Definitely a good thing to do during covid times, but you might want to move back after covid is over.
Have you ever lived in a small town in, say, Texas for a month? Nearly everything is cheaper there, and not by a little. Gas can be $1.50/gallon instead of $3.89/gallon. Dairy, produce, meat are all cheaper. Utilities/energy is cheaper.
Maybe it doesn't have as big an impact if you don't have kids, but I only have three and man these things eat a lot.
Beef was cheaper. Chicken and pork were same as Cali. Produce was a lot more expensive; regular produce cost the same as organic produce in Cali, and the quality dropped off a cliff in the winter.
Gasoline was cheaper, but the only utility that was cheaper was water. Internet was more expensive. Electricity and (natural) gas was significantly more expensive, because A/C was a must in the summer and heating was a must in the winter.
Car maintenance was much more expensive, since the salt they use to melt the snow is corrosive. House maintenance was more expensive, because the humidity year-round meant increased mold growth.
In order to get cheaper than LA/SF, you had to move to a small town...but you can do the same thing in Cali too; such as by moving to San Bernardino or Sacramento, and you end up with a much higher quality of life than a small town in the Midwest.
In LA with a little effort you can find endless Asian/Mexican options for sub-$10.
And yes, the tax rate is progressive, but the average rate is still around 9% at that income level (~36k). Marginal rate is just over 11%.
My overall point is just that almost all of the cost of living delta in CA is from taxes and housing. Didn't mean to get too deep into the numbers.
Whole Foods drip coffee is $1 for prime members in many locations and is drinkable if not great.
So the moral of my story is don’t move out of a high cost city for the money, it doesn’t add up. Move out for a myriad of other reasons that may be meaningful for you (family, life, etc)
My wife and I both work remotely now. We need a 3BR place to stay sane because we need two offices. Compared to the south bay, we are saving >3000/m in rent. At a high compensation, marginal tax rates in CA approach 50%. So that 36000 saved is worth 72000 in TC difference.
It gets more dramatic if you pay for childcare. Childcare in the bay area can easily run 20000 more than it might cost in a lower cost of living area. A family of four that has two kids in day care might save 60000 just off rent and childcare differences.
On the other hand, for single people who would have a 1BR wherever they chose to live, the rent difference may only be 20000 and the rest of expenses don't change much and then suddenly dropping 20% on your 200,000 TC ends up being a bad deal.
Even your chain restaurants are more pricey. Everyone has to pay rent, ya know?
The conventional wisdom (again) is to stay at FAANG and stay in the SFBA. You can also leave SFBA and work at smaller companies that don't offer FAANG comp, and it can still make sense because of the latter chunk of money (lower costs from housing and general CoL).
What specifically do you mean by “compound interest machine”?
How much would you have made if you'd invested in a FTSE index fund in 1990 till 2020?
Very little, as it happens. The reason everyone says index funds are great is because the US markets have done well historically. This is not a guarantee.
And of course market never recover.
you don't invest in just one region. You invest across the entire world, in all regions. You buy the entire market at market cap weights. This has been shown to have a positive expected return, going back over 100 yrs.
Also, at current interest rates, you'd need to save 65% of pre-tax income to have a good pension, so the likelihood of any of us having a decent pension is very, very low (modulo getting in early at a megacorp).
it's the best you can do. As the saying goes, past performance doesn't indicate future performance. However, it's the best guess you can make.
and has this been more correct than using historical data?
And the fundamentals and valuations are subjective - people value different aspects of a company differently. Who's to say your valuation is correct? This is the reason behind volatility.
But if you're buying a broad market cap-weighted index, the behaviour of the price is less affected by individual valuations and more affected by macro-economic factors. And historically, a broad market cap-weighted index has had positive returns. This cannot be said about individual companie's performance.
People have been saying "the markets are fundamentally changed and investing is dumb" for ages. Japan has been the single example people point to over and over and over. Meanwhile, other people are looking at 400% returns over several decades.
What metric are you using to say largest in 1960 though? Not disagreeing, just curious.
It's easier to think of your "total compensation" without taking into account cost of living. Lots of people (esp tech folks) don't have a personal budget and don't keep track of their costs / expenses in nearly the same level of detail that they keep track of their income.
The conventional wisdom on HN (for people who aren't going to be founding companies) is that if you join bigco FAANGs and bounce around among them for 20-30 years, you'll end up with way higher expected net worth by retirement than if you play the startup lottery.
Part of this is because of the power of compound interest. You can get that engine started in your early 20s and pour a lot of your "spare" money into it, especially you don't have kids yet.
This same argument applies to lowering your costs. If you live in SF, you could easily be paying $40k/y in rent or $100k/y on a mortgage. If you buy in a small town with 90% of a bay area comp package, you could be plowing all your housing savings into the compound interest machine.
edit: $/y instead of $/mo