Is high cost of living necessarily bad?

[Nika]

Since it generally correlates to higher pay for similar positions.

Sure, you won't be able to afford nice housing, like you would in a low cost of living area, but if your salary will allow you to max out retirement during working years, and build equity in whatever housing you can afford, than would you not be ahead come retirement time?

After 10 years of owning a place in a HCOL area, you can buy outright a house in most areas of the country.

[disneysteve]

Since it generally correlates to higher pay for similar positions.

I'm not sure that's true, or at least not on a dollar-for-dollar basis. For example, the pay might be 30% higher but if your expenses are 35% higher, you actually lose ground.

After college, I had several friends who were living and working in Manhattan. They were making what sounded like great salaries but they were paying insane amounts for rent, food, transportation, parking, etc. One of my former roommates was paying more for his parking space than I was paying for rent in Philadelphia. The higher salary was nice but wasn't enough to balance the higher expenses.

[Nika]

I'm not sure that's true, or at least not on a dollar-for-dollar basis. For example, the pay might be 30% higher but if your expenses are 35% higher, you actually lose ground.

After college, I had several friends who were living and working in Manhattan. They were making what sounded like great salaries but they were paying insane amounts for rent, food, transportation, parking, etc. One of my former roommates was paying more for his parking space than I was paying for rent in Philadelphia. The higher salary was nice but wasn't enough to balance the higher expenses.

It maybe more true at the beginning of their careers. In the hospital where my mother works, specialists make from 400K-2million. Sure, it is less for GPs, but I think the difference more than compensates for a $500 a month parking spot. Lab and MRI technicians make close to 100K.

Medical field is sweet here. Of course, the concentration of Drs. per person in NYC is high, which is one of the benefits for residents, who can see any specialist and have any procedure they need here (provided they are either rich or have great insurance). Unlike people in other areas, I don't have to choose a Dr. based on geographical proximity and lack of options, I really look into their credentials, and than my experience and impression during a visit, and if I don't find them a great fit, will move on and try another one next time. So some Drs, who build up a large client base can make a lot of money, but those just starting out will of course be making less.

[ua_guy]

The key is to create value for yourself in whatever cost of living situation you're in. Income and living expenses aren't always in step with each other and while the general trend would show that yes, HCOL areas generally have concentrations of higher incomes job for job, remember that the trend is made up of millions of data points - some which fall well below the average line, and some that are far above the average line. You kind of have to know and craft where your own data point lands.

[LivingAlmostLarge]

I'd say not true. Why? I know that in our field and fields where our friends are in they move and get the same salary in a lower COLA. Move from Silicon Valley to Seattle or Portland? Same salary. Lovely and huge drop in cost of living. Same with NYC. We've friends who've left and gotten same salary elsewhere and it's awesome. I know many doctors who get paid more elsewhere because it's harder to recruit to places like Kentucky. So the $400k specialist (a friends husband) was offered $800k in Louiville. They didn't want to move so they didn't. After all $400k isn't anything to sneeze at and they were happy. But think $800k in a much cheaper place wasn't tempting? It was.

But the reality is in a HCOLA you are struggling and one job loss away from losing it all. In a lower COLA you can stash all that extra cash and travel and do anything. Personally i'd leave the HCOLA for LCOLA if I could land a job. And turns out we are.

But I will say this HCOLA areas I think tend to have more to offer lifestyle wise (perhaps I'm biased). But I know this and am willing to make that trade off. But I would NEVER pretend the LCOLA has as much culture, arts, activities as the HCOLA. But that's the nature of choices.

But part of the choice probably also depends on what you think is important in your lifestyle. We like the idea of living low key, bigger house, more outdoor activities, garden, yard, neighborhood, etc. Stuff we can't get where we are now. We are outdoor kinds of people though. We don't like the opera, symphony, fancy restaurants. We like kayaking, hiking, biking, gardening, yard space, place for our dog, etc. And where we are moving? It's home for my DH in someways. Many ways so we know and understand the lifestyle.

But don't knock LCOLA areas and how much easier it is to get ahead. Read Mr Money Mustache. He'll show you how the salaries of a computer engineer isn't that different between silicon valley and colorado and colorado isn't even close to Silicon valley COLA.

[rennigade]

but if your salary will allow you to max out retirement during working years, and build equity in whatever housing you can afford, than would you not be ahead come retirement time?

So what you're saying is to devote 2/3's of your life to live in a hcol area just so you can save for retirement...then retire and live out the remaining 1/3 of your life somewhere else? Makes sense.

[ua_guy]

It's tempting to cash out of our current home in a high COL area and use the proceeds to outright buy a property in a rural, much lower COL area. We'd go from having a $500k mortgage to no mortgage at all. Both my s/o and I kind of fantasize about doing this...we already know we enjoy a much slower paced life and we love the outdoors, and we are not afraid of the work required to live on rural property.

The only "x" factor is the job situation. Would it be any less stress? Could we find jobs that afforded us our basic expenses, plus a way to continue saving for true retirement?

Another plan might be to continue working our asses off in this high COL area and paying down our house. Then, once we reached a threshold, we could retire early-- outright buy a property with part of the proceeds from our house, then use the remainder to bridge the gap between an early retirement date and retirement fund/SSI eligibility.

[JoeP]

Personally, the stress associated with having to track and pay many expensive bills, and some that may go with the territory (parking, tolls, dry cleaning, HOA, professional organizations, licensing) does not appeal to me. Even if we made a lot of money, I'd still gripe about having to pay them.

[scfr]

Since it generally correlates to higher pay for similar positions.

Not necessarily. I'm thinking Honolulu (2nd highest cost of living city in USA) salaries aren't that high.

[feh]

Fifteen years ago I considered moving from the midwest to the west coast (bay area). Yes, my salary would have increased, but it would not have made up for the increase in the cost of living.

[LivingAlmostLarge]

For my DH moving where we are to Silicon Valley the pay was not commesurate and we're in an expensive area but the increase in salary wouldn't make up for the cost of living increase.

[riverwed070707]

Since it generally correlates to higher pay for similar positions.

Sure, you won't be able to afford nice housing, like you would in a low cost of living area, but if your salary will allow you to max out retirement during working years, and build equity in whatever housing you can afford, than would you not be ahead come retirement time?

After 10 years of owning a place in a HCOL area, you can buy outright a house in most areas of the country.

Everyone has the same retirement max regardless of COL. Whether you can max it really depends more on your spending habits than the cost of living, doesn't it? Agree with the others that the salary difference isn't proportionate to the increased cost of living. I work for a global company based in Iowa and they pay me well for my line of work. I've looked many times at relocating to a coast and many jobs are only 10-20% more pay for an area that's 50-60% more expensive to live. I don't see how that translates to more in retirement.

[Bob B.]

This discussion also points to the disparity in federal income tax rates based on location. A household making 80K in Manhattan, after basic expenses are met, has a lot less spending cash as compared to a household making 80K in my neck of the woods (rural Michigan). Yet, they both pay the same federal tax rate.

[richard johnson]

I want to raise a point of why frugality has such a bad name, it’s not so much because people like Jacob no heat in winter, but because we see so many people who are forced into frugality due to terrible money management. I had many discussions with my sister in law about her spending and she keeps coming back to the same point

“I want to enjoy life”

And it’s hard to argue her point as her 70 year old parents (my in-laws) are facing the real possibility of being forced to sell their home due to poor financial decisions.