I also used to work in Nowhere, USA and now work in the Bay Area. While my "cost of living as a percent of salary" is much higher, so is my "salary minus cost of living" which is a more important measurement. To put it into concrete hypothetical terms:
Person A lives in rural Iowa, makes $50K a year after taxes, and their cost of living items (housing, gas, food, etc.) add up to $20K. Person B lives in the city, makes $100K a year after taxes, and their cost of living items add up to $60K. All other things being equal (I know, that's a stretch), who's doing better?
One school of thought is that A is better off because while they're making half the salary, their cost of living is 1/3rd. My school of though says that B is better off because he has $10K more to do things that cost the same as they do for person A: Investment, travel, Netflix, anything you buy on Amazon, whatever.
The biggest cost variance is in housing. In the Midwest, you can get a 2,500 sq ft home for ~1.3k +/- $350. [0] Under normal leasing standards (no more than 1/3rd your income to rent), you can pay that if you have a job in the $50k-$60k range. And that's almost the standard -- big houses and big yards for everyone.
In LA or SEA, you're looking at 2.5x-4x that, which is at least $3500/mo. [1] Under normal leasing income standards, you'd have to have a salary of $140k+ to barely meet the minimum requirements, and that's for a "cheap" rental home. The other option is to live way out in the burbs, where prices are probably closer to 1.5x-2.5x, and spend 2.5 hours commuting every work day.
(In SF or NYC, you probably can't obtain a comparable living situation, but a 2500 sq ft apartment apparently runs around $15k/mo, meaning you'd have to make almost $1M/yr to barely afford one)
If you're a single person or just have a partner, you can probably take a hit and go from a $800/mo 2-bedroom apartment @ $55k to a downsized $1600/mo apartment @ $110k and still make a lot more money than you did in the place with a lower CoL (even after calculating a 30-50% increase in the cost of some goods, like utilities, gas, and food).
However, if you have kids, this quickly becomes impractical, because it's way harder to jump from a $1300/mo home @ 60k to a $3500/mo home @ 115k.
For extra credit calculate the change to net pay based on differing tax laws. This is especially large if you're coming to CA, which has the highest state income tax in the nation at 13.3%. Most Midwestern states have tax rates between 4 and 7 percent. Some of the most populous "flyover" states (Texas and Florida) have a 0% tax rate (and to Amazon's credit, WA does too). [2]
[2] http://taxfoundation.org/sites/taxfoundation.org/files/docs/...
I'm not sure where you are getting this from. The mcmansion trend hit the bay area just as much as it hit anywhere else. The burbs are 20-30 minutes away with tech worker job hours. The 2500 sqft homes here cost a million dollars, so your mortgage cancels out the additional bay area income. But that mortgage money doesn't go into a black hole, it's equity. So at the end of the day you can sell your bay area house, go back to oklahoma, and buy ten houses. This is probably the best opportunity going in the world right now to build dynastic wealth.
Searching for rentals within the actual city limits. Burbs are fine but already addressed; generally you are looking at 1 hour+ commutes before it starts to get into "affordable" range (looking at 1.5x-2.5x the median cost for comparable housing in other metros).
In LA and SEA, it seems it's possible to find housing that's closer than 1 hours' commute for 2.5x-4.5x the national median.
In NYC and SF, it doesn't appear that way -- these areas are so dense that it's not possible to get a 2500 sq ft home within 1 hours' commute (meaning freestanding homes that have a yard, not condos/apartments; such homes actually appear to be so rare within city limits that you'd have difficulty getting them no matter how much money you were willing to spend). That's why I singled them out. I'm talking about a rush hour commute here, the need to get to work to do a 9-5. For example, I know Daly City is only a few miles from SF proper, but that doesn't mean you can get doorstep-to-doorstep in under an hour given the transit conditions.
I've never lived in either SF or NYC so it's completely possible that I'm making an incorrect extrapolation here.
>The 2500 sqft homes here cost a million dollars, so your mortgage cancels out the additional bay area income. But that mortgage money doesn't go into a black hole, it's equity. So at the end of the day you can sell your bay area house, go back to oklahoma, and buy ten houses. This is probably the best opportunity going in the world right now to build dynastic wealth.
This is a good idea if you can get the timing right.
I'm not claiming these homes are affordable inside SF, but they certainly exist - anyone who has spent much time in the city or searched zillow can attest (I would link you if I weren't on my phone). There are three-story single-family Victorians all over the place. The yard is usually in the back, though, as putting one next to city street traffic is a waste of space. There are some gated communities with front yards.
The preponderance of single-family homes in the city is one of the causes of the high housing prices. Most of the apartments/condos are actually subdivided versions of the victorians, because it is not legal to build anything taller. And now you have owners evicting all occupants of a property like this, converting them back into a single-family-home with an open floor plan, giant deck, lots of windows, and asking price in the millions. The circle is complete.
>For example, I know Daly City is only a few miles from SF proper, but that doesn't mean you can get doorstep-to-doorstep in under an hour given the transit conditions.
The BART train from Daly City reaches Montgomery station in 15 minutes. If you can't stand a train you do need to commute in off-hours.
>This is a good idea if you can get the timing right.
Granted, there are possible scenarios where this won't work, but all you need is for housing to appreciate at the rate of inflation over a few decades. If that happens fifteen years after you buy, you can sell and lock in your gains early. It's not so different from putting your 401k in equities when you are decades from retirement.
I think I've mentioned this before, but when I interviewed at Amazon, the topic of affordable housing came up. I asked the interviewer what was affordable these days, expecting Kent, Auburn, or maybe even Buckley. His answer was Puyallup.
San Leandro is a steal as well.
Dallas is the best of both worlds, high salary and low cost of living. I'm not a fan of Dallas but I may end up there again.
I'm not disrespecting their particular experience; it's awesome that their move worked in their favor. But I have interviewed for jobs in cities like SF and I have crunched the numbers on their salaries and so I have direct experience, too. Neither of our stories on their own are proof, they're just anecdotes; cost-of-living calculations are the result of lots of hard data.
You move and now make $120k and your expenses double to $80k. You're saving $40k; twice as much. But in reality, not all of your expenses increase that much, and the other benefits (bonuses, matching, raises, interest, etc.) are % based, so the discrepancy increases quickly.
I find the idea of overall expenses only doubling for a family moving from OK or MI to a place like Seattle somewhat silly. The vast majority of household budget's largest expense by far is housing. If they want to downgrade their standard of living from a 3-4 br 2000+sq feet house, then maybe it will only double. Otherwise it could easily triple or quadruple, as the original article discusses and evidence for is easily found. Salaries are not 3-4x larger in high CoL areas generally. The difference is pretty stark even starting from an area like Metro DC/Baltimore that isn't exactly known for being cheap, but nowhere near SF, Seattle, NYC or Boston levels.
Yes, the square footage of my apartment went way down. Pretty much everyone out here lives in less space, generally it's less a "standard of living" thing than a "that's the norm" thing, but obviously if you really need 2K sqft you're going to want to evaluate things separately.
I see you've gotten Stockholm Syndrome already :) But yes, it is definitely an individual-situation type of thing for sure. I'm merely responding to the blanket assertion that just because you ~double your salary in a ~2x CoL area you are always coming out ahead. As you say there are assumptions built into calculators that you personally have to decide how to value, and how you value things like a good commute, schools, and a backyard can change over time as well.
That's actually not true. I'm referring to cost-of-living, which includes housing, gas, food, etc. All the things you list. Here's a calculator you can use to try it for yourself [1]. Using that, if I live in Columbia, MO (which I chose at random) and make $60k, I must make $111k in the Bay Area to maintain the same standard of living.
[1] http://www.bankrate.com/calculators/savings/moving-cost-of-l...
> You're forgetting things like raises, bonuses, and 401(k) matching that are a % of your salary. Not to mention sign-on bonuses and stock benefits, which are rare in the Midwest.
That is definitely correct. But you can certainly find companies offering good (signing and regular) bonuses and 401k matching; I did. Stock is much rarer, as you say.