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Old 12-17-2014, 12:38 PM   #1
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Hi, I am Readyforachange

I have been lurking for a few months now and wanted to say hello to the group and thank all of you for the high quality information dispensed on this forum.

I am in my early 40s and I live in a high cost of living area. At this stage I am more focused on financial independence than retirement. I would not describe myself as frugal but I think that I have done pretty well in the wealth accumulation department by living below my means. I am about halfway to my net worth target. I think that I have a good shot at reaching that target in the next decade but I am not in such a hurry to get there as to forgo the things that make me happy (like living where I do despite the high cost).

I am here to continue my education with regard to investing and retirement planning. And I thank you in advance for the guidance.
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Old 12-17-2014, 01:11 PM   #2
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Hi Readyforachange. Welcome.

I can relate to the tradeoffs of related to high COL areas. For me - it's worth it - and I did what I could to reduce my costs going into retirement (by paying off the mortage, getting a tenant in place in our rental unit, etc.)

It's all about finding the balance between spending everything (and more) for immediate reward, or socking some away for the future.

Again, Welcome!
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Old 12-17-2014, 01:22 PM   #3
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Tradeoff for high COL area is higher salaries, at least in the professional fields. Trick is to keep housing costs low, which is next to impossible in LA. Studies have shown LA rents take up 40% of income. Unless you already own, buying real estate is impossible. I know at least one high earner who cannot afford to buy in our upscale neighborhood. If you must live in a high COL area, buy or rent only as much housing as you need, save the excess, then downsize. This has worked spectacularly for me, although quite by accident.
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Old 12-17-2014, 01:29 PM   #4
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Tradeoff for high COL area is higher salaries, at least in the professional fields.
That hasn't been my experience. I've had several opportunities for engineering positions in California. In every case I was offered less money than I was currently making in Texas or Louisiana (definitely low cost areas). Without hesitation, the comment was made that the "opportunity to live in California" was considered such a big plus for the position that they didn't need to offer as much salary. I declined all these idiotic offers. It may be different if you are a doctor or lawyer.
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Old 12-17-2014, 01:41 PM   #5
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Tradeoff for high COL area is higher salaries, at least in the professional fields. Trick is to keep housing costs low, which is next to impossible in LA. Studies have shown LA rents take up 40% of income. Unless you already own, buying real estate is impossible. I know at least one high earner who cannot afford to buy in our upscale neighborhood. If you must live in a high COL area, buy or rent only as much housing as you need, save the excess, then downsize. This has worked spectacularly for me, although quite by accident.
I rent a small apartment close to many amenities and the high rent for this central location is worth it to me. I really should buy a condo but the high purchase and carrying costs of real estate in this area really scare me.
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Old 12-17-2014, 01:54 PM   #6
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I rent a small apartment close to many amenities and the high rent for this central location is worth it to me. I really should buy a condo but the high purchase and carrying costs of real estate in this area really scare me.
Welcome to the forum. I think most of us lurk for a considerable amount of time before joining.

Everyone I've known in California are house poor. I find the housing prices to be horrible. If you took my ~$300k house in Texas to SF it would probably be worth ~$3MM. That has also kept me out of California. It's hard to LBYM when renting a closet takes 40% of your income.
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Old 12-17-2014, 02:47 PM   #7
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That hasn't been my experience. I've had several opportunities for engineering positions in California. In every case I was offered less money than I was currently making in Texas or Louisiana (definitely low cost areas). Without hesitation, the comment was made that the "opportunity to live in California" was considered such a big plus for the position that they didn't need to offer as much salary.
You're right, and I was generalizing. I seem to recall reading somewhere engineering positions paying more in places like Texas. I know of no organization stupid enough to tell an out of state person lower salaries are offered because of the opportunity to live in CA (although it wouldn't surprise me). In fact, it's a well known fact in Bay Area and SoCal organizations salaries offered must be higher to match lower COL areas out of state. I've been lucky enough to have a salary above the national average due to my location.

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...

Everyone I've known in California are house poor. I find the housing prices to be horrible. If you took my ~$300k house in Texas to SF it would probably be worth ~$3MM. That has also kept me out of California. It's hard to LBYM when renting a closet takes 40% of your income.
I'm not at all house poor, although my financial position would be different if I bought my place today. Thankfully, I'm selling soon and riding this horse out of Dodge with saddlebags full of gold and silver pieces. And you're right about the TX versus SF housing comparison. That comparison would hold just about everywhere else in the US, except maybe NY. I couldn't agree more about your last statement, which is why I personally wouldn't do it.
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Old 12-17-2014, 02:56 PM   #8
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Welcome aboard, readyforachange (may I shorten it to R4AC?)

I very much relate to placing a high priority on where you choose to live. We are in a high cost of living area (not as high as you, though) without nearly the quality of amenities, and certainly not the amazing weather you enjoy. We do have more house and yard than we need, but we place such a high value on privacy and breathing room that it's been (mostly) worth the sacrifices.

Looking forward to hearing more from you.

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Old 12-17-2014, 02:58 PM   #9
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That hasn't been my experience. I've had several opportunities for engineering positions in California. In every case I was offered less money than I was currently making in Texas or Louisiana (definitely low cost areas). Without hesitation, the comment was made that the "opportunity to live in California" was considered such a big plus for the position that they didn't need to offer as much salary. I declined all these idiotic offers. It may be different if you are a doctor or lawyer.
Interesting sounds like they were trying to low ball you. When our plant was shutdown and some of us were offered jobs in DFW from California it was with the understanding that they would be paying Texas wages not Calif ones which amounted to ~30% paycut...I declined the offer. OTOH I was offered a job at Intel for a 25% paycut from them because the stock price would make up for the difference . And I won't bother with what Micron in Boise tried to sell me
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Old 12-17-2014, 03:41 PM   #10
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Boise is a very, very nice place
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Old 12-17-2014, 03:47 PM   #11
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Welcome to the forum. I think most of us lurk for a considerable amount of time before joining.

Everyone I've known in California are house poor. I find the housing prices to be horrible. If you took my ~$300k house in Texas to SF it would probably be worth ~$3MM. That has also kept me out of California. It's hard to LBYM when renting a closet takes 40% of your income.

Fortunately, I still manage to save 25% of my gross income for retirement despite the high cost of living in California. This savings rate should get me to financial independence early enough. I expect my portfolio to do the heavy lifting from here on.

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Welcome aboard, readyforachange (may I shorten it to R4AC?)

I very much relate to placing a high priority on where you choose to live. We are in a high cost of living area (not as high as you, though) without nearly the quality of amenities, and certainly not the amazing weather you enjoy. We do have more house and yard than we need, but we place such a high value on privacy and breathing room that it's been (mostly) worth the sacrifices.

Looking forward to hearing more from you.

Amethyst
Feel free to shorten my screen name to R4AC, Amethyst! Thanks for the welcome.
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Old 12-17-2014, 04:52 PM   #12
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Welcome to the forum, from a CA escapee and could not be happier. If living in CA makes you happy, that is your choice and your decision. Just remember it is not just housing, but a lot of other related high costs that make up the total COL. Saving approx 25% of your income is great and you will do good with that. You currently LBYM and that is really the key for any location.

So where exactly do you live? We have a lot of forum members all over CA, or formerly CA.
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Old 12-17-2014, 05:56 PM   #13
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Boise is a very, very nice place
Not at the offer price

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Originally Posted by Readyforachange View Post
Fortunately, I still manage to save 25% of my gross income for retirement despite the high cost of living in California. This savings rate should get me to financial independence early enough. I expect my portfolio to do the heavy lifting from here on.



Feel free to shorten my screen name to R4AC, Amethyst! Thanks for the welcome.
It true that Calif is expensive to live in but if you have budget for it, in spite might be said, you'll be fine. It might have cost me some years of retirement to say here but a move might have cost me my wife and that would have been much more expensive than the COL
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Old 12-17-2014, 06:11 PM   #14
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Interesting sounds like they were trying to low ball you.
That's for sure. When employers complain that they can't find anyone to fill a position, there's usually something that they are leaving out.

Quote:
We can't find anyone who meets all of the qualifications for this job and who is willing to take it for the salary we are offering.
The lowball salary can mean one of several things. Some, from my work experience:
  • Hey, they screwed up. It happens.
  • The position is nowhere near as high-powered as they made it sound. That "Wizard-class enterprise software Guru with 10 years Java and relational database experience" position is mostly testing and light debugging of web pages generated by automation, for example.
  • The hiring manager think he's Trump or maybe Scrooge. Are you up for rationing of #2 pencils?
  • Inflexibility. They might have some corporate policy that starts everyone in a department out at the same pay for the first year, for example.
  • Low pay, but high incentives. This is more common with SF Bay Area startups. The pay ain't great, but you might get a big ole bunch of restricted stock or options. They usually go *poof*, but every once in a while...
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Old 12-17-2014, 06:26 PM   #15
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Tradeoff for high COL area is higher salaries, at least in the professional fields.

This isn't true in medicine either. I couldn't afford a house in Silicon Valley even in the early 90s. Salaries in medicine are fairly even around the country, a little higher in the north central part of the country. There are depressed rural areas of California where housing is cheap, but you wouldn't want to live there.



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Old 12-18-2014, 05:24 AM   #16
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Originally Posted by Readyforachange View Post
I have been lurking for a few months now and wanted to say hello to the group and thank all of you for the high quality information dispensed on this forum. I am in my early 40s and I live in a high cost of living area. At this stage I am more focused on financial independence than retirement. I would not describe myself as frugal but I think that I have done pretty well in the wealth accumulation department by living below my means. I am about halfway to my net worth target. I think that I have a good shot at reaching that target in the next decade but I am not in such a hurry to get there as to forgo the things that make me happy (like living where I do despite the high cost). I am here to continue my education with regard to investing and retirement planning. And I thank you in advance for the guidance.
Welcome R4AC; Congrats on saving 25 percent of your income while spending 40 percent on housing. That doesn't leave a whole lot for all of the other necessities of life (taxes, insurance, food, utilities, auto/transportation) and I imagine precious little for discretionary spending like entertainment/travel/clothing. I am interested though in your screen name. You seem ready to stay the course so what changes are you seeking?
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Old 12-18-2014, 09:25 AM   #17
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I went from broke to FIREd in about eight years in California. No stock options or windfalls. It's doable. But I'm single and I rent.
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Old 12-18-2014, 10:26 AM   #18
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Low pay, but high incentives. This is more common with SF Bay Area startups. The pay ain't great, but you might get a big ole bunch of restricted stock or options. They usually go *poof*, but every once in a while...
Startups underpay/overwork more often than not...its a big risk/reward thing but you can end up fabulously wealthy if you get lucky.

Quote:
This isn't true in medicine either. I couldn't afford a house in Silicon Valley even in the early 90s. Salaries in medicine are fairly even around the country, a little higher in the north central part of the country. There are depressed rural areas of California where housing is cheap, but you wouldn't want to live there.
This surprises me since I know a few Dr and they make a lot more than I do and we bought a house in SV in the early 90's. It was actually a very good time to buy since housing prices had depressed a fair bit after the Loma Prieta earthquake. The house is worth a tiny bit more now than back then so it was a good investment decision
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Old 12-18-2014, 12:00 PM   #19
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Welcome R4AC; Congrats on saving 25 percent of your income while spending 40 percent on housing. That doesn't leave a whole lot for all of the other necessities of life (taxes, insurance, food, utilities, auto/transportation) and I imagine precious little for discretionary spending like entertainment/travel/clothing. I am interested though in your screen name. You seem ready to stay the course so what changes are you seeking?

Hello Golden sunsets,

I do not spend 40 percent of my income on housing (that number was brought up by other posters). I am closer to 20%. This location also makes it possible to be car-free. My employer pays for my public transportation pass ($68 a month for unlimited transportation within the San Francisco city limits) and my health insurance premiums (good, low deductible plan). Taxes are up there of course, this being California.

The changes that I am seeking are not related to my finances. It's about appreciating what I have and finding contentment.


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Old 12-18-2014, 02:20 PM   #20
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Readyforachange-

Welcome. I'm fairly new myself. Similar age. I applaud that you embrace your lifestyle but manage to be a saver. That sounds like a great balance.

While most of us are (as the name would imply) working towards or are already retired, becoming FI is the first step. At least then you will have choices and security.

Best of luck to you.
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