Bay Area teacher saving half my income – why the doubt? (and asking more questions)

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Ron Ronnerson
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Location: Bay Area

Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 10:26 am

There was recently a thread about the cost to live a middle-class lifestyle in a VHCOL area. I posted that I’m a teacher in the Bay Area and my wife is a stay-at-home parent and we’re saving half our income. People began questioning how that could be but the thread was derailed and shut down before I could respond.

Here’s my post on that thread from the other day: viewtopic.php?f=2&t=290304&start=50#p4745967

I thought I’d answer some of the questions that were raised in response to my post and, to keep this actionable, ask for feedback on how to further improve our situation. I owe much gratitude to the people on this forum for providing guidance to us over the years.

These comments were made in response to my post:
-“115K income, live in a VHCOL and you save half your income. Seems VERY suspect. So you can live in San Fran with a family and survive off 4K a month?”

-“The older linked to post states his mortgage is less than $400k on a townhome worth more than $800k. So either bought a while ago, or got family help on the down payment and must live out in an affordable suburb somewhere.”

-“If he’s a teacher and his wife doesn’t work he need only live in a neighborhood with his school to have a reasonable commute. In areas where people are commuting to tech companies the rents and home prices get driven further up. I live in SoCal and the area around my work condos are probably $600k and homes 800 to 1M. And it’s not even the fanciest part of town.”

-“I don’t think many of us find it surprising that you can live in the Bay Area on $115k if you bought your home YEARS or even decades ago and have a stay at home spouse providing free childcare! Childcare and housing are the two largest expenses. Then there is saving for college which you barely have to do if you make $115k.”


So, here are more details about us (in response to the comments above):

We’re mid-40s with a five-year-old. We bought our home in 2010 (new construction) for $500k and did not have family help. We made around $125k at that time and put down 3% (no PMI due to a teacher loan but nor did the loan allow for a larger down payment). We live in the tri-valley in the Bay Area (Pleasanton/Dublin/San Ramon/Danville area). We refinanced in 2012 and have a 30-year fixed-rate mortgage with a payment of $1810. We paid down the mortgage by another $50k or so when refinancing to get the best terms.

Our home is now valued around $825k and we owe $354k. We also pay $10k/year in property taxes (which comes to around $840/month), $290 in HOA dues, and a bit for insurance and repairs. In total, our housing costs around $3100/month. We got lucky with the timing of our house purchase and that shouldn’t be discounted. However, our home would rent for around $3700/month so someone moving here today would only pay a bit more than we are for the same home (though, of course, they’d be renting instead of owning). The median home price in my zip code is $1.2 million.

I live in the East Bay but commute toward Silicon Valley for work. While I do have a commute, it’s not as bad as it could be. A teacher’s schedule helps. I can leave around 3 o’clock and grade papers, plan lessons, and respond to messages from home. I’m also off 180 days a year and have been carpooling the past couple of years too.

Our childcare costs are low because my wife doesn’t work but our household income is a lot less as a result of that too. My wife wanted to spend time with our daughter while she is young so we’re making things work on one income these days.

We actually are saving for our kid’s college but in retirement accounts since we’ll be old enough to tap retirement accounts without penalty when the kid goes to college. My pension, which is expected to be about $100k/year around age 60 (with COLA and 100% survivor benefits) should pretty much cover our retirement expenses. We’ll also get social security and our house should be close to paid off by then.

Annual Contributions/Savings:
I max out my 403b and 457b for a total of $38k (low-cost Vanguard funds). I also contribute $11k/year toward a pension and $11k/year is going toward mortgage principal. We contribute a little bit toward a traditional IRA as well. The total savings are a bit over $60k/year. We do count mortgage principal as savings.

By putting $50k+ into tax-deferred accounts, our MAGI becomes low enough that we qualify for a premium tax credit on the health care exchange that’s worth around $15k/year. My employer, a large school district, provides no health benefits. This is not uncommon in the region (a fact that surprises some). Health insurance is the reason that we are not contributing into Roth accounts at this time.

Our Assets:
•$50k in checking accounts earning 4% at Orion Credit Union
•Mid-six figures in retirement accounts, including $250k in Roth IRAs
•Townhome valued around $825k with a mortgage balance of $354k.
•Two relatively new Toyota Corollas that were purchased with cash

Our Monthly Expenses:
Mortgage Payment: $1810 (half of this goes toward mortgage principal)
Property Taxes: $840
HOA: $290
House Cleaning: $120 – done every 3 weeks
House Repairs/Maintenance: $50 (a good friend helps me with repairs if I buy him lunch)
Cable/Internet: $128 (AT&T U-Verse 200 package with HBO and 100mbps)
Electric/Gas Bill: $140
Cell Phones: $40 (Mint Mobile for two phones)
Water bill: $35
Garbage: $20
Health Insurance: $226 (subsidized)
Auto/Homeowner’s/Umbrella Insurance: $185
Life Insurance: $150 (super preferred rates, 30 year terms for both)
Gas for cars: $160
Car Maintenance/Repairs/Registration: $80
Groceries/Household Items: $800
Vacations: $100 (vacations are mostly paid for by churning credit cards for miles and points)
Restaurants: $250 (we go to inexpensive places like Chinese restaurants or Subway)
Clothing/Shoes/Hair/Nails: $50
Pets: $30
Entertainment: $50 (we tend to do stuff that doesn't cost money like go outside or to the library)
Union Dues: $100
Long Term Disability Taken from Paycheck: $30
Medicare: $130
Federal Income Taxes: $140 (about $1700 for the year)
California State Income Taxes: $0 (we itemize on state taxes and take 3 exemptions for 3 family members and this eliminates all liability)
Misc: $150
TOTAL: about $6100 ($73k a year total but $11k is for mortgage principal so expenses are really $62k)

Our savings plus expenses (including all taxes) are about $125k. My job pays $115k. We make up the $10k difference by churning credit cards & bank accounts for bonuses and through gifts we receive.

We live very comfortably - drive cars that we bought new, have cable TV with lots of channels, have iPhones, go on vacations, go out for meals and coffee sometimes, have a house cleaner, and I wear decent shoes.

My Questions:
1) This forum has always stressed the importance of living below your means. I’ve tried to follow that while still enjoying some of life’s luxuries. My budget is fairly accurate as I monitor expenses closely. Are my numbers so strange that it causes people to not believe them?
2) Should I start saving for appliance/car replacement or is just having an emergency fund adequate?
3) Is there anything that you see which should be changed or could be improved upon? (we're not getting rid of the house cleaner!)

Thanks again, forum.
Ron Ronnerson


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Brianmcg321
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Brianmcg321 » Sat Sep 14, 2019 10:46 am

Unfortunately most people are just dumb. They think if they are not able to do it, then nobody can.

If you went to the Mr Money Mustache forum, you'd be chastised for not saving 90% of your income. You'd be mr spendy pants in your clown house and your cable and not riding your bike to work.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.

HEDGEFUNDIE
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by HEDGEFUNDIE » Sat Sep 14, 2019 10:48 am

Thank you for showing folks what real “middle class” looks like. (Hint: it’s not $500k income)

And thanks for mentioning Orion! I’ll be opening an account soon.

roadnottaken
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Joined: Wed Jun 05, 2019 6:01 am
Location: San Diego, CA

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by roadnottaken » Sat Sep 14, 2019 11:00 am

Thanks for sharing your numbers, it’s always interesting to review other people’s finances in detail. The only thing I’d point out is that without the pension you’d have to save up an additional ~$2.5M+ to cover your retirement expenses which would be a considerable squeeze. Not trying to detract from your accomplishments, just pointing out what a large and fortunate factor that is in your personal finances.

MarkRoulo
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by MarkRoulo » Sat Sep 14, 2019 11:01 am

Ron Ronnerson wrote:
Sat Sep 14, 2019 10:26 am
There was recently a thread about the cost to live a middle-class lifestyle in a VHCOL area. I posted that I’m a teacher in the Bay Area and my wife is a stay-at-home parent and we’re saving half our income. People began questioning how that could be but the thread was derailed and shut down before I could respond.

Here’s my post on that thread from the other day: viewtopic.php?f=2&t=290304&start=50#p4745967

I thought I’d answer some of the questions that were raised in response to my post and, to keep this actionable, ask for feedback on how to further improve our situation. I owe much gratitude to the people on this forum for providing guidance to us over the years.


Federal Income Taxes: $140 (about $1700 for the year)
California State Income Taxes: $0 (we itemize on state taxes and take 3 exemptions for 3 family members and this eliminates all liability)
I suspect that a lot of people are surprised that someone can have a family income of about ~$115K (almost 2x the median US household income) and still pay less than 2% total income tax (state plus federal). I know that this surprised me.

HEDGEFUNDIE
Posts: 3682
Joined: Sun Oct 22, 2017 2:06 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by HEDGEFUNDIE » Sat Sep 14, 2019 11:05 am

MarkRoulo wrote:
Sat Sep 14, 2019 11:01 am
Ron Ronnerson wrote:
Sat Sep 14, 2019 10:26 am
There was recently a thread about the cost to live a middle-class lifestyle in a VHCOL area. I posted that I’m a teacher in the Bay Area and my wife is a stay-at-home parent and we’re saving half our income. People began questioning how that could be but the thread was derailed and shut down before I could respond.

Here’s my post on that thread from the other day: viewtopic.php?f=2&t=290304&start=50#p4745967

I thought I’d answer some of the questions that were raised in response to my post and, to keep this actionable, ask for feedback on how to further improve our situation. I owe much gratitude to the people on this forum for providing guidance to us over the years.


Federal Income Taxes: $140 (about $1700 for the year)
California State Income Taxes: $0 (we itemize on state taxes and take 3 exemptions for 3 family members and this eliminates all liability)
I suspect that a lot of people are surprised that someone can have a family income of about ~$115K (almost 2x the median US household income) and still pay less than 2% total income tax (state plus federal). I know that this surprised me.
I am curious about this too. Not disputing it, but would love to see the math.

Goal33
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Joined: Sun Apr 12, 2015 12:30 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Goal33 » Sat Sep 14, 2019 11:12 am

You bought your home at extreme low in 2010, otherwise you’d be commuting from Manteca to Silicon Valley.

There is an element of good fortune that is enabling your ability to live in tri-Valley Bay Area.
A man with one watch always knows what time it is; a man with two watches is never sure.

HomeStretch
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by HomeStretch » Sat Sep 14, 2019 11:13 am

With your level of savings and positive monthly cash flow, it’s not necessary to save separately for appliance replacement or other lumpy expenses. You can just cash flow lumpy expense as incurred.. But certainly if you prefer to have a separate account for lumpy expenses then go ahead, it’s a personal choice.

HEDGEFUNDIE
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Joined: Sun Oct 22, 2017 2:06 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by HEDGEFUNDIE » Sat Sep 14, 2019 11:17 am

Goal33 wrote:
Sat Sep 14, 2019 11:12 am
You bought your home at extreme low in 2010, otherwise you’d be commuting from Manteca to Silicon Valley.

There is an element of good fortune that is enabling your ability to live in tri-Valley Bay Area.
What % of current Bay Area residents have lived there since 2010 or earlier?

I’d guess 80%. Probably higher for homeowners and lower for renters.

Most Bay Area homeowners aren’t paying market rate for their housing. And when they form the large majority of the population, I don’t think you can call them lucky. You’d call the newcomers unlucky.
Last edited by HEDGEFUNDIE on Sat Sep 14, 2019 11:23 am, edited 1 time in total.

mtmingus
Posts: 242
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by mtmingus » Sat Sep 14, 2019 11:21 am

Amazing!
Thanks for sharing.
Keep up your good work.

mtmingus
Posts: 242
Joined: Sun Jan 07, 2018 4:15 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by mtmingus » Sat Sep 14, 2019 11:23 am

HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:05 am
MarkRoulo wrote:
Sat Sep 14, 2019 11:01 am
Ron Ronnerson wrote:
Sat Sep 14, 2019 10:26 am
There was recently a thread about the cost to live a middle-class lifestyle in a VHCOL area. I posted that I’m a teacher in the Bay Area and my wife is a stay-at-home parent and we’re saving half our income. People began questioning how that could be but the thread was derailed and shut down before I could respond.

Here’s my post on that thread from the other day: viewtopic.php?f=2&t=290304&start=50#p4745967

I thought I’d answer some of the questions that were raised in response to my post and, to keep this actionable, ask for feedback on how to further improve our situation. I owe much gratitude to the people on this forum for providing guidance to us over the years.


Federal Income Taxes: $140 (about $1700 for the year)
California State Income Taxes: $0 (we itemize on state taxes and take 3 exemptions for 3 family members and this eliminates all liability)
I suspect that a lot of people are surprised that someone can have a family income of about ~$115K (almost 2x the median US household income) and still pay less than 2% total income tax (state plus federal). I know that this surprised me.
I am curious about this too. Not disputing it, but would love to see the math.
They have low MAGI. And they have child credits.

JD2775
Posts: 309
Joined: Thu Jul 09, 2015 10:47 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by JD2775 » Sat Sep 14, 2019 11:24 am

My only question is why on earth would you commute to Silicon Valley from San Ramon? That is something tech ppl usually do, but as a teacher? Are there no other teaching positions closer? You must have it made at your current spot.

Good for you though for saving like you do!

Goal33
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Joined: Sun Apr 12, 2015 12:30 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Goal33 » Sat Sep 14, 2019 11:26 am

HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:17 am
Goal33 wrote:
Sat Sep 14, 2019 11:12 am
You bought your home at extreme low in 2010, otherwise you’d be commuting from Manteca to Silicon Valley.

There is an element of good fortune that is enabling your ability to live in tri-Valley Bay Area.
What % of current Bay Area residents have lived there since 2010 or earlier?

I’d guess 80%.
I don’t know but this teacher success story doesn’t reflect the current reality for teachers. But yes, for teachers that already own homes they can afford in the Bay Area, they’re probably doing fantastic!

I think what OP pulled off is admirable but at this point his expenses are maintained in part by his higher networth (housing equity), not his earnings.
Last edited by Goal33 on Sat Sep 14, 2019 11:26 am, edited 1 time in total.
A man with one watch always knows what time it is; a man with two watches is never sure.

protagonist
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by protagonist » Sat Sep 14, 2019 11:26 am

Ron Ronnerson wrote:
Sat Sep 14, 2019 10:26 am
There was recently a thread about the cost to live a middle-class lifestyle in a VHCOL area. I posted that I’m a teacher in the Bay Area and my wife is a stay-at-home parent and we’re saving half our income. People began questioning how that could be but the thread was derailed and shut down before I could respond.

Here’s my post on that thread from the other day: viewtopic.php?f=2&t=290304&start=50#p4745967

I thought I’d answer some of the questions that were raised in response to my post and, to keep this actionable, ask for feedback on how to further improve our situation. I owe much gratitude to the people on this forum for providing guidance to us over the years.

These comments were made in response to my post:
-“115K income, live in a VHCOL and you save half your income. Seems VERY suspect. So you can live in San Fran with a family and survive off 4K a month?”

-“The older linked to post states his mortgage is less than $400k on a townhome worth more than $800k. So either bought a while ago, or got family help on the down payment and must live out in an affordable suburb somewhere.”

-“If he’s a teacher and his wife doesn’t work he need only live in a neighborhood with his school to have a reasonable commute. In areas where people are commuting to tech companies the rents and home prices get driven further up. I live in SoCal and the area around my work condos are probably $600k and homes 800 to 1M. And it’s not even the fanciest part of town.”

-“I don’t think many of us find it surprising that you can live in the Bay Area on $115k if you bought your home YEARS or even decades ago and have a stay at home spouse providing free childcare! Childcare and housing are the two largest expenses. Then there is saving for college which you barely have to do if you make $115k.”


So, here are more details about us (in response to the comments above):

We’re mid-40s with a five-year-old. We bought our home in 2010 (new construction) for $500k and did not have family help. We made around $125k at that time and put down 3% (no PMI due to a teacher loan but nor did the loan allow for a larger down payment). We live in the tri-valley in the Bay Area (Pleasanton/Dublin/San Ramon/Danville area). We refinanced in 2012 and have a 30-year fixed-rate mortgage with a payment of $1810. We paid down the mortgage by another $50k or so when refinancing to get the best terms.

Our home is now valued around $825k and we owe $354k. We also pay $10k/year in property taxes (which comes to around $840/month), $290 in HOA dues, and a bit for insurance and repairs. In total, our housing costs around $3100/month. We got lucky with the timing of our house purchase and that shouldn’t be discounted. However, our home would rent for around $3700/month so someone moving here today would only pay a bit more than we are for the same home (though, of course, they’d be renting instead of owning). The median home price in my zip code is $1.2 million.

I live in the East Bay but commute toward Silicon Valley for work. While I do have a commute, it’s not as bad as it could be. A teacher’s schedule helps. I can leave around 3 o’clock and grade papers, plan lessons, and respond to messages from home. I’m also off 180 days a year and have been carpooling the past couple of years too.

Our childcare costs are low because my wife doesn’t work but our household income is a lot less as a result of that too. My wife wanted to spend time with our daughter while she is young so we’re making things work on one income these days.

We actually are saving for our kid’s college but in retirement accounts since we’ll be old enough to tap retirement accounts without penalty when the kid goes to college. My pension, which is expected to be about $100k/year around age 60 (with COLA and 100% survivor benefits) should pretty much cover our retirement expenses. We’ll also get social security and our house should be close to paid off by then.

Annual Contributions/Savings:
I max out my 403b and 457b for a total of $38k (low-cost Vanguard funds). I also contribute $11k/year toward a pension and $11k/year is going toward mortgage principal. We contribute a little bit toward a traditional IRA as well. The total savings are a bit over $60k/year. We do count mortgage principal as savings.

By putting $50k+ into tax-deferred accounts, our MAGI becomes low enough that we qualify for a premium tax credit on the health care exchange that’s worth around $15k/year. My employer, a large school district, provides no health benefits. This is not uncommon in the region (a fact that surprises some). Health insurance is the reason that we are not contributing into Roth accounts at this time.

Our Assets:
•$50k in checking accounts earning 4% at Orion Credit Union
•Mid-six figures in retirement accounts, including $250k in Roth IRAs
•Townhome valued around $825k with a mortgage balance of $354k.
•Two relatively new Toyota Corollas that were purchased with cash

Our Monthly Expenses:
Mortgage Payment: $1810 (half of this goes toward mortgage principal)
Property Taxes: $840
HOA: $290
House Cleaning: $120 – done every 3 weeks
House Repairs/Maintenance: $50 (a good friend helps me with repairs if I buy him lunch)
Cable/Internet: $128 (AT&T U-Verse 200 package with HBO and 100mbps)
Electric/Gas Bill: $140
Cell Phones: $40 (Mint Mobile for two phones)
Water bill: $35
Garbage: $20
Health Insurance: $226 (subsidized)
Auto/Homeowner’s/Umbrella Insurance: $185
Life Insurance: $150 (super preferred rates, 30 year terms for both)
Gas for cars: $160
Car Maintenance/Repairs/Registration: $80
Groceries/Household Items: $800
Vacations: $100 (vacations are mostly paid for by churning credit cards for miles and points)
Restaurants: $250 (we go to inexpensive places like Chinese restaurants or Subway)
Clothing/Shoes/Hair/Nails: $50
Pets: $30
Entertainment: $50 (we tend to do stuff that doesn't cost money like go outside or to the library)
Union Dues: $100
Long Term Disability Taken from Paycheck: $30
Medicare: $130
Federal Income Taxes: $140 (about $1700 for the year)
California State Income Taxes: $0 (we itemize on state taxes and take 3 exemptions for 3 family members and this eliminates all liability)
Misc: $150
TOTAL: about $6100 ($73k a year total but $11k is for mortgage principal so expenses are really $62k)

Our savings plus expenses (including all taxes) are about $125k. My job pays $115k. We make up the $10k difference by churning credit cards & bank accounts for bonuses and through gifts we receive.

We live very comfortably - drive cars that we bought new, have cable TV with lots of channels, have iPhones, go on vacations, go out for meals and coffee sometimes, have a house cleaner, and I wear decent shoes.

My Questions:
1) This forum has always stressed the importance of living below your means. I’ve tried to follow that while still enjoying some of life’s luxuries. My budget is fairly accurate as I monitor expenses closely. Are my numbers so strange that it causes people to not believe them?
2) Should I start saving for appliance/car replacement or is just having an emergency fund adequate?
3) Is there anything that you see which should be changed or could be improved upon? (we're not getting rid of the house cleaner!)

Thanks again, forum.
Ron Ronnerson
Thank you for posting this.
I see posts on this forum about how it is impossible to live comfortably (in NYC, SF, wherever...) without being in the top few percentiles of wealth, and that is simply untrue. Certainly compromises have to be made and challenges are present, but NYC (and I am sure the Bay area as well) is full of middle-income folks, and people poorer than that, who are perfectly happy and would never consider moving.

Posts that suggest that you need to make a quarter million a year if you want to live in NYC, SF etc are misleading to people whose priorities are different than theirs, present a distorted reality, and thus do a disservice to the general public. A cursory glance at median incomes by zipcode (available on multiple sites online) confirms that there are very few places where the median income comes anywhere close to those sort of figures, even in better neighborhoods in NYC and SF.

HEDGEFUNDIE
Posts: 3682
Joined: Sun Oct 22, 2017 2:06 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by HEDGEFUNDIE » Sat Sep 14, 2019 11:34 am

Goal33 wrote:
Sat Sep 14, 2019 11:26 am
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:17 am
Goal33 wrote:
Sat Sep 14, 2019 11:12 am
You bought your home at extreme low in 2010, otherwise you’d be commuting from Manteca to Silicon Valley.

There is an element of good fortune that is enabling your ability to live in tri-Valley Bay Area.
What % of current Bay Area residents have lived there since 2010 or earlier?

I’d guess 80%.
I don’t know but this teacher success story doesn’t reflect the current reality for teachers. But yes, for teachers that already own homes they can afford in the Bay Area, they’re probably doing fantastic!

I think what OP pulled off is admirable but at this point his expenses are maintained in part by his higher networth (housing equity), not his earnings.
The current reality for new teachers, I completely agree.

But the average teacher in my district has 12 years of experience. When do you think they bought their houses?

Goal33
Posts: 1034
Joined: Sun Apr 12, 2015 12:30 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Goal33 » Sat Sep 14, 2019 11:38 am

HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:34 am
Goal33 wrote:
Sat Sep 14, 2019 11:26 am
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:17 am
Goal33 wrote:
Sat Sep 14, 2019 11:12 am
You bought your home at extreme low in 2010, otherwise you’d be commuting from Manteca to Silicon Valley.

There is an element of good fortune that is enabling your ability to live in tri-Valley Bay Area.
What % of current Bay Area residents have lived there since 2010 or earlier?

I’d guess 80%.
I don’t know but this teacher success story doesn’t reflect the current reality for teachers. But yes, for teachers that already own homes they can afford in the Bay Area, they’re probably doing fantastic!

I think what OP pulled off is admirable but at this point his expenses are maintained in part by his higher networth (housing equity), not his earnings.
The current reality for new teachers, I completely agree.

But the average teacher in my district has 12 years of experience. When do you think they bought their houses?
I don’t know where you live but if it’s also the Bay Area, the average teacher in your district with 12 years is in a dual income household.

Edit: like I said, I admire OP but they are the exception, not the rule, and they had good housing market timing/luck. There is more to this story than simply living below your means.
A man with one watch always knows what time it is; a man with two watches is never sure.

HEDGEFUNDIE
Posts: 3682
Joined: Sun Oct 22, 2017 2:06 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by HEDGEFUNDIE » Sat Sep 14, 2019 12:00 pm

Goal33 wrote:
Sat Sep 14, 2019 11:38 am
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:34 am
Goal33 wrote:
Sat Sep 14, 2019 11:26 am
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:17 am
Goal33 wrote:
Sat Sep 14, 2019 11:12 am
You bought your home at extreme low in 2010, otherwise you’d be commuting from Manteca to Silicon Valley.

There is an element of good fortune that is enabling your ability to live in tri-Valley Bay Area.
What % of current Bay Area residents have lived there since 2010 or earlier?

I’d guess 80%.
I don’t know but this teacher success story doesn’t reflect the current reality for teachers. But yes, for teachers that already own homes they can afford in the Bay Area, they’re probably doing fantastic!

I think what OP pulled off is admirable but at this point his expenses are maintained in part by his higher networth (housing equity), not his earnings.
The current reality for new teachers, I completely agree.

But the average teacher in my district has 12 years of experience. When do you think they bought their houses?
I don’t know where you live but if it’s also the Bay Area, the average teacher in your district with 12 years is in a dual income household.

Edit: like I said, I admire OP but they are the exception, not the rule, and they had good housing market timing/luck. There is more to this story than simply living below your means.
I live on the Peninsula where 80% of the houses have not turned over in 10+ years. Lots of teachers and other public employees as my neighbors. They make around what the OP makes (or are retired), and yes, their houses have appreciated like crazy. But they are the rule, not the exception.

Goal33
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Joined: Sun Apr 12, 2015 12:30 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Goal33 » Sat Sep 14, 2019 12:04 pm

HEDGEFUNDIE wrote:
Sat Sep 14, 2019 12:00 pm
Goal33 wrote:
Sat Sep 14, 2019 11:38 am
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:34 am
Goal33 wrote:
Sat Sep 14, 2019 11:26 am
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:17 am


What % of current Bay Area residents have lived there since 2010 or earlier?

I’d guess 80%.
I don’t know but this teacher success story doesn’t reflect the current reality for teachers. But yes, for teachers that already own homes they can afford in the Bay Area, they’re probably doing fantastic!

I think what OP pulled off is admirable but at this point his expenses are maintained in part by his higher networth (housing equity), not his earnings.
The current reality for new teachers, I completely agree.

But the average teacher in my district has 12 years of experience. When do you think they bought their houses?
I don’t know where you live but if it’s also the Bay Area, the average teacher in your district with 12 years is in a dual income household.

Edit: like I said, I admire OP but they are the exception, not the rule, and they had good housing market timing/luck. There is more to this story than simply living below your means.
I live on the Peninsula where 80% of the houses have not turned over in 10+ years. Lots of teachers and other public employees as my neighbors. They make around what the OP makes (or are retired), and yes, their houses have appreciated like crazy. But they are the rule, not the exception.
I think we are agreeing but saying this differently. The teachers in your neighborhood have a high net worth (housing equity) and that’s how they are able to live in your neighborhood. They can not do this on OPs income alone.

We make 250k+ and would probably not even qualify for a loan to live in your neighborhood, even though I can afford the 20% down. How does a teacher swing it on half? Short of having bought 10 years ago and dual income.
Last edited by Goal33 on Sat Sep 14, 2019 12:08 pm, edited 1 time in total.
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Pinotage
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Pinotage » Sat Sep 14, 2019 12:07 pm

Good for you OP!

I agree with other posters that it is eye opening how different tax liability can be.

$1,700 per year federal and state combined???? :sharebeer

HEDGEFUNDIE
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by HEDGEFUNDIE » Sat Sep 14, 2019 12:10 pm

There are two Bay Areas.

The one for long time residents and the one for newcomers. The newcomers shoulder the burden of the infamous high housing costs, but they also tend to have the lucrative high paying tech jobs.

The long time residents have worked in “regular” jobs with “regular” incomes and aren’t exposed to market rate housing costs.

The long timers outnumber the newcomers by a lot. So if you want to describe what a “typical” Bay Area lifestyle is like, you should be describing someone like the OP, not a FAANG household making $500k.

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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 12:20 pm

HEDGEFUNDIE wrote:
Sat Sep 14, 2019 10:48 am
Thank you for showing folks what real “middle class” looks like. (Hint: it’s not $500k income)

And thanks for mentioning Orion! I’ll be opening an account soon.
Make sure to read the fine print on Orion if you decide to open an account there. 4% is on up to $30k per account (so a couple can get 4% on up to $60k). To get that rate, it is required that a $500 deposit into the account occur each month (I have it set up so this happens automatically) and you need to make 8 transactions on the debit card per month. It takes me about 5 minutes to make the 8 charges. There are various ways to do it efficiently (such as loading money onto Amazon, Starbucks, etc.). Since you don't earn cash back or miles as you would on a credit card, it's best to keep the 8 charges for low dollar amounts. It may be too much hassle for some but it takes me 5 minutes to earn $100 of interest from Orion each month.

campy2010
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by campy2010 » Sat Sep 14, 2019 12:23 pm

Congrats! You're doing very well. Your post highlights how middle income earners in HCOL and VHCOL areas can live comfortably while saving, but it usually comes with a trade-off or two. In your case, you put up with a bit of a commute and were fortunate to have timed the real estate market well. It's the middle/high income earners who expect to have it all in HCOL and VHCOL areas who are disappointed and struggling.

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by HEDGEFUNDIE » Sat Sep 14, 2019 12:24 pm

Ron Ronnerson wrote:
Sat Sep 14, 2019 12:20 pm
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 10:48 am
Thank you for showing folks what real “middle class” looks like. (Hint: it’s not $500k income)

And thanks for mentioning Orion! I’ll be opening an account soon.
Make sure to read the fine print on Orion if you decide to open an account there. 4% is on up to $30k per account (so a couple can get 4% on up to $60k). To get that rate, it is required that a $500 deposit into the account occur each month (I have it set up so this happens automatically) and you need to make 8 transactions on the debit card per month. It takes me about 5 minutes to make the 8 charges. There are various ways to do it efficiently (such as loading money onto Amazon, Starbucks, etc.). Since you don't earn cash back or miles as you would on a credit card, it's best to keep the 8 charges for low dollar amounts. It may be too much hassle for some but it takes me 5 minutes to earn $100 of interest from Orion each month.
Understood, thanks. $30k is about as much as I would keep in checking anyway, and I have some online subscriptions and utility bills that I can easily move over to the card.

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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 12:25 pm

roadnottaken wrote:
Sat Sep 14, 2019 11:00 am
Thanks for sharing your numbers, it’s always interesting to review other people’s finances in detail. The only thing I’d point out is that without the pension you’d have to save up an additional ~$2.5M+ to cover your retirement expenses which would be a considerable squeeze. Not trying to detract from your accomplishments, just pointing out what a large and fortunate factor that is in your personal finances.
Yes, the pension is very beneficial. I've got 17 years in the system and if I were to leave tomorrow, I could withdraw what I've contributed so far. However, if I were to leave it alone, I could collect a pension of around $40k/year in my 60s. My plan is to work another 15 years or thereabouts so the pension should be a lot more if I keep at it (around $100k/year in 2019 dollars). I honestly love my job of teaching 5th graders so I'm not counting down the days until retirement. I certainly feel blessed.

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Maven » Sat Sep 14, 2019 12:29 pm

Goal33 wrote:
Sat Sep 14, 2019 11:26 am

I think what OP pulled off is admirable but at this point his expenses are maintained in part by his higher networth (housing equity), not his earnings.
Goal33 - How are expenses maintained by home equity if you don't tap into the equity?

OP - thank you for the in depth post. I appreciate seeing the details.
Last edited by Maven on Sat Sep 14, 2019 7:40 pm, edited 1 time in total.

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by CoastalWinds » Sat Sep 14, 2019 12:30 pm

So, you’re making $115k/year and you get 180 days a year off (your words). That’s a really good salary!
Last edited by CoastalWinds on Sat Sep 14, 2019 12:36 pm, edited 1 time in total.

Cuzz35
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Cuzz35 » Sat Sep 14, 2019 12:34 pm

No medical expenses? Does your health plan cover it all?

I'm paying over 3x on insurance premiums with a high deductible plan subsidized through work. We hit our deductible every year which accounts for about $600 a month. Salary is similar to yours but I live in Atlanta, mortgage is half and RE taxes are a third. We save nothing. Our spending doesn't seem much different than yours but we pay more in taxes and healthcare. I also pay more for life insurance as we have three kids, one who is autistic.

But congratulations.

Goal33
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Goal33 » Sat Sep 14, 2019 12:39 pm

Maven wrote:
Sat Sep 14, 2019 12:29 pm
Goal33 wrote:
Sat Sep 14, 2019 11:26 am

I think what OP pulled off is admirable but at this point his expenses are maintained in part by his higher networth (housing equity), not his earnings.
Goal33 - How are expenses maintained by home equity if you don't tap into the equity?

OP - thank you for the in depth post. I appreciate seeing the details.
Because let’s say I make 100k. I can’t afford a 2 million dollar house alone.

If I make 100k, and have 1.5 million dollars equity in my 2 million dollar house, I can afford it.

Home equity is keeping my expenses low in the 2nd example.

That’s where I am struggling with hedgefundie on this post, however he refers to it as newcomers vs long time residences. I just see it as a difference in networth.
A man with one watch always knows what time it is; a man with two watches is never sure.

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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 12:44 pm

HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:05 am
MarkRoulo wrote:
Sat Sep 14, 2019 11:01 am
Ron Ronnerson wrote:
Sat Sep 14, 2019 10:26 am
There was recently a thread about the cost to live a middle-class lifestyle in a VHCOL area. I posted that I’m a teacher in the Bay Area and my wife is a stay-at-home parent and we’re saving half our income. People began questioning how that could be but the thread was derailed and shut down before I could respond.

Here’s my post on that thread from the other day: viewtopic.php?f=2&t=290304&start=50#p4745967

I thought I’d answer some of the questions that were raised in response to my post and, to keep this actionable, ask for feedback on how to further improve our situation. I owe much gratitude to the people on this forum for providing guidance to us over the years.


Federal Income Taxes: $140 (about $1700 for the year)
California State Income Taxes: $0 (we itemize on state taxes and take 3 exemptions for 3 family members and this eliminates all liability)
I suspect that a lot of people are surprised that someone can have a family income of about ~$115K (almost 2x the median US household income) and still pay less than 2% total income tax (state plus federal). I know that this surprised me.
I am curious about this too. Not disputing it, but would love to see the math.
Here are the numbers:
Federal
Gross Income: $115k from work + $5k interest (from churning bank accounts): $120k
Above-line deductions: $59k ($12k for pension contributions, $2k for dental premiums taken from paycheck, $19k for 457b, $19k for 403b, $1k for health FSA, $6k for traditional IRA)
AGI: $61k
Standard Deduction: $24.4k
Taxable Income: $36.6k
Tax: $4k
Child Tax Credit (one child) and Saver's Credit: $2400
Tax Owed: $1600

California
AGI: $61k
Itemized Deductions: $21.5k ($10k property tax and $11.5k mortgage interest)
Taxable Income: $39.5k
Tax: $600
Exemptions for 2 adults and 1 child: $600
Tax Owed: $0

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by HEDGEFUNDIE » Sat Sep 14, 2019 12:49 pm

Ron Ronnerson wrote:
Sat Sep 14, 2019 12:44 pm
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 11:05 am
MarkRoulo wrote:
Sat Sep 14, 2019 11:01 am
Ron Ronnerson wrote:
Sat Sep 14, 2019 10:26 am
There was recently a thread about the cost to live a middle-class lifestyle in a VHCOL area. I posted that I’m a teacher in the Bay Area and my wife is a stay-at-home parent and we’re saving half our income. People began questioning how that could be but the thread was derailed and shut down before I could respond.

Here’s my post on that thread from the other day: viewtopic.php?f=2&t=290304&start=50#p4745967

I thought I’d answer some of the questions that were raised in response to my post and, to keep this actionable, ask for feedback on how to further improve our situation. I owe much gratitude to the people on this forum for providing guidance to us over the years.


Federal Income Taxes: $140 (about $1700 for the year)
California State Income Taxes: $0 (we itemize on state taxes and take 3 exemptions for 3 family members and this eliminates all liability)
I suspect that a lot of people are surprised that someone can have a family income of about ~$115K (almost 2x the median US household income) and still pay less than 2% total income tax (state plus federal). I know that this surprised me.
I am curious about this too. Not disputing it, but would love to see the math.
Here are the numbers:
Federal
Gross Income: $115k from work + $5k interest (from churning bank accounts): $120k
Above-line deductions: $59k ($12k for pension contributions, $2k for dental premiums taken from paycheck, $19k for 457b, $19k for 403b, $1k for health FSA, $6k for traditional IRA)
AGI: $61k
Standard Deduction: $24.4k
Taxable Income: $36.6k
Tax: $4k
Child Tax Credit (one child) and Saver's Credit: $2400
Tax Owed: $1600

California
AGI: $61k
Itemized Deductions: $21.5k ($10k property tax and $11.5k mortgage interest)
Taxable Income: $39.5k
Tax: $600
Exemptions for 2 adults and 1 child: $600
Tax Owed: $0
Love it.

And to think I get criticized around here for having the temerity to suggest that a 500k couple could have $80k+ in above the line deductions.

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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 12:54 pm

Goal33 wrote:
Sat Sep 14, 2019 11:12 am
You bought your home at extreme low in 2010, otherwise you’d be commuting from Manteca to Silicon Valley.

There is an element of good fortune that is enabling your ability to live in tri-Valley Bay Area.
Prior to 2010, I rented in the Bay Area. My rent was $1600/month in 2010 (near Silicon Valley). My income was a lot lower then too. I suspect that if I had not purchased in 2010, I'd still be renting. Maybe I'd rent my current home for $3700 or still be renting an apartment for maybe $2500 or so. I'm currently paying $3100 for housing so the cost wouldn't be that different.

I had expected to never be able purchase a home in the Bay Area but prices dipped enough that I could swing it in 2010. I don't take that luck for granted but doubt that I'd be in Manteca today otherwise. I have a small family and am sort of a minimalist (nothing too extreme, though) so I don't need a lot of space. We would just have kept renting and our costs would be about the same as they are now (though our net worth would be lower due to no home equity).

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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 12:57 pm

HomeStretch wrote:
Sat Sep 14, 2019 11:13 am
With your level of savings and positive monthly cash flow, it’s not necessary to save separately for appliance replacement or other lumpy expenses. You can just cash flow lumpy expense as incurred.. But certainly if you prefer to have a separate account for lumpy expenses then go ahead, it’s a personal choice.
Sounds good. Thank you.

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by cherijoh » Sat Sep 14, 2019 1:04 pm

Goal33 wrote:
Sat Sep 14, 2019 11:26 am
I don’t know but this teacher success story doesn’t reflect the current reality for teachers. But yes, for teachers that already own homes they can afford in the Bay Area, they’re probably doing fantastic!

I think what OP pulled off is admirable but at this point his expenses are maintained in part by his higher networth (housing equity), not his earnings.


I'm not following the part of your post highlighted in blue. Can you explain what you meant?

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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 1:08 pm

JD2775 wrote:
Sat Sep 14, 2019 11:24 am
My only question is why on earth would you commute to Silicon Valley from San Ramon? That is something tech ppl usually do, but as a teacher? Are there no other teaching positions closer? You must have it made at your current spot.

Good for you though for saving like you do!
Several Reasons:
-I'm not all the way in the heart of Silicon Valley (just the outskirts) and it takes, on average, 45 minutes each way. That isn't great but just to get across town can take 20-30 minutes.
-I have a great boss (same principal for the past 15 years and I am hoping he never retires; unfortunately, it is bound to happen at some point).
-I work at a great school. Almost all the students' parents are in the tech industry and value education highly. The school is rated in the top 1% in the state based on test scores. The kids couldn't be nicer and I don't really deal with behavior issues very often (I teach 10-year-olds).
-I have tenure which I'd lose if I switched.
-I have fairly high seniority (currently in my 17th year).
-Pay is determined, in part, by years in a district. Most districts would only give me 5-10 years of service credit if I went there. I'm quite a bit beyond that.
-San Ramon pays for health benefits but has a lower salary. I get health insurance on the exchange and qualify for a subsidy.
-Pension is based on pay. San Ramon pays less so the pension would be lower when I retire.
-I have a great thing going and I don't wish to give it up.

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by ladycat » Sat Sep 14, 2019 1:20 pm

retracted - answered my own question.
Last edited by ladycat on Sat Sep 14, 2019 1:36 pm, edited 2 times in total.

student
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by student » Sat Sep 14, 2019 1:21 pm

Thank you so much for posting the details.

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 1:24 pm

CoastalWinds wrote:
Sat Sep 14, 2019 12:30 pm
So, you’re making $115k/year and you get 180 days a year off (your words). That’s a really good salary!
My employer can't seem to find anyone to hire these days. Perhaps it's that the median house costs around $2M where I teach and teachers don't get health benefits. To get a job where I work, all you need these days is a teaching credential and a pulse. It was the opposite a few years back. There are currently tumbleweeds blowing through Bay Area teacher credentialing programs. Class sizes are going up but pay is as well.

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by hap_ca » Sat Sep 14, 2019 1:27 pm

As others have mentioned, housing is generally the biggest factor in cost of living in the Bay Area. Renting a ~1100 sq ft 2 bedroom apartment costs $2,700-$3,000 per month these days. For those who already own a home the cost of living is much lower.

It's also nice that you have flexible hours to avoid rush hour traffic, although traffic seems to start up earlier and earlier due to everyone having the same idea. I personally would not be able to keep my sanity doing a commute from San Ramon to the South Bay.

Goal33
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Goal33 » Sat Sep 14, 2019 1:33 pm

cherijoh wrote:
Sat Sep 14, 2019 1:04 pm
Goal33 wrote:
Sat Sep 14, 2019 11:26 am
I don’t know but this teacher success story doesn’t reflect the current reality for teachers. But yes, for teachers that already own homes they can afford in the Bay Area, they’re probably doing fantastic!

I think what OP pulled off is admirable but at this point his expenses are maintained in part by his higher networth (housing equity), not his earnings.


I'm not following the part of your post highlighted in blue. Can you explain what you meant?
He got his house cheap many years ago. It’s allowing him to live where he lives now where he may otherwise not be able to afford.

Op, sorry if I derailed your thread here. Will stop posting on this one.
A man with one watch always knows what time it is; a man with two watches is never sure.

EnjoyIt
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by EnjoyIt » Sat Sep 14, 2019 1:34 pm

Thank you for sharing a middle class suburban lifestyle in a VHCOL area and killing it for themselves. This post should be an inspiration to all those complaining how they have it sooooo tough on an income twice yours.
Goal33 wrote:
Sat Sep 14, 2019 12:04 pm
We make 250k+ and would probably not even qualify for a loan to live in your neighborhood, even though I can afford the 20% down. How does a teacher swing it on half? Short of having bought 10 years ago and dual income.


OP has made life choices that have created this life. Just take a look at all the OP expenses and compare it to yours? The only three difference should be, higher taxes, higher mortgage and higher property tax. OP pays their own health insurance premiums where most with a $250k+ W2 income would likely get healthcare from their job. Does that come out to $125k difference? I can't imagine it does.

Honestly, I personally would not pay the premium to live in that area, but I appreciate why people choose to.

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 1:42 pm

Cuzz35 wrote:
Sat Sep 14, 2019 12:34 pm
No medical expenses? Does your health plan cover it all?

I'm paying over 3x on insurance premiums with a high deductible plan subsidized through work. We hit our deductible every year which accounts for about $600 a month. Salary is similar to yours but I live in Atlanta, mortgage is half and RE taxes are a third. We save nothing. Our spending doesn't seem much different than yours but we pay more in taxes and healthcare. I also pay more for life insurance as we have three kids, one who is autistic.

But congratulations.
My employer offers health insurance but pays for nothing toward it. So, the employee share is 100% and the employer share is 0%. The cost to cover a family of three through my employer (with decent coverage) would be roughly $24k/year.

Per the rules of the ACA, if the employee's cost for the least expensive health insurance option available to cover only the employee (no dependents) is greater than 9.86% of the employee's household income (which is considered MAGI, not gross income), the health insurance offered by the employer is deemed "unaffordable." If that happens, the entire family becomes eligible for the premium tax credit. Otherwise, no one in the family is eligible.

The least expensive option my employer offers to cover only me is about $6600/year. If I keep our household income (MAGI) under $66k, we qualify for the subsidy. In 2020, the cheapest health insurance option to cover only me is dropping a little bit so I need to keep MAGI under $64k to qualify for the premium tax credit.

Additionally, by dropping MAGI below $64k, we also qualify for $400 for the Saver's Credit. Any additional income we earn is directed toward retirement accounts (traditional IRA can be funded until April of the following year) so that we can keep MAGI at a level we want. In 2019, the subsidy is around $15k.

We currently have the gold plan (Kaiser) on the exchange and pay around $200/month. Our out-of-pocket medical expenses are low and we do utilize a flexible spending account as well.

I like reading through tax stuff for some reason. I was an accounting major my first couple of years in college but decided to teach 5th grade instead. Switching to teaching is among the best decisions I've ever made as I really like my job, but I suppose I kept reading about taxes as a hobby (I should probably find something more interesting to do).

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by mmmodem » Sat Sep 14, 2019 1:46 pm

Thanks for your post. I found it very interesting. Being a Bay Area native, I know that a middle class lifestyle on your income is neither rare or an exception for the folks living here. It is not due to you being fortunate buying at the right time as you've already pointed out that a person today can rent your home for not much more. There are still people replying saying you are lucky with timing on your home. :oops: that someone making your income cannot do the same today.

I moved out of the Bay Area about 2 years ago with an on and off again stay at home parent. We averaged around $130k household income. My home was bought in Milpitas in 2012. With 3 children we don't quite measure up to your level of savings but we did max out Roth IRA's every year and on some years maxed out my 401k. We also went on vacations with one newer and one older vehicle. I had a Prius and she drove a Hyundai. Our federal taxes were in the high single percentages and state was 1%.

I don't think there is anything rare about what we do except for our savings rates. Most middle class people in the Bay Area that I know of saved nothing outside of 401k matching. They have newer iPhones and BMW's. You know what is interesting? Here in New England, it seem to be the same. Just swap BMW for 4x4 pick ups.

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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by HEDGEFUNDIE » Sat Sep 14, 2019 1:46 pm

FoolMeOnce wrote:
Sat Sep 14, 2019 1:37 pm
Nathan Drake wrote:
Sat Sep 14, 2019 1:18 pm
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 1:15 pm
Nathan Drake wrote:
Sat Sep 14, 2019 1:12 pm
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 12:57 pm


The median teacher at the suburban Chicago high school district where I grew up is making $100k.

Sounds like your teachers are underpaid.
So teachers in Chicago making 2x the average house hold income translates into them being paid appropriately?

Teachers here make 45-55K, around average HHI.
In Chicago the median household income is $68k.

And why isn’t 100k appropriate for a teacher? The median household in America does not have anyone with a college degree.
Making nearly 50% more than household income (2 income earners, generally) for a teaching position on ONE SALARY alone seems to be WAY overpaid for that position, especially with all the benefits of holidays and time off.
Why wouldn't we want to value teachers more than, say, search engine optimization or internet ad sales?
Exactly, OP could be making 2-3x in tech.

Cuzz35
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Cuzz35 » Sat Sep 14, 2019 1:49 pm

Nice. I looked into the premium tax credit years ago but do not qualify. So all in all we spend around 15% on medical. Alot more back when my son was in all kinds of therapy that wasn't covered.

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Ron Ronnerson
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Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 1:50 pm

HEDGEFUNDIE wrote:
Sat Sep 14, 2019 1:15 pm
Nathan Drake wrote:
Sat Sep 14, 2019 1:12 pm
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 12:57 pm
Nathan Drake wrote:
Sat Sep 14, 2019 12:46 pm
CoastalWinds wrote:
Sat Sep 14, 2019 12:30 pm
So, you’re making $115k/year and you get 180 days a year off (your words). That’s a really good salary!
Are teachers normally this overpaid in the Bay Area?
The median teacher at the suburban Chicago high school district where I grew up is making $100k.

Sounds like your teachers are underpaid.
So teachers in Chicago making 2x the average house hold income translates into them being paid appropriately?

Teachers here make 45-55K, around average HHI.
In Chicago the median household income is $68k.

And why isn’t 100k appropriate for a teacher? The median household in America does not have anyone with a college degree.
Good point. I have two majors from an undergraduate degree, a multiple-subject teaching credential, and two master's degrees (MBA and master's in education). I've spent 10 years at universities. How much should I make?

Topic Author
Ron Ronnerson
Posts: 1357
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson » Sat Sep 14, 2019 1:57 pm

hap_ca wrote:
Sat Sep 14, 2019 1:27 pm
As others have mentioned, housing is generally the biggest factor in cost of living in the Bay Area. Renting a ~1100 sq ft 2 bedroom apartment costs $2,700-$3,000 per month these days. For those who already own a home the cost of living is much lower.

It's also nice that you have flexible hours to avoid rush hour traffic, although traffic seems to start up earlier and earlier due to everyone having the same idea. I personally would not be able to keep my sanity doing a commute from San Ramon to the South Bay.
It's around 90 minutes in a car per day (on average) and 180 days per year. I'm usually home by 4 p.m. It could definitely be better but it could also definitely be worse. Also, the highway headed north is expanding and construction is supposed to be done late next year. We're also currently at full employment. Anyway, I'm hopeful that congestion may ease a bit once construction is finished.

anonenigma
Posts: 737
Joined: Thu Apr 21, 2011 11:58 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by anonenigma » Sat Sep 14, 2019 2:01 pm

Ron Ronnerson wrote:
Sat Sep 14, 2019 1:42 pm
Cuzz35 wrote:
Sat Sep 14, 2019 12:34 pm
No medical expenses? Does your health plan cover it all?

I'm paying over 3x on insurance premiums with a high deductible plan subsidized through work. We hit our deductible every year which accounts for about $600 a month. Salary is similar to yours but I live in Atlanta, mortgage is half and RE taxes are a third. We save nothing. Our spending doesn't seem much different than yours but we pay more in taxes and healthcare. I also pay more for life insurance as we have three kids, one who is autistic.

But congratulations.
My employer offers health insurance but pays for nothing toward it. So, the employee share is 100% and the employer share is 0%. The cost to cover a family of three through my employer (with decent coverage) would be roughly $24k/year.

Per the rules of the ACA, if the employee's cost for the least expensive health insurance option available to cover only the employee (no dependents) is greater than 9.86% of the employee's household income (which is considered MAGI, not gross income), the health insurance offered by the employer is deemed "unaffordable." If that happens, the entire family becomes eligible for the premium tax credit. Otherwise, no one in the family is eligible.

The least expensive option my employer offers to cover only me is about $6600/year. If I keep our household income (MAGI) under $66k, we qualify for the subsidy. In 2020, the cheapest health insurance option to cover only me is dropping a little bit so I need to keep MAGI under $64k to qualify for the premium tax credit.

Additionally, by dropping MAGI below $64k, we also qualify for $400 for the Saver's Credit. Any additional income we earn is directed toward retirement accounts (traditional IRA can be funded until April of the following year) so that we can keep MAGI at a level we want. In 2019, the subsidy is around $15k.

We currently have the gold plan (Kaiser) on the exchange and pay around $200/month. Our out-of-pocket medical expenses are low and we do utilize a flexible spending account as well.

I like reading through tax stuff for some reason. I was an accounting major my first couple of years in college but decided to teach 5th grade instead. Switching to teaching is among the best decisions I've ever made as I really like my job, but I suppose I kept reading about taxes as a hobby (I should probably find something more interesting to do).
That explains why your (non-administrator) teacher salary is as high as it is. Amazing that you pay union dues for a union that hasn't negotiated affordable health benefits for you and your colleagues.

Presumably you are in CalSTRS? You mentioned Social Security down the road. Be sure to read up on the IRS Windfall Elimination Provision and Government Pension Offset.

Nathan Drake
Posts: 459
Joined: Mon Apr 11, 2011 12:28 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Nathan Drake » Sat Sep 14, 2019 2:02 pm

HEDGEFUNDIE wrote:
Sat Sep 14, 2019 1:46 pm
FoolMeOnce wrote:
Sat Sep 14, 2019 1:37 pm
Nathan Drake wrote:
Sat Sep 14, 2019 1:18 pm
HEDGEFUNDIE wrote:
Sat Sep 14, 2019 1:15 pm
Nathan Drake wrote:
Sat Sep 14, 2019 1:12 pm


So teachers in Chicago making 2x the average house hold income translates into them being paid appropriately?

Teachers here make 45-55K, around average HHI.
In Chicago the median household income is $68k.

And why isn’t 100k appropriate for a teacher? The median household in America does not have anyone with a college degree.
Making nearly 50% more than household income (2 income earners, generally) for a teaching position on ONE SALARY alone seems to be WAY overpaid for that position, especially with all the benefits of holidays and time off.
Why wouldn't we want to value teachers more than, say, search engine optimization or internet ad sales?
Exactly, OP could be making 2-3x in tech.
He also wouldn't have 180 days off every year...

anonenigma
Posts: 737
Joined: Thu Apr 21, 2011 11:58 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by anonenigma » Sat Sep 14, 2019 2:04 pm

Nathan Drake wrote:
Sat Sep 14, 2019 2:02 pm

He also wouldn't have 180 days off every year...
To clarify, teachers work about 180 days per year, which is 36 full weeks. His 180 days off includes weekends and legal holidays.

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