Affording California

[StarTrekDoc]

Develop a personal statement and plan the retirement, execute it.

As folk above have done on crunching the math - 300k works out for almost any situation. It's a BIG shovel.

Most everyone here have 1st world problems and debate the finer points of the disposable funds one has. Living in a HCOL/VHCOL reduces that disposable income; but it's still there.

We live in one of the best neighborhoods of San Diego and best school districts that's 4miles from the beach and work in academic setting in primary care. Most docs will have significant earnings above us.

Sure we don't have huge expensive vacations. We also live in pretty good paradise conditions.

[Trigeminal]

As usual, I am not feeling the “California Love” in this group. To the OP, I suggest if you want to live in LA then first consider renting an apartment in Santa Monica, Marina Del Rey, or Westwood. They are all desirable places and with your salary can be easily afforded. From a pure investment perspective, buying a house in CA will appreciate more than almost anywhere else. Save up for your down payment and buy a property where you want to live if this is truly the place where you want to work. Don’t let the politics and taxes get to you, I’m the opposite of most voters in this state and yet I mange just fine. I was able to put 5% down almost 10 years ago on my property and my income to mortgage ratio was (collective gasp from some) 1:4.2, now after my income has risen along with debt reduction and refinance that ratio is 1:1. I grew up in flyover country and have never looked back since finishing college. I do miss the small town and laid back atmosphere along with visiting relatives but after 2 days of that I’m done. Some say why live here when you can always visit, I say why not live where others want to visit. Everyday is 60-80 degrees with an occasional marine layer in the morning and then sunshine by 10/11am in my little enclave between LA and Santa Barbara. Good luck in your search and I hope you find a place to enjoy.

[ObgynMD]

As usual, I am not feeling the “California Love” in this group. To the OP, I suggest if you want to live in LA then first consider renting an apartment in Santa Monica, Marina Del Rey, or Westwood. They are all desirable places and with your salary can be easily afforded. From a pure investment perspective, buying a house in CA will appreciate more than almost anywhere else. Save up for your down payment and buy a property where you want to live if this is truly the place where you want to work. Don’t let the politics and taxes get to you, I’m the opposite of most voters in this state and yet I mange just fine. I was able to put 5% down almost 10 years ago on my property and my income to mortgage ratio was (collective gasp from some) 1:4.2, now after my income has risen along with debt reduction and refinance that ratio is 1:1. I grew up in flyover country and have never looked back since finishing college. I do miss the small town and laid back atmosphere along with visiting relatives but after 2 days of that I’m done. Some say why live here when you can always visit, I say why not live where others want to visit. Everyday is 60-80 degrees with an occasional marine layer in the morning and then sunshine by 10/11am in my little enclave between LA and Santa Barbara. Good luck in your search and I hope you find a place to enjoy.

Lol, fair. I actually really love living in one of those above coastal CA cities we can’t imagine living somewhere else right now. The diversity, and respect for public health guidelines, and willingness to get vaccinated, the awesome food, having my kids in a daycare where other kids look like them. Living here is our luxury and we can afford it. Numbers were run, decisions were made, a house was bought, kids were had.

No CA shade meant here!! Just that this is a finance blog so it’s cathartic to complain about finance things. We aren’t moving

[StarTrekDoc]

I do wonder how many folk here do live in HCOL environments - I would venture at least 1/3 do. Perhaps a Lordosis poll?
Trigeminal - plenty of diversity within CA - even within the metro/coastal cities. There's a neighborhood that fits most everyone's leanings/flavors.

Come join us -- We'll leave the light on for you.

[CordMcNally]

I would love to see a breakdown like I posted earlier on where the money goes in a LCOL area.

What are LCOL physicians doing with all their money? It doesn’t seem most are retiring earlier because I think that’s very uncommon no matter where you are?

I can only speak for myself but mostly saving and investing. And we still live a very good life with nice trips. My wife is a saver by nature but isn't really interested in investing so I take care of all of that. She's a fantastic cook so we rarely eat out unless we're on vacation. When we eat out and we're not on vacation it's usually cheap Mexican because that's our soft spot. I enjoy cleaning so we don't have a maid or other cleaning service come by. Our home that we bought 6 years ago is valued at about .7x our current income with the mortgage being about .35x. We live in one of the more 'uppity' suburbs for our area with the best school district in the state.

As far as speaking for others, I'll tell you some of my observations. Some people will always spend most of their money no matter where they live. I've got partners that spend close to $60k in private school tuition when they live in the best school district in the state. Many of our mid-levels live in more expensive homes than I do and our house is pretty nice. Some of my partners like living in $1M+ houses. Those kind of houses around here are incredibly large and come with the associated expenses for upkeep of the house and property. It can be pretty easy to take a large income and make it small in a LCOL area just like it can be in a HCOL area.

[billy]

Having never lived in a high cost of living area these threads always amaze me at how expensive things can be. If you have to live there for your job I understand that. But a physician can have a job anywhere in the country. It would be way cheaper to move your entire extended family someplace else then to live in some of these places.

Theres also a big difference between being happy as a single person looking for a mate vs DINK vs family when comparing some places. No amount of geo arbitrage making bank in the middle of nowhere wouldve been worth it when I was single.

[Turf Doc]

I can only speak for myself but mostly saving and investing. And we still live a very good life with nice trips. My wife is a saver by nature but isn't really interested in investing so I take care of all of that. She's a fantastic cook so we rarely eat out unless we're on vacation. When we eat out and we're not on vacation it's usually cheap Mexican because that's our soft spot. I enjoy cleaning so we don't have a maid or other cleaning service come by. Our home that we bought 6 years ago is valued at about .7x our current income with the mortgage being about .35x. We live in one of the more 'uppity' suburbs for our area with the best school district in the state.

As far as speaking for others, I'll tell you some of my observations. Some people will always spend most of their money no matter where they live. I've got partners that spend close to $60k in private school tuition when they live in the best school district in the state. Many of our mid-levels live in more expensive homes than I do and our house is pretty nice. Some of my partners like living in $1M+ houses. Those kind of houses around here are incredibly large and come with the associated expenses for upkeep of the house and property. It can be pretty easy to take a large income and make it small in a LCOL area just like it can be in a HCOL area.

Thanks for this, that's very helpful.

Your latter paragraph definitely puts into words what i had been thinking. Just like with the roth vs. pre-tax debate or the pay off debt vs. invest question, the crux of it ultimately comes down to: are you actually using the difference to build wealth? as someone who went to public schools, spending 60k on tuition per year sounds absolutely insane to me, and a 4k sq foot seems enormous so not sure what 1M gets you in a LCOL area but should be larger than that.

For people who post on here though, maybe the difference is that your kids are going to inherit a lot more than someone in a HCOL area...

[CordMcNally]

For people who post on here though, maybe the difference is that your kids are going to inherit a lot more than someone in a HCOL area...

Most likely but we still live very well and do whatever we want to do. Our house is right around 4k square feet. Could we afford something much larger? Absolutely, but the additional headaches wouldn't be worth it for us. I wouldn't mind having 5-10 acres but I honestly think the benefits vs. headaches would about even out at that point and I haven't quite talked my wife into moving further out. Instead, we plow money into savings and retirement, buy whatever we want/need (which doesn't currently take a lot of money), and talk about charitable giving and retirement and all the options we're going to have.

[StarTrekDoc]

Most likely but we still live very well and do whatever we want to do. Our house is right around 4k square feet. Could we afford something much larger? Absolutely, but the additional headaches wouldn't be worth it for us. I wouldn't mind having 5-10 acres but I honestly think the benefits vs. headaches would about even out at that point and I haven't quite talked my wife into moving further out. Instead, we plow money into savings and retirement, buy whatever we want/need (which doesn't currently take a lot of money), and talk about charitable giving and retirement and all the options we're going to have.

First world problems. Just more of it in LCOL then HCOL areas for most physicians/people earning 300k+. So for OP -- yes, affording Cali is just fine.

[Lordosis]

I would love to see a breakdown like I posted earlier on where the money goes in a LCOL area.

What are LCOL physicians doing with all their money? It doesn’t seem most are retiring earlier because I think that’s very uncommon no matter where you are?

I wouldn't call my hairy unnecessary low cost of living probably more moderate. I am in upstate New York. Housing here is quite affordable but we still have New York state taxes to deal with. Our family income is variable but 300 is about a good average.

After taxes and deferred saving it comes to about 15k a month.
2.5 k goes to the mortgage since we are on a 15-year. Call it 3k after utilities.
3k goes towards daycare.
1K on property tax would be the monthly average
1K on groceries is about average 1K a month goes to 529 accounts 1 to 3K on various other spending like clothing or activities

We consistently spend about 10-11k a month and this is about how it adds up.

I do not consider the large one-off purchases like cars and major home repairs in this average spending but I am conservative enough in my estimates that I doubt those will have much of an impact.

A lot of my saving is deferred income so I never see that money. And all the extra after our spending just gets thrown into a taxable account.


Our daycare spending will hopefully remarkably decrease next year when my twins hit school age and I look forward to getting rid of that large fixed payment. The mortgage will disappear just before my oldest is college age. My conservative outlook on our financial future would put me at financial Independence right around that time as well. However if the future even resembles the past a little bit it will likely be even sooner than that.


However this is just us. I think we are rather unique.

Most people I know who make similar to money to me spend most of that money if not all of it or more than all of it. It is very easy to do. You live in a larger home. You drive nicer cars. Your kids go to more expensive daycare or private schools. You own boats and RVs. You go on expensive vacations. You furnish your home expensively or buy more expensive electronics. You go out to eat regularly or order lunch or get coffee daily. You belong to country clubs. You hire people to clean and maintain your home.

There is an unlimited way to spend money. It just goes further in a low cost of living area.

BUt if I wanted to I could do most of those things I just described but I choose not to because I would like to be financially secure in the next 10 to 15 years.

[FishingMD]

Having never lived in a high cost of living area these threads always amaze me at how expensive things can be. If you have to live there for your job I understand that. But a physician can have a job anywhere in the country. It would be way cheaper to move your entire extended family someplace else then to live in some of these places.

Having lived in VLCOL and VHCOL areas, there are tradeoffs. Living in a VHCOL area, I will never have to sent my children to pvt school. My property taxes will be less than pvt school tuition. While I can find a job everywhere, my SO, who is in business cannot. She has physician-level earnings with a pension, something that isn't really found most places. We've often tossed around the whole 'geographic arbitrage' mentality, but have always found ourselves a little gun shy.

[TheDangerZone]

First world problems. Just more of it in LCOL then HCOL areas for most physicians/people earning 300k+. So for OP -- yes, affording Cali is just fine.

But let’s also take in to account that a lot of jobs in HCOL/VHCOL areas pay less and have higher state income tax.

My peds friend in LA is not doing just fine, but he loves the area and doesn’t want to move away. Give the terrible job market, he is resigned to trying to start his own practice, with much associated risk.

The average physician (who is not very financially literate) in VHCOL/HCOL is definitely going to have a harder time putting away 20% of gross, no doubt about it.

[blippi]

if you don’t like what the vhcol has to offer, then it won’t be worth it. truly don’t want a big house, not s positive to me. i value weather, interesting outdoor activities, and diversity in my daily and weekend life. i made the decision to live where i prefer and have a high probability of being comfortable and still retiring early, rather than have a chance at dying with 8 figures of retirement savings that i never enjoyed using. if desired, my child can inherit my home with what will end up being a low property tax. seems rational to me and for me. money is a tool and not an end in itself.

would want to be paid a premium to live in any central valley region. there would be the pro of being in driving distance to big cities, mountains, or ocean, and not dealing with snow. for me, it would probably make more sense to live in NV unless the job really paid a premium.

[mercredis]

I have only ever lived/worked in California (Los Angeles, San Diego, Orange County, Inland Empire, Bay Area). This state has been home to my parents since they immigrated here 50+ years ago. I was lucky enough to attend very good public schools, which I think played a big role in getting me to where I am now. Yes, my net pay is <40% of my gross pay and we rent and we don't go on expensive vacations...etc etc. But at the end of the day, especially as I hear the fog horns and see the ocean on the horizon on my walk home, there is really no where else I'd want to live. (Just had to contribute some California Love).

[Tim]

300k gross

according to smartasset tax calculator for a single person in california,

175k after 19500 deductible 401k contribution. Assume 10k match from employer, 30k in mega backdoor/backdoor roth contributions, have 145k after taxes and after saving 20% gross

145k/12 = 12k/mo

Big dumb doctor house at 1.2M 30 year mortgage 3% interest rate is 5k/month

7k left over to do whatever you want.

$1.2m does not buy a Big dumb doctor house within a reasonable commute for most of the large desirable coastal areas. There will be trade offs to "undesirable neighborhoods and schools. Just saying, probably more of a hope than a plan.