:23 am

HockeyFan99 wrote:
Thu Sep 12, 2019 6:15 am
Starfish wrote:
Thu Sep 12, 2019 2:22 am
njdealguy wrote:
Wed Sep 11, 2019 10:34 pm
Post this same article link on MMM and will get shred to pieces there hehe.

Seems like a lot of bloated expenses such as over 2k on food, 400 for clothes, and whoa 4.5k for childcare expenses for 2 kids? Can imagine in this case a full time nanny can be had for maybe half that amount to care for both kids.
2-2.5k per kid for childcare is normal price in BA.
A nanny is 25$/h for 2 kids. Multiply to 50h/month and you end up with more. Plus pre-school is much better for kids.
That’s actually low for our VHCOL. You can find cheaper but only if you go unlicensed or a significant reverse commute to get them there.

Nanny could be cheaper but only if you pay under the table, which is a whole different conversation that I won’t start here but, for many, not an option.

Point about day care not being a forever expense, however, is correct. There are good and free public school options starting at age 5 even in VHCOL places.
My kid will start the public school system next year. We bought in this neighborhood because of the school district. (Which just means we grossly overpaid for the house).

Public schools in my area are half day. So then you pay for after school care, gradually replaced with after school activities. These usually run several hundred dollars per kid, with any savings going into a 529.

Once they are self sufficient so they didn't need constant supervision, you start paying for summer camps, which run $1,000/week here.

Then you pay for college when they're older.

When they done with college, you pay for the wedding and help them with the house down payment.

By the time the expense of kids goes away I'll be collecting social security!!!!

I'm not saying the article isn't ridiculous, but kids are very expensive! For the amount we spend on them I could be driving both a Ferrari and Lamborghini!

ryman554
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Re: Bay Area budget for $350k family income

Post by ryman554 » Thu Sep 12, 2019 9:27 am

ARoseByAnyOtherName wrote:
Thu Sep 12, 2019 5:16 am
Starfish wrote:
Thu Sep 12, 2019 2:23 am
HEDGEFUNDIE wrote:
Thu Sep 12, 2019 2:22 am
Starfish wrote:
Thu Sep 12, 2019 2:17 am
HSA for people with 2 small kids? Seriously?
Why is 401k quoted everywhere? Is not that common to have a large 401k match.
Backdoor Roth is not some kind of additional income.
Of course FS exaggerates, he always does, that is his thing. But the idea remains: BA is very expensive and what if seems like a high income is not that high.
His worst exaggeration is writing about pre-school expenses like they are for life. 50k a year free up when the kids get older.
HSA is almost always the better option, especially if you are likely to hit the OOP max
I went through this exercise. It was a bad idea.
Me too. Same situation and in my case the numbers for the available HSA just don't work out.
My numbers with an HSA *always* worked out. We must be talking past each other or making different assumptions, since my HSA always included at least some employer HSA contribution to make it the best for low/no health care and the best for lots of health care.

Putting my cards on the table, I had 1 kid and a pregnant wife, and I chose an HSA because the total OOPmax was the lowest.
Now, I choose the lower premiums. For both kids, I can count the number of times on one hand we went to the doctor outside of the regularly scheduled yearly checkup. 2 or 3, maybe? And I have clumsy kids. They get sick, they stay home and get better. My wife gets sick, she's tough and toughs it out. I get sick, I'm a wimp and go the the urgent care place if I can't swallow anymore and then immediately feel better. We just don't go see the doctor too much Is this the big difference?

If you go to the doctor 3-4 times a year, I can see how HSA won't work out. Otherwise, perhaps there is a big variety of deductibles and employer subsidy that is changing the calculus?

HEDGEFUNDIE
Posts: 3640
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Re: Bay Area budget for $350k family income

Post by HEDGEFUNDIE » Thu Sep 12, 2019 9:28 am

unclescrooge wrote:
Thu Sep 12, 2019 9:23 am
HockeyFan99 wrote:
Thu Sep 12, 2019 6:15 am
Starfish wrote:
Thu Sep 12, 2019 2:22 am
njdealguy wrote:
Wed Sep 11, 2019 10:34 pm
Post this same article link on MMM and will get shred to pieces there hehe.

Seems like a lot of bloated expenses such as over 2k on food, 400 for clothes, and whoa 4.5k for childcare expenses for 2 kids? Can imagine in this case a full time nanny can be had for maybe half that amount to care for both kids.
2-2.5k per kid for childcare is normal price in BA.
A nanny is 25$/h for 2 kids. Multiply to 50h/month and you end up with more. Plus pre-school is much better for kids.
That’s actually low for our VHCOL. You can find cheaper but only if you go unlicensed or a significant reverse commute to get them there.

Nanny could be cheaper but only if you pay under the table, which is a whole different conversation that I won’t start here but, for many, not an option.

Point about day care not being a forever expense, however, is correct. There are good and free public school options starting at age 5 even in VHCOL places.
My kid will start the public school system next year. We bought in this neighborhood because of the school district. (Which just means we grossly overpaid for the house).

Public schools in my area are half day. So then you pay for after school care, gradually replaced with after school activities. These usually run several hundred dollars per kid, with any savings going into a 529.

Once they are self sufficient so they didn't need constant supervision, you start paying for summer camps, which run $1,000/week here.

Then you pay for college when they're older.

When they done with college, you pay for the wedding and help them with the house down payment.

By the time the expense of kids goes away I'll be collecting social security!!!!

I'm not saying the article isn't ridiculous, but kids are very expensive! For the amount we spend on them I could be driving both a Ferrari and Lamborghini!
I wonder how the median American household who can’t afford to pay for any of those things manage to raise their kids.

HEDGEFUNDIE
Posts: 3640
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Re: Bay Area budget for $350k family income

Post by HEDGEFUNDIE » Thu Sep 12, 2019 9:30 am

ryman554 wrote:
Thu Sep 12, 2019 9:27 am
ARoseByAnyOtherName wrote:
Thu Sep 12, 2019 5:16 am
Starfish wrote:
Thu Sep 12, 2019 2:23 am
HEDGEFUNDIE wrote:
Thu Sep 12, 2019 2:22 am
Starfish wrote:
Thu Sep 12, 2019 2:17 am
HSA for people with 2 small kids? Seriously?
Why is 401k quoted everywhere? Is not that common to have a large 401k match.
Backdoor Roth is not some kind of additional income.
Of course FS exaggerates, he always does, that is his thing. But the idea remains: BA is very expensive and what if seems like a high income is not that high.
His worst exaggeration is writing about pre-school expenses like they are for life. 50k a year free up when the kids get older.
HSA is almost always the better option, especially if you are likely to hit the OOP max
I went through this exercise. It was a bad idea.
Me too. Same situation and in my case the numbers for the available HSA just don't work out.
My numbers with an HSA *always* worked out. We must be talking past each other or making different assumptions, since my HSA always included at least some employer HSA contribution to make it the best for low/no health care and the best for lots of health care.

Putting my cards on the table, I had 1 kid and a pregnant wife, and I chose an HSA because the total OOPmax was the lowest.
Now, I choose the lower premiums. For both kids, I can count the number of times on one hand we went to the doctor outside of the regularly scheduled yearly checkup. 2 or 3, maybe? And I have clumsy kids. They get sick, they stay home and get better. My wife gets sick, she's tough and toughs it out. I get sick, I'm a wimp and go the the urgent care place if I can't swallow anymore and then immediately feel better. We just don't go see the doctor too much Is this the big difference?

If you go to the doctor 3-4 times a year, I can see how HSA won't work out. Otherwise, perhaps there is a big variety of deductibles and employer subsidy that is changing the calculus?
Exactly.

Between (1) the lower premiums, (2) the lower max OOP, and (3) the employer HSA match, the HDHP will almost always win out. This is not even counting the long term tax savings on the HSA investments, which are substantial.

stoptothink
Posts: 6499
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Re: Bay Area budget for $350k family income

Post by stoptothink » Thu Sep 12, 2019 9:36 am

HEDGEFUNDIE wrote:
Thu Sep 12, 2019 9:28 am
unclescrooge wrote:
Thu Sep 12, 2019 9:23 am
HockeyFan99 wrote:
Thu Sep 12, 2019 6:15 am
Starfish wrote:
Thu Sep 12, 2019 2:22 am
njdealguy wrote:
Wed Sep 11, 2019 10:34 pm
Post this same article link on MMM and will get shred to pieces there hehe.

Seems like a lot of bloated expenses such as over 2k on food, 400 for clothes, and whoa 4.5k for childcare expenses for 2 kids? Can imagine in this case a full time nanny can be had for maybe half that amount to care for both kids.
2-2.5k per kid for childcare is normal price in BA.
A nanny is 25$/h for 2 kids. Multiply to 50h/month and you end up with more. Plus pre-school is much better for kids.
That’s actually low for our VHCOL. You can find cheaper but only if you go unlicensed or a significant reverse commute to get them there.

Nanny could be cheaper but only if you pay under the table, which is a whole different conversation that I won’t start here but, for many, not an option.

Point about day care not being a forever expense, however, is correct. There are good and free public school options starting at age 5 even in VHCOL places.
My kid will start the public school system next year. We bought in this neighborhood because of the school district. (Which just means we grossly overpaid for the house).

Public schools in my area are half day. So then you pay for after school care, gradually replaced with after school activities. These usually run several hundred dollars per kid, with any savings going into a 529.

Once they are self sufficient so they didn't need constant supervision, you start paying for summer camps, which run $1,000/week here.

Then you pay for college when they're older.

When they done with college, you pay for the wedding and help them with the house down payment.

By the time the expense of kids goes away I'll be collecting social security!!!!

I'm not saying the article isn't ridiculous, but kids are very expensive! For the amount we spend on them I could be driving both a Ferrari and Lamborghini!
I wonder how the median American household who can’t afford to pay for any of those things manage to raise their kids.
+1...as I roll my eyes to the previous post. Raising children generally costs what you want it to cost. No judgement if yours cost a "Ferrari and Lamborghini", but some of us are spending a lot less and probably doing OK on this parenting thing.

dziuniek
Posts: 611
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Location: Corrupticut

Re: Bay Area budget for $350k family income

Post by dziuniek » Thu Sep 12, 2019 9:37 am

HEDGEFUNDIE wrote:
Thu Sep 12, 2019 9:28 am
unclescrooge wrote:
Thu Sep 12, 2019 9:23 am
HockeyFan99 wrote:
Thu Sep 12, 2019 6:15 am
Starfish wrote:
Thu Sep 12, 2019 2:22 am
njdealguy wrote:
Wed Sep 11, 2019 10:34 pm
Post this same article link on MMM and will get shred to pieces there hehe.

Seems like a lot of bloated expenses such as over 2k on food, 400 for clothes, and whoa 4.5k for childcare expenses for 2 kids? Can imagine in this case a full time nanny can be had for maybe half that amount to care for both kids.
2-2.5k per kid for childcare is normal price in BA.
A nanny is 25$/h for 2 kids. Multiply to 50h/month and you end up with more. Plus pre-school is much better for kids.
That’s actually low for our VHCOL. You can find cheaper but only if you go unlicensed or a significant reverse commute to get them there.

Nanny could be cheaper but only if you pay under the table, which is a whole different conversation that I won’t start here but, for many, not an option.

Point about day care not being a forever expense, however, is correct. There are good and free public school options starting at age 5 even in VHCOL places.
My kid will start the public school system next year. We bought in this neighborhood because of the school district. (Which just means we grossly overpaid for the house).

Public schools in my area are half day. So then you pay for after school care, gradually replaced with after school activities. These usually run several hundred dollars per kid, with any savings going into a 529.

Once they are self sufficient so they didn't need constant supervision, you start paying for summer camps, which run $1,000/week here.

Then you pay for college when they're older.

When they done with college, you pay for the wedding and help them with the house down payment.

By the time the expense of kids goes away I'll be collecting social security!!!!

I'm not saying the article isn't ridiculous, but kids are very expensive! For the amount we spend on them I could be driving both a Ferrari and Lamborghini!
I wonder how the median American household who can’t afford to pay for any of those things manage to raise their kids.
One spouse doesn't go to work... is often the case.

If wife and I had a 3rd child soon... I am not sure going to my state job would make sense.
- Yes it would due to SS credits + pension, but from a cashflow perspective... not so much.

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bligh
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Re: Bay Area budget for $350k family income

Post by bligh » Thu Sep 12, 2019 9:39 am

mervinj7 wrote:
Wed Sep 11, 2019 10:29 pm
muffins14 wrote:
Wed Sep 11, 2019 10:16 pm
Really boggles my mind that $4500 a month is what someone considers reasonable for daycare/preschool
That's around what we pay for two kids, one in daycare and the other in preschool.
Yeah sounds about right to me too. I don’t think people realize how expensive day care is in VHCOL urban areas. We were paying $1900x2 for our two kids before we moved out to the suburbs. This was 8 years ago.

We hated paying that much, but in our area we essentially had to choose either high end day care for the rich or really low end day care run out of some ladies home. There didn’t seem to be anything in the middle. It is also hard to put into numbers the thought process of a parent when deciding what day care to put their tiny defenseless, innocent and developing little child into. It isn’t a rational thought process.

knowledge
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Re: Bay Area budget for $350k family income

Post by knowledge » Thu Sep 12, 2019 9:43 am

This boils down to another article lamenting the fact that housing, childcare, education and healthcare costs have skyrocketed in the last 60 years. If you magically adjusted those costs down, then the headline number would fall dramatically.

Also, these are the figures to lead a "middle class" lifestyle in the prestigious parts of 3 major US cities. Manhattan (not upper), SF proper (not Alameda), and West LA (not Yorba Linda). So this applies to the <1% of the US that lives in those areas. And guess what, the people that do live in those areas, they make over $350k/yr (or have the equivalent wealth already).

Miguelito
Posts: 283
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Re: Bay Area budget for $350k family income

Post by Miguelito » Thu Sep 12, 2019 9:43 am

That life is decidedly not middle class. Also, I don't see that budget being Bay Area-specific. It would apply to many places, particularly in the northeast.

The point should be that $350k (or $500k) does not lead to a life of unrestrained luxury, which is what many in America believe. I see/hear that a lot. Households who try to make it work with ~$100k incomes in HCOL areas hear of $400k and think it is 4 times as much and they would be living the life. Sure, they would be MUCH better off, but whereas they probably pay little in taxes now, they would have to kiss 100k of that good-bye for taxes. Bigger houses come with bigger expenses besides the mortgage, services/vacations/cars get very expensive quickly, etc. Few typical people think of more money and think of saving it. They think of what they could do or buy with it. Unless they are utterly irresponsible, with high incomes should come higher savings and that leads to less disposable income than they would think.

No one should feel bad, it's just that reality is not the visions of wealth people making $50k envision when they think of $400k. I recall the days back when Obama wanted to institute higher taxes on those making over $250k, every article lead with a photo of a couple walking on a tarmac from a Rolls Royce onto a private jet or a in a huge yacht. That's not $250k or the 1%. That's the 0.01% and possibly not even then. But that helps reinforce that incorrect notion that a few hundred thousand makes you super rich.

Finally, and perhaps more importantly, it's not about making $400k one year. That won't make you rich. It's making $400k for many years and saving a good chunk of it. That can lead to great wealth.

stoptothink
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Re: Bay Area budget for $350k family income

Post by stoptothink » Thu Sep 12, 2019 9:43 am

dziuniek wrote:
Thu Sep 12, 2019 9:37 am
HEDGEFUNDIE wrote:
Thu Sep 12, 2019 9:28 am
unclescrooge wrote:
Thu Sep 12, 2019 9:23 am
HockeyFan99 wrote:
Thu Sep 12, 2019 6:15 am
Starfish wrote:
Thu Sep 12, 2019 2:22 am


2-2.5k per kid for childcare is normal price in BA.
A nanny is 25$/h for 2 kids. Multiply to 50h/month and you end up with more. Plus pre-school is much better for kids.
That’s actually low for our VHCOL. You can find cheaper but only if you go unlicensed or a significant reverse commute to get them there.

Nanny could be cheaper but only if you pay under the table, which is a whole different conversation that I won’t start here but, for many, not an option.

Point about day care not being a forever expense, however, is correct. There are good and free public school options starting at age 5 even in VHCOL places.
My kid will start the public school system next year. We bought in this neighborhood because of the school district. (Which just means we grossly overpaid for the house).

Public schools in my area are half day. So then you pay for after school care, gradually replaced with after school activities. These usually run several hundred dollars per kid, with any savings going into a 529.

Once they are self sufficient so they didn't need constant supervision, you start paying for summer camps, which run $1,000/week here.

Then you pay for college when they're older.

When they done with college, you pay for the wedding and help them with the house down payment.

By the time the expense of kids goes away I'll be collecting social security!!!!

I'm not saying the article isn't ridiculous, but kids are very expensive! For the amount we spend on them I could be driving both a Ferrari and Lamborghini!
I wonder how the median American household who can’t afford to pay for any of those things manage to raise their kids.
One spouse doesn't go to work... is often the case.

If wife and I had a 3rd child soon... I am not sure going to my state job would make sense.
- Yes it would due to SS credits + pension, but from a cashflow perspective... not so much.
Not sure what that has to do with Unclescrooge's statement that paying for all of college, wedding, and providing a home down payment for your children were just normal "costs of raising children".

cj2018
Posts: 172
Joined: Tue Jun 12, 2018 3:49 pm

Re: Bay Area budget for $350k family income

Post by cj2018 » Thu Sep 12, 2019 10:00 am

mervinj7 wrote:
Wed Sep 11, 2019 9:40 pm
There was a post today by Sam Dogen, the financial samurai, on expenses breakdown for a family of four making $350k a year trying to live a "typical" middle class life in a VHCOL coastal city.

https://www.cnbc.com/2019/09/11/you-nee ... s-why.html

In my opinion, it's surprisingly accurate for our situation and a good reference post for the bi-weekly moving to Bay Area posts. Did he miss anything?
I’m a regular reader of Sam’s article and DW and I are also a household making over $350k/year in UVHCOL on west coast, and we have no kids - we don’t feel like we have a comfortable lifestyle to be honest. I’m always feeling stressed about job and trying to save on every penny we make as we know the good time doesn’t last and we can go from a $350k household to probably $0 in matter of days. Our minds simply don’t stop and rest/chill - sometimes I envy those who can constant just chill and relax and feel no pressure since they don’t have high expectations of anything!

Folks who don’t live work and live in Bay Area these days simply have NO CLUE how expensive this place has become!

Let me give you a dose of reality here:
  • New grad engineers at FB start with $250k in total comp. (my cousin)
  • day care/pre school for 2 kids cost at least $5k and you have to be on the wait list over a year in advance
  • a decent 1B apartment rents for well over $3k
  • a decent 2B apartment rents for well over $5k
  • medium house price: well over $1.5M

Obviously you can “survive” in Bay Area on much less than $350k but those are “poverty line” lifestyle (which SF government defines as anyone making below $110k).

Also keep in mind that SF/BA is an international city which has talents from all over the world competing for high paying jobs and bidding up housing prices. That’s totally not the case for any inland/Midwest American cities where you see mostly locals who probably truly earn the medium income of $60k and live just fine.

The “techtopia” is not worth for
  • new comers
to relocate and live in unless you clear over $200k individually or $350k in combined total comp. if you are one of the Bay Area incumbents/locals who own properties - this obviously doesn’t apply to you. But if you are young person trying to start and establish yourself? This place is absolutely abysmal if you don’t have a high paying job!
Last edited by cj2018 on Thu Sep 12, 2019 10:16 am, edited 3 times in total.

User avatar
bligh
Posts: 1117
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Re: Bay Area budget for $350k family income

Post by bligh » Thu Sep 12, 2019 10:08 am

unclescrooge wrote:
Thu Sep 12, 2019 9:23 am

I'm not saying the article isn't ridiculous, but kids are very expensive! For the amount we spend on them I could be driving both a Ferrari and Lamborghini!
Haha. It's funny to see someone else make that kind of comparison. My wife and I often refer to our kids as our two vacation homes. :D

brianH
Posts: 321
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Re: Bay Area budget for $350k family income

Post by brianH » Thu Sep 12, 2019 10:11 am

Miguelito wrote:
Thu Sep 12, 2019 9:43 am
No one should feel bad, it's just that reality is not the visions of wealth people making $50k envision when they think of $400k. I recall the days back when Obama wanted to institute higher taxes on those making over $250k, every article lead with a photo of a couple walking on a tarmac from a Rolls Royce onto a private jet or a in a huge yacht. That's not $250k or the 1%. That's the 0.01% and possibly not even then. But that helps reinforce that incorrect notion that a few hundred thousand makes you super rich.
As a counterpoint -- and one that frequently gets lost on a forum largely populated by wealthy (income & asset-based) individuals -- $434K/y salary is currently the cutoff for the 1%. So, 350-400K/year salary puts you in the 1-2% of earners in the wealthiest country on the planet that has ever existed in all of history. 'Super rich' is relative, but there has to be some perspective applied.

I don't think anyone would argue that it is possible to ratchet up your expenses to the point that even someone earning millions a year would be living paycheck to paycheck. However, that probably garners about as much sympathy as someone complaining that oil changes on their Rolls Royce are very expensive.

sawhorse
Posts: 3460
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Re: Bay Area budget for $350k family income

Post by sawhorse » Thu Sep 12, 2019 10:22 am

brianH wrote:
Thu Sep 12, 2019 10:11 am
Miguelito wrote:
Thu Sep 12, 2019 9:43 am
No one should feel bad, it's just that reality is not the visions of wealth people making $50k envision when they think of $400k. I recall the days back when Obama wanted to institute higher taxes on those making over $250k, every article lead with a photo of a couple walking on a tarmac from a Rolls Royce onto a private jet or a in a huge yacht. That's not $250k or the 1%. That's the 0.01% and possibly not even then. But that helps reinforce that incorrect notion that a few hundred thousand makes you super rich.
As a counterpoint -- and one that frequently gets lost on a forum largely populated by wealthy (income & asset-based) individuals -- $434K/y salary is currently the cutoff for the 1%. So, 350-400K/year salary puts you in the 1-2% of earners in the wealthiest country on the planet that has ever existed in all of history. 'Super rich' is relative, but there has to be some perspective applied.

I don't think anyone would argue that it is possible to ratchet up your expenses to the point that even someone earning millions a year would be living paycheck to paycheck. However, that probably garners about as much sympathy as someone complaining that oil changes on their Rolls Royce are very expensive.
Going purely by income to determine wealth level is misleading because it doesn't take into account cost of living. My household income is 30% higher now in a very high cost area than it was in a low cost area. In the low cost area, I could live a much richer lifestyle despite the lower salary.

I don't think anyone who makes $400k a year can call themselves anything other than rich even in very high cost areas. But a person in a low cost area making half that has just as much reason to not call themselves anything other than rich.

Going purely by income also doesn't account for inherited or gifted wealth, student loan debt, or many other factors that determine what kind of lifestyle you can afford.

Miguelito
Posts: 283
Joined: Thu Feb 27, 2014 1:21 pm

Re: Bay Area budget for $350k family income

Post by Miguelito » Thu Sep 12, 2019 10:31 am

brianH wrote:
Thu Sep 12, 2019 10:11 am
Miguelito wrote:
Thu Sep 12, 2019 9:43 am
No one should feel bad, it's just that reality is not the visions of wealth people making $50k envision when they think of $400k. I recall the days back when Obama wanted to institute higher taxes on those making over $250k, every article lead with a photo of a couple walking on a tarmac from a Rolls Royce onto a private jet or a in a huge yacht. That's not $250k or the 1%. That's the 0.01% and possibly not even then. But that helps reinforce that incorrect notion that a few hundred thousand makes you super rich.
As a counterpoint -- and one that frequently gets lost on a forum largely populated by wealthy (income & asset-based) individuals -- $434K/y salary is currently the cutoff for the 1%. So, 350-400K/year salary puts you in the 1-2% of earners in the wealthiest country on the planet that has ever existed in all of history. 'Super rich' is relative, but there has to be some perspective applied.

I don't think anyone would argue that it is possible to ratchet up your expenses to the point that even someone earning millions a year would be living paycheck to paycheck. However, that probably garners about as much sympathy as someone complaining that oil changes on their Rolls Royce are very expensive.
I don't see that as a counterpoint, really. $400k is a lot of money. Yes. Does it reasonably yield to a life of spectacular opulence? That is, RR's, yachts, and private jets? I think objectively, the answer is no. You can you live in a nice home, drive a nice car, treat yourself to comfortable vacations, and enjoy some luxuries. As I said, maybe even after enough years of diligent/aggressive saving perhaps achieve significant wealth. But you cannot/should not to be spending $250k on a car, send kids to prestigious boarding schools, have a butler, and buy first class tickets and stay at the Four Seasons in your yearly trips to Europe and Asia with the family while living in a large home in a prestigious zip code in a VHCOL area. That requires 7 figures a year. The large yachts and private jets require 8 figures. I'm speaking in gross generalities, of course.

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Re: Bay Area budget for $350k family income

Post by abuss368 » Thu Sep 12, 2019 10:33 am

Did you ever see the website Financial Samurai? The blogger is from San Francisco and he writes a lot about property values and the changes in the city.
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Re: Bay Area budget for $350k family income

Post by an_asker » Thu Sep 12, 2019 10:36 am

muffins14 wrote:
Wed Sep 11, 2019 10:16 pm
Really boggles my mind that $4500 a month is what someone considers reasonable for daycare/preschool
From what I've heard - granted it's hearsay - a bunch of tech firms offer lunch on the house. Don't know what proportion do, but yes, I have no idea how anyone in their sane mind would budget $70 a day on an average.

Also the healthcare - from examples I've seen right here, the employer appears to pick up the tab in a lot of IT companies.

Maybe the numbers quoted are for non-Bogleheads who are also not in IT. Folks who like to spend top dollar, that is!

I fail to understand how folks are getting umbrella protection for $500 a year though. The minimum I've been quoted in $2,000. :oops:

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Re: Bay Area budget for $350k family income

Post by jharkin » Thu Sep 12, 2019 10:36 am

I saw that this morning.

IM (not so)HO all this article shows is what a bubble the author lives in.

He claims that to live a "middle class" lifestyle in one of the wealtheist cities in the world that a couple needs to pay for $25,000 private preschool and $45,000 private high school. Seriously? San Francisco has the tax revenue to fund excellent public schools. These are completely optional, and definitely upper class, expenses.

Similarly, real middle class (i.e. median ~60k households) cannot afford 2-3 week long destination vacations each year. Most are lucky to do one week at a rental house in driving distance (think Cape Cod, Jersey Shore, etc)

Nor is your typical middle class family driving a brand new 40k Toyota highlander every 3-5 years. The median family is driving a used minvan or Chevy Blazer at about half that cost.

Bottom line - Sam Dogen is not middle class... not even upper middle (and not even by the inflated standards of SF). He is solidly upper class/wealthy by any objective measure. He just makes the very common logical mistake of assuming that since he has met people with more money than he has that he must automatically be "middle class" In reality I wouldn't be surprised if there isn't even anyone in his social circle of extended family that acutally fits any accepted economist definition of middle class.

https://www.theatlantic.com/politics/ar ... ss/278240/
https://www.pewresearch.org/fact-tank/2 ... dle-class/
https://www.investopedia.com/financial- ... e-you.aspx

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Re: Bay Area budget for $350k family income

Post by bligh » Thu Sep 12, 2019 10:40 am

Miguelito wrote:
Thu Sep 12, 2019 9:43 am
That life is decidedly not middle class. Also, I don't see that budget being Bay Area-specific. It would apply to many places, particularly in the northeast.

The point should be that $350k (or $500k) does not lead to a life of unrestrained luxury, which is what many in America believe. I see/hear that a lot. Households who try to make it work with ~$100k incomes in HCOL areas hear of $400k and think it is 4 times as much and they would be living the life. Sure, they would be MUCH better off, but whereas they probably pay little in taxes now, they would have to kiss 100k of that good-bye for taxes. Bigger houses come with bigger expenses besides the mortgage, services/vacations/cars get very expensive quickly, etc. Few typical people think of more money and think of saving it. They think of what they could do or buy with it. Unless they are utterly irresponsible, with high incomes should come higher savings and that leads to less disposable income than they would think.

No one should feel bad, it's just that reality is not the visions of wealth people making $50k envision when they think of $400k. I recall the days back when Obama wanted to institute higher taxes on those making over $250k, every article lead with a photo of a couple walking on a tarmac from a Rolls Royce onto a private jet or a in a huge yacht. That's not $250k or the 1%. That's the 0.01% and possibly not even then. But that helps reinforce that incorrect notion that a few hundred thousand makes you super rich.

Finally, and perhaps more importantly, it's not about making $400k one year. That won't make you rich. It's making $400k for many years and saving a good chunk of it. That can lead to great wealth.
Well said!

I will add one more point to this. Just like there is a false sense at the lower end of the income ladder that the high income people (ie. making $350K+ .. top 2% by income for the US) fly by private jet, and have super cars and such. There is a false sense among the high income folks of what a middle class house and lifestyle looks like. The expectation of a decent middle class lifestyle is a largish, well maintained and manicured house, good newish cars, eating out frequently, taking vacations, etc. Basically quite close to what is described in that article.

I put some of the blame for this "lifestyle expectation inflation" on the entertainment media and now social media too. If you look at the vast majority of tv shows , movies or ads portraying middle class folks... what does the "background" set look like? It looks like what I described above... largish, well maintained and manicured house, good newish cars, eating out frequently, dont ask how much things cost, take vacations without much planning, etc. If they want to portray the rich, the background set portrays the super high end lifestyle with butlers, chauffeurs and private jets.

If they are going to show a small apartment, or an older ill maintained home, or cheaper/older compact cars or show the people asking how much something costs before buying it.. or discussing their credit card bill this month... they are usually portraying the lower middle class or poor. Someone working hard but down on their luck. In California with its aging homes, super high house prices, high taxes and cost of living.. the middle class looks like what is usually portrayed on TV as the lower middle class or the poor.

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Re: Bay Area budget for $350k family income

Post by sawhorse » Thu Sep 12, 2019 10:43 am

jharkin wrote:
Thu Sep 12, 2019 10:36 am
I saw that this morning.

IM (not so)HO all this article shows is what a bubble the author lives in.

He claims that to live a "middle class" lifestyle in one of the wealtheist cities in the world that a couple needs to pay for $25,000 private preschool and $45,000 private high school. Seriously? San Francisco has the tax revenue to fund excellent public schools. These are completely optional, and definitely upper class, expenses.

Similarly, real middle class (i.e. median ~60k households) cannot afford 2-3 week long destination vacations each year. Most are lucky to do one week at a rental house in driving distance (think Cape Cod, Jersey Shore, etc)

Nor is your typical middle class family driving a brand new 40k Toyota highlander every 3-5 years. The median family is driving a used minvan or Chevy Blazer at about half that cost.

Bottom line - Sam Dogen is not middle class... not even upper middle (and not even by the inflated standards of SF). He is solidly upper class/wealthy by any objective measure. He just makes the very common logical mistake of assuming that since he has met people with more money than he has that he must automatically be "middle class" In reality I wouldn't be surprised if there isn't even anyone in his social circle of extended family that acutally fits any accepted economist definition of middle class.

https://www.theatlantic.com/politics/ar ... ss/278240/
https://www.pewresearch.org/fact-tank/2 ... dle-class/
https://www.investopedia.com/financial- ... e-you.aspx
Bingo. Anyone who sends their kids to private schools and/or takes destination vacations every year is not living a middle class lifestyle.
bligh wrote:
Thu Sep 12, 2019 10:40 am
Well said!

I will add one more point to this. Just like there is a false sense at the lower end of the income ladder that the high income people (ie. making $350K+ .. top 2% by income for the US) fly by private jet, and have super cars and such. There is a false sense among the high income folks of what a middle class house and lifestyle looks like. The expectation of a decent middle class lifestyle is a largish, well maintained and manicured house, good newish cars, eating out frequently, taking vacations, etc. Basically quite close to what is described in that article.

I put some of the blame for this "lifestyle expectation inflation" on the entertainment media and now social media too. If you look at the vast majority of tv shows , movies or ads portraying middle class folks... what does the "background" set look like? It looks like what I described above... largish, well maintained and manicured house, good newish cars, eating out frequently, dont ask how much things cost, take vacations without much planning, etc. If they want to portray the rich, the background set portrays the super high end lifestyle with butlers, chauffeurs and private jets.

If they are going to show a small apartment, or an older ill maintained home, or cheaper/older compact cars or show the people asking how much something costs before buying it.. or discussing their credit card bill this month... they are usually portraying the lower middle class or poor. Someone working hard but down on their luck. In California with its aging homes, super high house prices, high taxes and cost of living.. the middle class looks like what is usually portrayed on TV as the lower middle class or the poor.
:thumbsup :thumbsup The media bears a lot of responsibility in distorting what an average lifestyle is. A lot of shows depict people living far more lavishly than they realistically could with their stated occupation, Sex and the City a prime example.

A true middle class lifestyle is closer to Archie Bunker than to the typical modern TV show character.

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Re: Bay Area budget for $350k family income

Post by mountain-lion » Thu Sep 12, 2019 10:57 am

He also has $12K a year for the 529. Saving for college well in advance makes some sense, but when those kids are in college, the $55k a year he has for preschool and child care will be gone. At that level you can fund most of college from current cash flow. Saving the money in a 529 makes sense from a tax perspective, but it doesn't count as an expense the way he is thinking about it.

$13000 on vacations and entertainment is completely and easily avoidable.

Car payments in perpetuity? Come on. Even if you do this once, you don't have to do it in perpetuity.

I never spent $4,200 on baby items or toddler items in a single year with my kids. That's some very nice stuff. All new. Do you really get no hand-me downs from anyone? We had people from all over give us stuff, and we handed that down too.

$70/day food for four is also pretty high. My similarly sized family ate for much less than that when we were all at home.

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