Living In An Expensive City Can Make You Richer, Happier, And More Diplomatic

Living in an expensive city has been the main way for millions to get ahead for decades. After all, most of the high paying jobs are all in expensive cities, which is why they are expensive in the first place!

When asked about career advice, I always recommend people follow the money. Go to where the wealthiest, most powerful people live so you can take advantage of the most opportunities.

New York City has all the financial firms. San Francisco has all the tech, internet, and venture capital money. While Washington DC and the surrounding suburbs have all of our tax money to spend on massive government contracts!

I've lived in all three types of cities for extended periods of time. In my experience, I've seen massive fortunes made in multiple ways.

If you want to “get lucky,” then you might as well go where there's the most opportunity in an expensive city. Because twiddling your thumbs in a dying town, complaining why you can't get ahead doesn't make sense. We live in a free country with no state border controls.

Expensive Cities Have The Most Opportunity

The biggest push back I get for my “follow the money” advice is that such places are just so damn expensive. It is absurd that the median rent in San Francisco is still around $4,400 a month in 2023. But the only reason why rent is $4,400 a month is because incomes are high enough to afford such levels! If there weren't, rent would be cheaper.

Seriously, 22-year-old college graduates are getting compensation packages of between $120,000 – $180,000 at big tech firms. By the time these graduates are 30 years old, they will likely be earning in excessive of $300,000.

Then if two of them shack up, we're now talking a $600,000+ household income thanks to living in a big expensive city. They can clearly afford a big expensive house by mid-age.

The Spreading Out Of America

Further, post pandemic, more people want to live in less densely populated cities. I get it. However, the biggest career, money-making, and networking opportunities will remain in big cities. It's just a law of numbers and opportunities.

I believe big city living will come back with a vengeance. People are social creatures who want to interact and have fun again.

Only if you are already established in your career or business will big city living be less effective for you. In this case, you may want to get away because too many people are asking you for help.

The market is efficient. Capital is fluid. Everything is rational. Only an idiot with an online business would NOT try and geo-arbitrage his way to a lower cost area of the world. Oh wait, that's me.

And that's my point. Even though I can relocate to the middle of nowhere, the opportunities are too endless to leave San Francisco.

Living Expensively Makes Everything Ironically Cheaper

If you live in the most expensive city in the world, then you've only got upside in terms of savings when it's time to visit somewhere else. Everybody's happiness meter ticks up when they're saving money.

When I proposed my Adjusted NHER© formula for figuring out how much to spend on a hotel room when traveling internationally, Financial Samurai readers from the Midwest smartly pointed out that my Adjusted NHER© formula won't work for them given their cost of living is so low.

One reader comments,

“I am in a West-side (read: less expensive) suburb of Cincinnati and my NHER© works out to about $28.00/day. If I booked a hotel at that price, I’d have to bring my own sheets, mattress and can of Raid.”

This simple, yet insightful comment got me thinking along several lines:

* We live in the richest country in the world where the cost of living can also be so cheap.

* Perhaps one reason why so many Americans don't have passports (110 million out of a 320+ million population) is because with low NHERs©, many feel it is relatively expensive to travel overseas? Even if you are wealthy and have a low NHER©, your propensity to travel abroad may be negatively affected.

* Living cheaply due to circumstance or because you choose to actually makes everything else much more expensive.

* If you choose to live in an expensive city, not only will you have a high NHER©, but you'll have more opportunities to make more money. 

* If you want to save on living expenses, relocate within your city. I moved three miles west in San Francisco in 2014 and ended up saving 50% on housing expenses.

Solving A Myopic Problem Through More Travel

One of the reasons why so many countries despise Americans is because we think everything should revolve around us. It's totally logical for us to expect everybody to speak English in America, but when we still expect everyone to speak English when we travel abroad, and get frustrated when they don't, we're a bunch of self-centered donkeys who lack culture and respect!

I firmly believe that if the government imposed a mandatory travel abroad year for every single American before the age of 21 (subsidies for those whose families earn below a certain amount), there would be less wars and even more productivity in America due to a greater appreciation of how good we've got it.

Once you've traveled abroad to much poorer countries, you'll realize how hilarious it is for privileged Americans to complain how lucky other people are in America.

An Experience In Angor Wat, Cambodia

I was sleeping in the van on the way back from Banteay Srey temple to my hotel in Siem Riep when I glimpsed outside the window and saw some kids walking in 100 degree heat on the side of the road.

I asked the driver where they were going, and they said they were walking home from school several kilometers away! At least they were giggling as they soldiered home.

Spend 10 minutes under the blazing Cambodian sun, and you will experience such oppressive heat that you'll think you're a vampire whose skin is burning. Now spend an hour walking in one direction and realize how good you had it growing up.

My story of feeling embarrassed biking to school at age 16 when all my friends had cars is so trivial. At least I had a bike!

Cambodian school kids walking on the side of the road in 100 degree heat - Living In An Expensive City Can Make You Richer
Cambodian school kids walking on the side of the road in 100 degree heat

Traveling Internationally Will Make You A Better Person

I swear to you, such random international observations will change you for the better. Here are some examples as to why international travel will help you:

* You'll no longer complain about the AC going out at the gym, at work, or at home.

* You'll no longer complain about having a shitty bike, or a crappy car.

* You'll no longer complain or be embarrassed about riding the bus.

* You'll cherish what you have longer.

* You'll stop whining about long work hours as it's unlikely that no matter how hard these kids try, they will never be as fortunate as you.

* You'll think twice about gorging yourself with so much food at one meal that might somewhere else feed a family of five.

* You'll naturally be much fitter because you'll be more mindful of how little other people have to eat.

* You'll stop wasting money on stupid crap, which after a short period of time you'll no longer use.

* You'll try harder to make the most of your situation because you'll be reminded that not everybody is as lucky as you.

* You'll stop thinking that everybody else is privileged and lucky because you're already so much luckier than so many other people already.

* You'll begin to focus on how you can better yourself, rather than try and bring someone else down to your level.

* You'll empathize more with people who are less fortunate.

How Living In An Expensive City Makes Things Cheaper

Let's say you own and live in an average San Francisco home that costs $1.6 million. Sounds expensive right? Not so if you analyze what everything else costs compared to your place. 

  • $32,000 median price car = only 2% of the total cost of the house or 10% of a $300,000 gross income.
  • $30,000 bathroom creation = only 2% of the total cost of the house.
  • $25,000 annual tuition for college = just 35% of the annual cost ($66,000 for mortgage, property tax, insurance, maintenance) of owning the house.
  • $1,500 round-trip economy class ticket to Asia =  just 2% of the annual cost of owning the house.
  • $150 nightly hotel cost = only 2.5% of the monthly cost of owning the house.

Although living in an expensive city is expensive, expensive cities are expensive for a reason. They usually are some of the highest income cities in the country. You can only save so much, but your income upside is unlimited!

Why Living In A Cheap City Can Be Costly

Let's say you live in Cincinnati, Ohio in a $300,000 house. Pretty cheap right? Not really if we start to make the same cost comparisons.

  • $32,000 median price car = 10.7% of the total cost of the house or 42.7% of a $75,000 gross income if we are to keep the ratio of gross income:housing cost the same at 1:4.
  • $30,000 bathroom construction = 10% of the total cost of the $300,000 house.
  • $25,000 annual tuition = 167% of the annual cost of owning the house ($15,000 for mortgage, property tax, insurance, maintenance).
  • $1,500 round-trip economy class ticket to Asia = 10% of the annual cost of owning the house, and 120% the monthly cost ($1,250).
  • $150 nightly hotel cost = 12% the monthly cost of owning the house ($1,250).

Well That's Just Silly

I know what some of you who are living in inexpensive places are thinking. What kind of stupid logic is it to spend lots of money on housing in order to feel like you're saving money on everything else?! I hear you.

But don’t forget. The reason why a median priced home costs over $1,700,000 in San Francisco in 2023 is because there are plenty of jobs that pay healthy six figure incomes.

Once you get to six figures, you have a clearer path to making over one million a year if you last long enough.

For example, the median income for a 29 year old MBA graduate from Berkeley, Stanford, Columbia, UCLA, and Harvard is around $180,000 all in. Add two of these graduates together and we're at $350000+. Fast forward five years, and it's likely they are making $250,000+ each. It’s much rarer to find $150,000 – $500,000 a year jobs in smaller cities.

Furthermore, if you end up paying off your $1.6 million house within 30 years through forced savings, you’ll end up with at least $1,400,000 in cash after commission and taxes. With the $1,400,000 in cash, you could then buy that $300,000 house in Ohio. Then you can retire in style because you've still got $1,100,000 in your pocket!

Just look at how strongly the NASDAQ has performed during the 2020 pandemic. 2021 was another great year for stocks. Unfortunately, 2022 turned out to be a bear market. Can't win them all!

NASDAQ at record-high during pandemic

It's Easy To Save Living In A Big City

Believe it or not, there are many ways to save money while living in an expensive area. You can shack up with multiple roommates, find a rent-controlled apartment, or live a little further away from downtown.

For example, just seven miles west of downtown San Francisco, you can rent a single family home in the Outer Sunset for $2,700 a month. That single family home can comfortably house three people, each paying $900 a month in rent. The sacrifice? A 45-minute commute compared to a 15 minute commute three miles west renting a similar home for $7,000 a month.

But guess what? Thanks to the work from home trend, commuting is no longer as big of a deal. As a result, many big city residents are smartly finding cheaper areas in the city to live. Buying property in or near your city that's a little further out is probably the best near-term real estate buying opportunity.

Live In Cheaper Areas Of An Expensive City

The proper geoarbitrage strategy is to first look for cheaper housing within your city. After all, you've spent years building your network, you will first look around your city to save. There's no need to relocate to Des Moines, Iowa immediately when you can save 20% – 40% relocating with your city. That's what I did in 2014 to save 40% and haven't looked back.

Finally, even though housing and other expenses might take up a greater percentage of your income living in an expensive city, you'll have a larger absolute dollar value amount to save and invest.

our wealth will end up compounding much greater over time. Example: $20,000 net income, $5,000 housing cost = 25% of net income to housing and $15,000 left to invest vs. $5,000 net income, $500 housing cost = 10% of net income to housing and $4,500 left to invest.

Start Life Expensively

One reason baseball players swing two bats at a time before going up to the plate is because it makes swinging with one bat easier. They'll be able to swing faster and with more force.

If you start life, or live your life in an expensive city, out of necessity you'll learn how to become frugal. Read all the comments in the linked post on how everybody saves in NYC while making less than six figures a year. Resourcefulness is a valuable life skill!

Living in an expensive city might even propel you to start a side business to generate more income. From this extra activity comes a stronger work ethic. You'll gain more knowledge that could very well open doors to exciting new things.

I'm sure people who live in inexpensive areas also feel the pressure to work long hours in order to make as much money as possible. However, at the margin, the pressure is much greater in expensive cities. Why else do you think New York City has the reputation of being a pressure cooker? “Live in New York City once, but leave before it makes you hard,” says the sunscreen speech.

What About Happpiness?

And what about my assertion that living in an expensive city will make you happier? Well, for one thing, you'll meet a lot more diversified people who will delight your mind with new perspectives.

Having attended international schools growing up, I can attest that it's infinitely more pleasurable than attending my homogeneous Northern Virginia suburban high school.

Meanwhile, once you travel to another place, you'll be happier. You'll feel instantly richer given everything is so much cheaper. My trip to Kuala Lumpur finally made me feel rich with a R3.6:$1 exchange rate.

Living in an expensive place gives you more optionality. It's kind of like having a timeshare in Kauai. You're at the top of the pyramid and can trade your timeshare for anywhere else. If you have a timeshare in Topeka, Kansas, you ain't trading up with anybody!

In fact, some of the happiest cities in America are also the most expensive. Meanwhile, some of the lowest cost cities in America are among the unhappiest. Why? Because many residents in lower-cost cities require a greater net worth multiple to be happy.

Happiest cities in America and most satisfied financially

Earn Your Way To Riches

Even if you take the risk to relocate to an expensive city where jobs are plentiful, there are still no guarantees that you will succeed. It's important to network, hustle, be a good person, and develop desirable skills. Competition will always be fierce.

As a totally rational human being, you are going to make moves that enable you to succeed. You'll naturally befriend other people with similar interests in your area of expertise. If you stay long enough, you will probably also find the love of your life in your new expensive environment. He or she may also be making a healthy income.

Living in an inexpensive city is like trying to save your way to riches. It's possible, but there's only so much money you can save. Living in an expensive city is like trying to earn your way to riches. It'll take a lot more effort, but the upside is unlimited!  

Related posts:

When Is The Best Time To Travel Or Live Abroad With Kids

The Cheapest International City In The World: San Francisco

Best Credit Cards For International Travel

Wealth Building Recommendations

1) Invest in the heartland of America.

Although I'm a proponent of big city living to make the most amount of money possible, there is definitely a demographic shift towards lower cost states and cities. The internet and the pandemic have enable this shift to accelerate.

As a result, I think investing in real estate across lower cost areas of the country is a smart idea. The investment trend should be multiple decades long. The easiest way to invest these cities is through CrowdStreet and Fundrise.

Fundrise has been around since 2012 and manages over $3.3 billion for 400,000+ investors. You can get started investing in one of their private funds with as little as $10. Both are free to sign up and explore.


CrowdStreet offers accredited investors a way to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. These cities also have higher growth potential due to job growth and demographic trends. 

If you are a real estate enthusiast with more time, you can build your own diversified real estate portfolio with CrowdStreet. However, before investing in each deal, make sure to do extensive due diligence on each sponsor. Understanding each sponsor's track record and experience is vital.

I've personally invested $954,000 in the heartland through real estate crowdfunding while also investing in San Francisco real estate. So far, I've received over $624,000 in passive distributions from private real estate.

Real estate crowdfunding investments dashboard

2) Track your wealth better.

In order to optimize your finances, you’ve first got to track your finances. I recommend signing up for Empower’s free financial tools. With the tool, you can track your net worth, analyze your investment portfolios for excessive fees. You can also run your financials through their fantastic Retirement Planning Calculator.

Those who are on top of their finances build much greater wealth longer term than those who don’t. I’ve used Empower since 2012. It’s the best free financial app out there to manage your money.

Planning for retirement when paying for private grade school
Are you on the right retirement path? There is no rewind button.

Living In An Expensive City Can Make You Richer And Happier is a FS original post. Join 60,000+ others and sign up for my free weekly newsletter.

About The Author

111 thoughts on “Living In An Expensive City Can Make You Richer, Happier, And More Diplomatic”

  1. Evergreen article! I agree 100% about the traveling abroad requirement. I was supposed to have a study abroad summer in Singapore/HK/Asia when the last H1N1 shut down my plans. I think the cross-cultural exchanges have to continue somehow if we don’t want more Brexit events of isolation fallout.

    On the idea of living in an expensive city, my sister has been in NYC for a decade now and for her fashion and art industry, I get it. But it’s now almost 2021, and I’m witnessing the IT geo-arbitrage first-hand from SF. Even one of my tennis students is a ph.D from Stanford and at least 3 SF’ers have moved into this La Jolla area near the I-5, likely because of covid. So much so that Uhaul’s are going for $3K one way!

    The past 2 months before we went into Purple tier, I had been scouting for homes with a Zillow realtor in the San Diego area (closer to Encinitas and Carlsbad) so tempting with the low rates and 7-8% appreciation in real estate seemed like a good move while I sell my rental back in DC (Vienna, VA) to the Amazon crowd moving in.

    However, after my 20% down offer the owner wanted a 3% markup due to another coompetiting offer just 2 days after it was listed. I decided that a 3/2 townhouse is just too much space for a single guy to maintain and weird to try to squat in suburbia during a lockdown.

    The new California exodus locations now are: 1) Austin with the Elons and 2) Las Vegas with rich Cali investor money. With so much work from home opts and no foreseeable reversal even after this is over.

    Q: Do you think new super-cities are going to start forming and up the cost of living in those areas? Anyone think it is a better choice to jump ship now or rent in SoCal a while longer to see if any bubbles or major legislation for a wealth tax appears? (*Hopefully, this is a good segway into another article*)

  2. Hmm…I think you should update a section about remote work – as that’s where the economy is moving. For myself, I found your article wondering if I should buy a cheap middle class home in Georgia, or move to New York City for the “other benefits” and it didn’t answer that question.

    With remote work, or running your own business remotely, it *seems* like moving outside of city is the right move on the surface. But then it’s three key functions: (a) a lack of culture and (b) if single, a lack of dating pool (c) distance to family and close friends.

    Hope to see an update soon!

      1. I hope you’re saving more than 40% by living in a boat in the ocean 3 miles west of SF. Literally, ocean beach is the westmost part of SF and the only thing more west is the ocean.

  3. You do know that a lot of now expensive places “San Francisco, Seattle” got hyped up housing market is mostly because of wealthy Chinese immigrants buying million to multimillion dollar houses right? Rent don’t get hyped up Crazy like that because of “income” it’s because of millionaires. And renting $4000 apartment/houses doesn’t make you a good candidate to live in these cities, as long as you’re renting you’re not wealthy enough to live there. And living on an average income of mid $100Ks would never be enough to buy a house there. So unless you’re a millionaire, you’re not wealthy enough to live in these places.

  4. This article is total nonsense. Get a solid degree in a high paying field, work in a big city at the beginning of your career, but then transfer to one of several lower cost yet great job markets around the country. I live in Dallas and am able to save 4 times what I did in New York and can invest in rental properties to accelerate my net worth creation. Good luck doing that in NYC or SF..

    1. Only life doesn’t work anyway you’d like it. There’s more wealthy people in high COL areas and more poor people in lower COL areas for a reason. More opportunity and higher pay in wealthier areas. You don’t just “have a super high paying job in a poor place”
      Life isn’t that simple.

      1. As someone who has lived in NYC and Dallas, I would say that life does work like this: “have a super high paying job in a *low cost of living* area”

        In fact, as long as you’re working remotely (which I do), you can really take advantage of this.

  5. Moving to Denver area, much higher COL than Fort Worth, where I am moving from. If I wasn’t married and have a child I don’t think it would be a challenge at all, but figuring things out with them is proving a challenge for sure. Its interesting, all the posts I have read of yours (sporadically) have all been made with the assumption that the reader has a very high income. It is interesting, I assume everyone is making less, you assume they make more. Curious why the difference. Take care!

  6. I absolutely LOVE this article. It’s very true that living expensively forces us into frugality as well as makes us feel much safer, happier, more likely to want to bring people into our home and socialize, take more pride in where we live…

    I have been hearing endlessly about how I shouldn’t get into my townhouse in Scottsdale, AZ because it’s at the top of my budget, but I got it walking distance from work and much closer to my daughter’s school (saving on gas!), it has a community gym so I can cancel my $50 per mo gym membership, I can save money going home to eat instead of buying take-out, it’s a much bigger place than my old crummy apartment way out west so I will actually WANT to be home more, which will save me money….it really does seem to pay off!

    Thanks for sharing!

  7. “income if we are to keep the ratio of gross income:housing cost the same at 1:4.”

    ^this is the key problem with your logic. You assume that people in San Francisco make an average of 4x more money than those in Cincinnati.

    Median household income, San Francisco: $78000

    Median household income, Cincinnati: $48000

    You are correct that people make more money in San Francisco, but only about 50% more on average. Compare that with the fact that San Francisco is, as you say, 4x more expensive (that’s 300%) and it’s pretty simple: the higher salary does not outweigh the cost of living.

    The household income of 300K in San Francisco that you are using to make your argument is, literally, 4 times more than the 78K the average household is actually making.

  8. I wish I could relate to anything you said in this post.

    I live in the most expensive city in the world. That is Luanda. Where the cheapest hotel costs you 600 bucks a night, with dial-up internet. Or with no internet at all. (Do some Googling)

    Where a plate of food can cost you 200 dollars. Where a basic internet monthly plan can cost you a thousand bucks for a caped limit of maybe 20gb.

    With all that said, I manage a hotel. And my salary is 500 dollars a month. Meaning I make 6 grand a year, while the average new yorker makes the same (if not more) a month. Those below me make a third or a fourth of what I earn. With my salary, I can only live for this much until I get into an endless debt. So much for being advantageous! As you can see, not the whole world lives like you described. So be thankful.

  9. Pingback: Spoiled Or Clueless? Try Working Minimum Wage Jobs | Financial Samurai

  10. You say the market is efficient, yet you also agree that rich people game any system that you’ve discussed on this blog. Isn’t that a contradiction? How can we have efficient markets when they are gamed to benefit those who already have (like the 2008 bailout)?

  11. Pingback: Scraping By On $500,000 A Year | Financial Samurai

  12. I spent three years living in DC, for grad school and work, and can definitely say that the cost of living was a killer. Even with roommates I wasn’t able to save any money to pay off debts and get ahead.* I’ve found its much easier to save money after moving to the Twin Cities. Plus, the cost of housing is cheap compared to rent, and rental property is very affordable. There is no way you could afford a place in DC unless you’re willing to buy in some very sketchy areas.

    Sure, there is less diversity in Minnesota and in other, smaller states, but it really matters if you have a lot of local connections to a place. You can’t replace a close network of friends and family who’ve known you for decades with a loose assortment of people you’ve met here and there. I’ve known some military brats who don’t understand what the word “home” really means because their family moved so much, and that is incredibly sad.

    *Granted, it might have helped had I been able to land a non-contract job, but while I managed to miss the recession in the private sector I got hit after graduation when the government finally started cutting its budget in 2011. There are so many MA’s in DC that you wouldn’t even get hired to fetch coffee. All there was available was contract work, and that pays half what you’d earn as an official employee in just about any location. Still, in my experience DC is a place of extremes. You’re either doing very well or you’re just getting by, and you don’t ahead when you’re fighting just to stay in place.

  13. Pingback: The Digital Nomad Lifestyle Is Worth Living | Financial Samurai

  14. Pingback: West Coast Living - Yes It Really Is That Much Better! | Financial Samurai

  15. I live in Baltimore. Say what you want; if you haven’t been here before then you probably don’t know what you are taking about. I moved to the area after college with a well paying government contracting job.

    I was able to payoff all of my student loans within the first year and a half out of college. I was able to do that by living frugally and focusing on them. Based on what my other friends were making in New York and Boston and what they were paying to live there, I probably would not have been able to do that.

    Now I work for a startup and work from home. I’ve been able to perform Geo arbitrage: make a good salary and not have many expenses.

    People my age are buying houses in the area. I personally am not going to because I see that Baltimore is a small town and only has so much potential for the startup realm. I really love my job now. My next goal is to move to a city like San Fransisco that has a larger startup culture. I would have greater job opportunities there.

    Don’t get me wrong though. I will always have a special place in my heart for Baltimore. It allowed me to get my finances on track after college. I’m glad I didn’t move straight to NYC as a broke graduate because “its what you do”. Now that I feel financially secure with no student loans and a healthy emergency fund, I’d like to consider moving to a more expensive city for the greater job oppotunities and higher standard of living.

  16. My husband and I are both Dallas transplants (from Birmingham and Minneapolis), and although neither of us thought we’d stay here forever when we came, the combination of a strong job market and low cost of living is hard to beat. Both of us are in finance with 6 figure incomes, and with no state income taxes and relatively low housing costs we have plenty of money to save and to spend. The city is surprisingly diverse and has plenty to do too, depending on your scene (concerts, the arts, professional sports).

    We looked at relocating to SF last year, and we both could have probably negotiated roughly 25% raises to move laterally into similar positions. It’s my husband’s favorite city and we got engaged there, but we just couldn’t justify the hit our lifestyle and savings rate would take to make the move. I did a detailed budget and even looked at potential rental listings, but even after giving up one of our cars we’d need to decrease savings slightly and live in a MUCH less cool (yet more expensive) place to make up for the increased tax hit.

  17. I’m a social worker who lives in Missouri. I want to move to San Francisco. However, my income will only be about $10,000 more a year there, while my rent alone will likely go up that much. Other “middle ground” cities like Portland pay less than what I make here. I want very much to move, but I don’t see how I can afford it. Not every job in an expensive city pays well, not even when it requires a master’s degree.

  18. This is really interesting. This post got me thinking… damn you. The one point of your article that really hits home to me is seeing how others really live outside of the US. My wife and I got married in St. Lucia, and have been to Turks & Caicos and Mexico since then for vacations. While all of these places had really nice resorts, the towns showed us what it was really like in those places. People live in what most of us would consider a run-down shack with no windows, no door, and barely a roof. Yet this is their HOME.

    We complain about things like a “non-modern” kitchen, so we go out and spend $60,000 of money we don’t have to upgrade it. It’s disgusting when you think about it. Maybe it’s time for us to take a step back and look at how we’re living our lives. What would one of those local St. Lucians say if they saw how we lived? Is that what we’re going for?

    At risk of going on a rant here, I really do appreciate this article – it brings up some excellent thoughts I think all of your readers can benefit from. Thank you.

    1. Howdy Chris! Thanks for reading and sharing your thoughts. You hit the nail on the head about traveling abroad. It will change you for the better. The whining and complaining will get turned down to a minimum. As a result, we’ll appreciate more, and do more with our circumstances!

  19. I feel really blessed to have been able to see so many places overseas and across the US. It really is eye opening to see how so many people live from desperately poor to super rich. We really do have more than we realize and I’m grateful that I was always able to go to school, have clean drinking water and never went to bed hungry. Things are certainly expensive in SF and that has taught me to be disciplined with my money and to stay focused.

  20. Living in the Bay Area doesn’t make sense if you can get a good job somewhere else. Well yes, there are thousands of people who got into the right start up and made millions, but it’s still less than 1%. If you are in IT you get paid pretty much the same everywhere in the West Coast. Like I make ~$300k no matter where I live and I could have chosen to pay $6000/mo mortgage in San Fran or $2000/mo in Portland. I chose Portland. Now I have extra $4000/mo to put in stocks (or just enjoying life!). (I have to admit I got into IT in Bay Area and lived there for 10 years, but living there with a family didn’t make any sense financially..)

  21. +1 for sales guys. I live in Atlanta and my income is not tied to location. Networking is just a LinkedIn request (or flight to an industry event) away…

    It’s more important that you pick the right (ie, high-paying) industry, than the right location. The HQ location is irrelevant. Most companies prefer their field staff to be closer to the customer anyhow.

    For example: I’d venture to guess that the average income of passengers on an MD88 en route to Bentonville, AR surpasses 767’s to/from SF on most any given day.

    Sam your thoughts?

  22. Not for Doctors

    As a two physician family in the Midwest, there is no ROI in relocating to a higher income city for us. Actually, physician incomes are less due to increased competition in the expensive cities you mentioned along with significantly worse lifestyles. Having attended Stanford, I can attest my doctor friends in the Bay Area are NOT living as nice a lifestyle as we are. We are in our forties and are both semi-retired despite making combined gross income in excess of $700K. Since we have no debt (including mortgage) and save over 50% gross per year, money is simply not a problem for us. (It helps that we both grew up middle class and are somewhat conservative with our spending.) We travel a lot with our family and when I reflect how my day to day life would be in these major US cities, I cannot fathom ever moving. There are plenty of highly educated and successful people here, so I certainly don’t feel like I settled for less in life particularly when my peer group feels the same way I do. (Even my neighbor, a billionaire by the way, feels the same way but of course he is in a completely different league than me!)

    At my last Stanford reunion, only the minority of Bay Area residents were living the lifestyles of the rich and famous. The bulk of folks in IT were just trying to get by working for the big companies or start-ups. The doctors in the group were definitely not living the glamorous life. Yes, there are outliers, but from my perspective, your analysis doesn’t apply to most physicians. For us, we would make half of what we make here in SF (working full time I might add). We would also still have a big mortgage payment along with many other expenses we do not incur at present. I fail to see how we could save as much as we do in SF. It is mathematically impossible. Once you get to financial house in order with a big cushion, the world looks a lot brighter, wherever you live!

    1. I agree about physicians making less in big cities, and much more in less densely populated areas. Yet, there are many more physicians in more expensive areas due to choice. They believe the more expensive areas have a better lifestyle and perhaps education.

      Where do you guys live? That’s the missing variable from your comprehensive comment.

      1. Not for Doctors

        For the sake of our privacy, let’s say I live in a city like Cleveland or Pittsburgh. As for financial choices physicians make, they have much to be desired. This informed opinion comes from my personal observations, reading the White Coat Investor blog, and helping some of my physician friends with their finances. For being reasonably intelligent people, most doctors just don’t understand (or care to understand) personal finance.

        Many doctors I know that live in the cities you mentioned do so for family reasons, research opportunities at major academic centers, or ego. It’s certainly not for the ROI of 15 years of education after high school. Physician incomes are partly based on supply and demand. SF has some of the highest ratio’s of physicians:population in the country, especially psychiatrists! I’m not sure this translates necessarily to better health care for the general public, but it definitely translates to lower incomes and worse lifestyles for physicians.

        As for education, I went to public HS and my kids go to an even better public HS (ranked top 20 in the country) or excellent private HS. I’m not sure I’d get a much better schools for them unless I sent them to boarding school at Exeter/Andover/etc.

        I love you blog by the way. I’ve learned much from you. Thanks.

  23. Every year, I read stories about interns and investment bankers commit suicide. Is the extra salaries worth it? Happiness is a state of mind. Wealth is also a state of mind to some extend.

    Everybody regrets in the above story.

    1. I read that story too. It’s sad, and I do think it’s important for young folks to push back if they are really feeling the pain, as an early death is not worth it.

      But I’m not sure whether it was the job that did this young man in, or his physical and mental health. I went through the two year rigorous analyst program at GS in NYC, and yes, it was pretty painful in 1999-2000, but I felt fortunate to have a job, let alone a front-line job at GS. But, I didn’t like the environment, so I left to a new firm in SF in 2001. If I didn’t leave, I would have left banking within 5 years.

  24. My NHER is 6.96. Spending money used to be extremely painful, but somehow the more I spend the better my life becomes.

    I’ve never lived in a place over 3,000 people, but because of this article I’m going to sell a bunch of stuff and visit my friend for a week in the city, just to try and get in. I would love to earn over 15k a year, maybe they’ll be a good job in the newspaper.

    The problem is always the leases though, I mean who plans to live in the same spot for a whole year?

    1. Where do you live where your NHER is only $6.96? That’s pretty incredible. Are you happy with your current situation now? Definitely don’t need to earn much with that type of expense!

      It’s worth seeing if there are opportunities in more expensive areas by crashing at your friend’s place for free and pinging people online for jobs.

  25. I couldn’t agree more with you on travel. There are so many things you can learn from traveling around the world, especially to a less developed country. When you experience that aspect first hand you become more appreciative of what you have in your life.

  26. “Living in an expensive city might even propel you to start a side business or moonlight in order to generate more income.”
    I can totally relate to that, but I’d say my choice of friends, rather than my choice of city, is what triggered that: Many of my friends were making much more than I was, triggering an impulse on my side to generate side income. I ramped it up progressively, and now that my salary increased, I’m at their level, but in addition to them I have this side gig that is generating a good additional amount of money, and doesn’t seem to want to stop. I’m not fully on autopilot, but motivated myself to make more money in order to catch up with my friends, and ended up making more than them as the outcome.
    So I agree, that living an expensive lifestyle can force you to find creative ways to make money, and that is good as long as you have plans to ultimately tone the expenses down while keeping the same revenue. It is a risky bet, you could end up accustomed to the expensive lifestyle!

    About sending Americans one year abroad: great ideas. Suggestions:
    – 1 year of military or civil service: some sort of paid work abroad(paid a reasonable amount to live in the country for a year) for example
    – 1 year of exchange for college students. LOTS of universities in Europe do that, with a program named Erasmus, and which has the reputation of living great memories to all students who go through it (I recommend the French movie “The Spanish apartment” on that subject)
    – 1 year of work abroad for a US company. Like an internship, except more exciting. France does that through a system named VIE (Volontariat International a l’etranger”, which roughly translates to “International voluntary service abroad”)

    1. Did you find your higher income earning friends working in a more expensive area? All these go-getters tend to push lazier folks like myself farther than if we had no competition.

      In Malaysia, there’s “Malaysia Week” where students go for one week to some part of the country to explore, learn, and volunteer their services. It was AWESOME. Now there’s a GAP week by ISKL where kids go to other parts of Asia to explore and volunteer. Of course, this takes money, which not everybody has, but it definitely helps put things in perspective.

  27. I spent my undergrad studying abroad, then worked abroad prior to law school. I couldn’t agree with you more. Incidentally, places I have loved the most had the most poverty (Guatemala, Rio, parts of Thailand). Travel completely changes you. I disagree that one has to go to NYC/SF to chase a high paying job. For lawyers, I’ve always maintained that Houston is the best place to start your career; same salaries as NYC with almost the same upside potential, but a significantly lower COL. But gosh, I’m so grateful to live in a place that offers an excellent lifestyle that I can’t imagine living somewhere that less than amazing ever again!

    1. Another Houston proponent! I’ve been many times before. Nice city, but I donno if I could do it for more than five years. Worth saving a boatload if you can earn NYC type lawyer salary though for sure. It’s not like Houston is hell or anything!

  28. The beauty of making a living in the US is the large variation in living options here. I can make my money in an expensive area (LA) and then retire in an inexpensive area (Phoenix, Texas etc.). And these days, even the less expensive areas have great amenities and culture. The best part of all of this is to buy rental property in the expensive areas. I can buy a condo in LA, and in 20 years, the rent will pay for my McMansion rent in Phoenix or Las Vegas.

    1. Very much agree. The biggest expense is housing in an expensive city, but at the end you have a ton of equity if you bought right. One can always take that and move to a cheaper city when they are done working. The other way not so much.

      I am probably biased because I have timed the market well with my primary residence (1998) and rental properties (2011 and 2013) and have around $1M in gains to show for it.

      I do think most people would benefit from living in an expensive city which challenges them in their 20s even for just 2 or 3 years. It would be a positive experience for most people.

  29. I grew up in SE Asia, I have traveled to 38 countries (so far) and I can see your point of not complaining about things. I don’t because I have a hugely different perspective than most Americans.

    My other point, I don’t want to live in a City at all. Be it cheap or expensive. I think city living is one of the worst problems we have in this country as the costs, lack of jobs for normal people, and crime make me not even want to think of living in a city. Your perspective, I feel, is skewed because you are an intelligent, extremely motivated individual. 90% of people are not that way. No matter what carrot you put out in front of them, they will never be that way. I am an extremely smart and motivated individual, but would rather earn 1/2 the salary you are talking about and pay 1/5 the prices for everything. Yes I wont have 8 million dollars in the bank by the time I am 50, but I will have 3.

    At that point, how much do you really need?

    1. Good point. And I’m not necessarily proposing living in a big expensive city, but in an expensive location that provides all the opportunities.

      If you can get that $3 million by 50, and love your lifestyle now, then why not? But man, that extra $5 million sure would be nice!

      I think this article will help provide more perspective to those who can’t get to the first $1 million, or who are in general just struggling.

      PS, I think you give me too much credit for being intelligent, or motivated beyond average. Just look at all the dissension by hundreds, if not thousands of readers for some of my posts! If I was motivated, I would have sucked it up and kept working in finance. Perhaps different motivations I guess.

      1. Motivated doesn’t have to be for a lifetime. You can be motivated for 10 years, and put up with the hell for 10 years, and then do something else.

        However motivations may change. You still wish to make as much money as possible, with an alternate framework of revenue than a 9-5 (or 7-7) job.

  30. I live in NYC and make a very healthy salary. My partner does as well, so we are in a good financial position. Still, I find the cost of NYC insane. I can never reasonably dream of owning a home or apartment that I would find adequate with a reasonable. Yes, I could stuff a family of four in a studio in Queens, but that is not ideal. Childcare starts at $2k per month per child, which ends promptly at 6 pm. Forget being able to afford private school. I work in finance, and it is very intense. My hours are long (usually leave at 9 – 10 pm), and its very competitive. I dream about living in a more mid-priced city that will not only provide me with better work life balance but also the ability to imagine my family’s future / home ownership / not counting every penny / etc. For now, I will continue to work save as much as possible, so that I can buy when I leave.

  31. What about living just outside of an expensive area (thinking specifically about NJ that borders NYC, or Boston “suburbs”) and working in the more expensive city with a reasonable commute (30-45mins)? Make a decent check and have relatively lower costs? Specifically talking about Boston, there’s plenty of $100k+ jobs and plenty of <$500k homes if you want to use this strategy. In fact, there's a pretty large geographic area of high paying jobs if you're in the right fields (thinking medical, medical R&D, technology, finance). Just curious if these are considered anomalies or if other densely populated areas could be taken advantage of similarly?

    1. That works. And that’s why I highlight this passage in my post,

      “Believe it or not, there are many ways to save money while living in an expensive area. You can shack up with multiple roommates, find a rent-controlled apartment, or live a little further away from downtown.

      For example, just seven miles west of downtown San Francisco, you can rent a single family home in the Outer Sunset for $2,700 a month. That single family home can comfortably house three people, each paying $900 a month in rent. The sacrifice? A 45-60 minute commute compared to a 15 minute commute three miles west renting a similar home for $7,000 a month.”

      For some reason, people who don’t know about an expensive location just read the headlines about how expensive things are. But ANY local knows how to save money. This was very apparent in the post I wrote about surviving on less than six figures in NYC.

      1. I work in finance (NYC) and live in NJ. I live in a 4 bd, 3 ba, 2000 sf home that I purchased last year for $1.1mm. This is a very average home in the community I live; to be clear AVERAGE. I have a 35-min midtown-direct train from my town and am in my cubicle in less than an hour door to door. However, I save tremendous money not paying NYC taxes and create an arbitrage situation for my family’s housing costs. Living in a great NJ town saves me $30k/yr private school tuition per kid when they can now attend a great public school for free!

        Sam’s case for following the money is spot on–I make anywhere from $300k-$700k/year depending on bonus and reasonably expect this to go up every year. I have considered taking various corp. dev jobs or mm cfo roles in more affordable areas of the U.S. However, I would take a huge pay cut and the absolute dollar value of my savings after expenses would go down. Once I amass my “nut” I will simply retire, move to Lake Tahoe and enjoy life. This figure to me is $5mm and the timeline is five to seven more years.


        1. Funny when I worked in NYC I choose to live in NYC to avoid NJ/LI property taxes. Now I made a lot less then you just above $100,000 so $2,000 in income taxes and $2000 in property was better then $10-12,000 for a modest house. I also don’t have kids but my NYC elementary school was rated a 9 on whatever the heck scale shows up on zillow.

  32. I think my earlier comment got eaten by the machine…

    The numbers you cite in your example don’t add up:

    $1.2M home in SF on a $300K salary is a home to salary ratio of 4. Compare that to the Cincy example where you have a $300K home on a salary of $53K, a ratio of 5.7? That doesn’t make sense.

    Let’s take straight data available to the public… I’m going to let Forbes do the legwork (Forbes Best Places for Business and Career)

    San Francisco Area
    Median home price: $902K
    Median income: $81K
    Home to income ratio: 11

    Cincinnati Area
    Median home price: $133K
    Median income: $53K
    Home to income ratio 2.5

    The other examples you cite also aren’t taking into account lower costs of living. A bathroom renovation in Cincy is going to be far cheaper than in SF. The car value might be the same, but why is a family making $81K or $53K buying a $32K car? The other examples… college tuition, airfare compared to the house? I don’t follow the logic of comparing it to the house?

    Also, the example of the MBAs from Harvard, etc… each of those schools graduate only a couple hundred students each year and a handful go into tech (17% at Harvard), compared to the thousands of “state school” grads moving to SF each year. These MBA salaries are outliers.

    Your comparison example is skewed to support your claim. I’m not saying you are wrong in your claim, but the data and evidence you cite is cherry picked and doesn’t hold up when compared side by side.

    1. All these figures are real life examples. I’ve created the same 1:4 housing price:income ratio for NYC and Cincinnati now with the Cincinnati person making $75,000. The end result is the same:

      Housing might make up a bigger percentage of income for an expensive location dweller, but the ABSOLUTE dollar amount left over is still much greater for investing/compounding purposes.

      And yes, colleges don’t give tuition breaks just because you come from Ohio. Tuition is the same, no matter where you come from. Tuition gets adjusted by your income. So, one strategy is to make less to get grants. Airfare or hotels don’t give price breaks just because you come from a cheaper area either!

      Why pick on Harvard? I highlighted Berkeley, Stanford, Columbia, UCLA. In fact, the top 20 schools are graduating kids with over $100,000 starting median salaries.

      I’d love to hear your story. Where do you live, what do you do, and what do you feel about your current opportunities and finances.

      1. Hey Sam,

        By holding SF/NYC to the same housing to income ratio as Cincy skews the data in favor of your hypothesis. It will always favor the more expensive areas. The ratio must be adjusted to reflect the reality of the medians in order to get a “fairer” comparison:

        Cincy –
        $53K income = $4,400 a month
        $133K house @ 4%x30 years = $635/mo
        Difference = $3,765

        SF –
        $91K income = $7,600/mo
        $902K house @ 4%x30years = $4,306/mo
        Difference = $3,294

        Using median data… living in a less expensive area actually makes you richer to the tune of $500/mo. This doesn’t take into consideration the cost of living difference that eats away at the remainder.

        I wasn’t just picking on Harvard in my comment, I was generalizing the rest of the schools. Each of them only graduate a handful of MBAs each year. Using a sample size of Ivy League and top 20 business schools as an example of earning potential is misleading. What is the average starting salary in the San Francisco area for any college graduate, regardless of school? That would tell you more about average earning potential than looking just at incomes from top programs of top schools.

        As for the other comparisons, I didn’t understand the comparison of cost of airfare/hotel/etc. to the cost of the house.

        Anyway, my point in all of this was that your hypothesis was generalized, therefor generalized data should be used to support the claim. If you use median data as the baseline for your analysis, your hypothesis could be rejected.

        You asked about my story:
        Grew up in the upper midwest, engineering bachelors and masters degrees, been working at a Fortune 500 manufacturing company since graduating in 2005 (the masters degree was paid by the company).

        Worked in Seattle for 3 years before transferring back to the Midwest, taking my west coast salary with me. As for opportunities, our business and physical presence are strong and growing in the city where I live. Since it’s a low cost of living area, we are winning more contracts from both internal and external customers. Our manufacturing facilities could be at maximum capacity by 2020, and over 50% of our senior leadership is/will be eligible to retire in the next few years. A lot of opportunities.

        My finances are also strong, frankly I think it’s due to living in a low cost of living area. I’ve been fortunate enough, and worked hard enough to advance and make a low $100K+ figure salary. That salary goes a very, very long way here. With 2 young kids and a working spouse, we spend a lot, but it’s not on lavish things, mostly on home improvements (we bought a big cosmetic fixer upper) and the kids. We are also fortunate enough to stash away 20% of our incomes not including pensions (we both get them, but mine is being phased out to a defined contribution plan next year).

        Maybe my situation is unique for the Midwest, but I don’t think I’d be as financially stable without living here.

        1. Hi Tom,

          You make a good point. There’s just one interesting thing that I should add. The median income earner is NOT buying the median income house. It’s really the top 20% income earners e.g. $150,000+, because it is practically impossible to buy a $1-$1.2 mil house on a median ~$75-80k SF salary if you plan to put 20% down.

          SF attracts an international demand curve as well, unlike smaller cities, so there is foreign money involved. Less than 1% of the housing stock trades at any given time.

          Looks like you’ve started your path in a more expensive city and decided to move to the Midwest? I think that’s a wise financial choice if you like where you are living. Do you think you’d build the same amount of wealth if you did the reverse?


          1. To answer your question… I don’t think so.

            If I go by my company’s internal salary reference tool, the target salary for a project engineer is $117K in my city. If I change the location to Seattle, the target salary is $125K, only about a 7% increase.

            According to CNN’s cost of living calculator a $117K salary would be equivalent to a $157K salary in Seattle. That’s a far cry from the $125K my company would target.

            CNN also claims that housing is 126% more expensive from here to Seattle.

            Given this rough analysis, it would be tough to say I would build the same amount of wealth.

            You could argue that there are more high paying jobs in Seattle. If I got one with Amazon or Microsoft, I might have a different conclusion…

  33. Wow ! , I never thought in this perspective and surely eye opener for me as I always wonder why people prefer expensive cities than moderate less expensive ones.

    “Follow the money” always has the considerable risk to it but taking risk makes you wealthier. I also feel that money plays a part to have a happy life if we are “Lucky”.

  34. fun in the sun

    The decision on where to live really heavily depends on your industry. Certain industries are much more lucrative in high cost of living cities.

    A few years ago, I really wanted to move to New York. I spent a few months living there on a project, and considered moving there full-time. Every time I sat down, looked at NY salary in IT contracting, and compared them to Denver salaries, I just could not bring myself to move. NY pay was about 10-20% higher, which wouldn’t cover the rent difference, let alone other costs.

    I think staying in Denver over 5 years probably added half a million to my net worth vs living in New York. More than enough to go visit on weekends.

    Many people living in high COL cities, working long hours are chasing the carrot that may never come. How many of your colleagues burned out after 3-5 years, and never hit the payback income you reached?

    Life is a trade-off. You either have it all now, or retire earlier. You got both in San Fran, but you worked harder than I ever would to achieve that.

    1. You bring up a good point about figuring out WHEN to give up. Maybe that figure is after 10 years, or after you’re down to your last month’s rent in savings.

      Although I might have worked harder, I’m not sure how much harder I worked than the average person. One thing about hard work is that it’s over. You reap the benefits of what you put in, and in retrospect, I would gladly work harder because I’ve seen the other side of the rainbow!

      I swear, once people see the benefits of investing, hard work, whatever… they’ll do a lot more. It’s natural to hedge by not working hard b/c there are no guarantees we’ll ever reach what we want.

  35. Living in Silicon Valley, I earn a good salary and save a significant portion while still paying extra on the mortgage each month.

    It’s nice being able to save 30% of a >150k salary than a $100k one. Then taking the equity in our condo and moving back east to buy a large house to raise the kids. If I’m really lucky I’ll be able to transfer and keep my bay area salary.

    It’s expensive living in the area but you can make it pay off handsomely as long as you’re smart about it.

    1. Yeah, but if you have a family with a couple of kids then you cannot afford to buy a home with $150k income. A decent house in a decent school district costs $1.5M so you need to make at least $250k to have a nice home. And then you have zero left for anything extra. But yeah, if you are single, you can survive with that $150k in Bay Area, but it’s much better to make that $150k somewhere where houses are 75% cheaper. And if you are a software engineer you can make pretty much the same money anywhere. SW companies these days don’t care where you live.

      1. You assume kids=need a house. I can’t use SF but I’ll use NYC. I lived in a complex where I owned a 650sqft 2 bedroom. At least 50% of my neighbors either had kids currently or had raised kids who were now on their own. You don’t need a house for kids. I will agree that a good school district is a plus. My local NYC schools were good.

        1. It’s definitely do-able. 650 sounds tight to me; we’re in a 950 2BR 2BA with 3 kids. Our problem is the zoned public school… otherwise we would be here for another 5 years at least.

  36. John C @ Action Economics

    Although I have never lived in a large city, my sister lives in an expensive CA city. Her and her husband easily out earn my wife and I by a factor of around 4:1. Even though their rent is around 8X what ours is, they are in a much better financial position because the gross dollars they can save is well over what we can save. Making $24,000 a month with a $3,600 a month rent payment is much better than Making $6,000 a month with a $600 house payment. My house payment is a lower percentage of my income, but they have way more whole dollars left over to save, and in retirement they can live in a cheaper area.

    Living in an expensive city is a much quicker way to build wealth than in a low cost area where there are fewer opportunities. There are only a handful of employers in my area where people can earn 6 figures at and those jobs are fairly rare. The big advantage I have in this area is that land is cheap. I have 8 acres of land, where in large cities a large backyard for kids to play in doesn’t exist. One can certainly feel happy or “lucky” in either situation.

    1. Thanks John for providing a real life example with some real numbers!

      I need to make this a more clearer point in my post.

      You are correct. Even though housing as a percent of total income may be higher, the absolute dollar amount left over is higher to use for investments, savings, etc, which in turn compounds to much larger figures over time.

      Sweet you have 8 acres of land! Could build a baseball field :)

  37. I know many people who have refused to relocate, either for a career advancement or a better job offer elsewhere. The stated reason for 100% of them? Family. Certainly, this does not represent all people. Likewise, while I do think that this article represents a particular strategy / philosophy shared by a group of people, it is by no means the one-size-fits-all answer. Money can’t buy happiness. While it is a factor, the deeper story is much more complex.

    I do admit that when I go back to my small, rural hometown from my moderately-priced Midwestern city, I go into the convenience store I used to think was a ripoff, and say “wow, it’s not that bad.” Clearly, there are business opportunities for low-cost areas to take advantage of the high-cost anchoring of big city folk. Every tourist area has places like that: at least, restaurants and souvenir shops. Sometimes, hotels and other amenities. Walk a block off the crowded main streets of any tourist town, and you will save a lot of money! Or, even better, watch for places with a lot of locals.

    Living in a lower-cost area of the US, I don’t at all feel that people in NYC are lucky or better off for dealing with bigger numbers. I think, “that’s not for me.” But, it’s not that I don’t like to visit there. I research and understand the cost (just like any financial decision) and compare my options. That also goes for traveling internationally–I value the different experiences; I do not look at it as “housing myself somewhere else.” The main reason I avoid 4-star and 5-star hotels is not the cost, but the fact that they are often set to a global standard of experience, like airports. I can get that homogeneous experience back home, for less. What I want is to experience the place I am going to, so I try to travel like a local. (easy to say and do, in Europe at least) Again, unless there is some specific amenity there that I am traveling for. But if what I want is someplace to sleep, so that I can get back out in the city and go see the sights, why pay more? I want to spend the money for the reasons I came, not for the logistics of getting (or staying) there.

    There are also a lot of free or cheap experiences at any destination. Eating is always cheaper if you get it to go: hot prepared at a counter, or a cold picnic from a grocery store or farmers’ market. You can double the value by taking your to-go meal to a park, and people watch. I have to admit, grocery shopping is one of my favorite things to do while traveling–not buying a full week’s groceries, but observing how people shop: in some places, eggs are so fresh they are not refrigerated–they’re just on the shelf. In some places, you have to weigh your produce, there is no scale at the register. In a lot of places, the hot deli counter is great food at a good cost–that’s where locals “eat out”.

    There is no doubt that international travel is eye-opening, scary (at first), and very beneficial. And Americans, who otherwise do not experience a high degree of diversity in their daily lives, don’t do enough of it.

    1. Ah yes, family is also the other big push back for not relocating, taking that promotion, or exciting/scary new job offer.

      But I wonder though… is it FEAR driving people to not want to leave their family? Or is it LOVE? I know in Asia, it’s all about family, and having multiple generations under one roof. But in the US, it’s more focused on individuality and independence no?

      With Skype, free phone calls, and cheap transportation, why not leave the nest for a little bit to seek something that could potentially provide huge upside and then return once you’re tired?

  38. In general, I would say that you are right. But, there is something to be said for the ease of life when living in a lower cost environment. My mother just left the city and made a ranch her primary residence. I thought, “I could get used to this”. I’ve been to little hippie hollows like manitou Springs Co. and I’ve though “I could get used to this”. People tell me their parents plan to leave Houston and retire in Laos. I bet, in their minds, they’re thinking “I could get used to that”.

    But, if you’re chasing money, I agree, follow the money and stand next to a waterfall.

  39. Agree with T. I’m a software engineer and wife is a scientist. We live in Chicago metro area. Our housing (mortgage) is just over a grand on a huge 2 bdrm condo (15 y mortgage). We commute ~35 minutes to work on average. Our income is a little north of 150k/yr. If we were to move to bay area, then our income would probably be ~ 200k, but we wouldn’t even dream to own a condo this large with that commuting distance. So I’m definitely for the middle of the road here.

    However, if you’re an enterpreneur, or enjoy high pressure living, then I agree with Financial Samurai.

    1. I’m with Greg. A place like Chicago (where I live) offers high salaries and expensive city amenities without the crazy prices.

      Alternatively, the best approach in my opinion is to pick the highest paying industry in a particular average city. Petroleum engineer in Texas, aerospace in Witchita, Finance in Hartford, whatever.

      I think FS’s fundamental hypothesis is too narrow and therefore wrong. It only works in America where housing is very expensive but regular goods (think milk and car prices) are price normalized across the nation at a pretty low level. I lived in Copenhagen which is extremely expensive for everything (not just housing, but also everyday things like haircuts). In that environment, nothing ever feels cheap. People rate very high for happiness, but it is because they have given up dreaming about ever getting rich.

      1. Agreed re: living in Chicago. I live there too, in a nice neighborhood (Wicker Park). Best of both worlds – affordable living, big city amenities, extremely short commute to work (15 mins.).

        Only downside is the winter… but it really does make you appreciate the other seasons more.

    2. Ah, but you already own your huge condo Greg! Just rent it out.

      Now you can come to the Bay Area, earn that $200,000+, and enjoy the great weather 365 days a year. Trust me, you’ll feel as if your life just got longer by 50-80%. Happiness levels will increase!

  40. In my industry, there is a clear correlation between a city’s cost of living and the market salary. The big exception being Houston/Dallas, where you can get New York-like pay but with much lower COL.

    I couldn’t stomach the thought of putting down roots in Texas, so I went with the next-best option for the ratio of salary to cost-of-living: Boston. Not a cheap place to live by any means, but cheaper than New York or San Francisco but still with top-of-the-market salaries.

    1. +1

      Dallas may not sound glamorous to coastal people, but I can attest that it’s very easy to find both high paying jobs and keep cost of living very low. Super low taxes don’t hurt either.

      1. It’s funny! There was a time when Dallas was considered “glamorous”.

        There was even a TV soap opera called “Dallas”.

    2. What about sucking it up in Dallas/Houston for 5 years if you can make the NYC money, save tons of your salary since there is no state income tax, and then leave?

      Kinda like a tour of duty!

      1. Yep, that’s definitely an option.

        As you know, though, you can become attached to a place, as you have with San Francisco. And that can be even more the case when you have a spouse and kids who put down roots themselves. So you have to put a little thought into whether the place to which you are moving *could* be an acceptable long-term solution, if that’s the way that life (which is more complicated than any amortization spreadsheet) works out.

  41. From my experience in the public accounting industry in the mid-atlantic, the salary adjustments offered to employees to live in the bigger cities benefits the employer and not the employee. I helped a lot in recruiting and the “cost of living” adjustments between the larger cities and the smaller was not nearly enough to account for the huge discrepancy in rent/food/etc. While not exact figures, generally the difference in people starting with us made almost the same salary plus the below based on location:

    NYC/DC +6-8k
    Phila/Baltimore +3-5k
    Smaller cities (Richmond, Pittsburgh, Raleigh, etc.) 0

    Those differences are not nearly enough! My wife and I have since moved to one of the smaller cities and are reaping the rewards of lower cost of living while still making above average salaries (gross household income before pre-tax adjustments is 200k)

    1. Pittsburgh is my hometown and I love it!!! I am currently in DC and love the action down here. Its a hard choice when you have so many options.

    2. Are you talking 6-8K more a MONTH or a year? If you’re talking more a month, then sign me up!

      But obviously, if you can earn a combined 200K while living in an expensive area, and like the inexpensive area, then great! I think this is more common for mid-career or later career professionals who have more authority and options. What do you think?

    3. Mysticaltyger

      I also agree with this. Unless you’re in an industry where you have to live in the big, expensive city, the economics are usually more favor of living in the moderate or low cost locale.

      But of course there will be exceptions. Some low or moderate cost cities can be traps—full of low paying service jobs and not many career jobs–and the professional type jobs pay much less than other moderate cost places. Cities like Tucson & Albuquerque come to mind. The two cities have similar economies, cost of living in both places is average, but wages have always been below average.

      At the same time, I also think most people working ordinary jobs in high cost metro areas should probably move instead of struggling.

      1. I live in Albuquerque… Am 22 and an engineer and make just shy of 100k on my bachelor. My company is sending me to get my Master’s and bumping me up about 30k while they pay my school and salary. I’ll be 24 pulling 115-125k, loan free in a cheap city. So when you say we have low paying jobs, for engineers we make a straight killing. With the low cost of living I’m able to save 80-90% of take home religiously and as I get older I’m only going to make a LOT more and I don’t forsee my expenses going up.

        But yes there are a lot of low paying jobs (I attribute this to educational level in the city). So on my salary I’m already like a King Kong. Being able to save all my money practically and invest it all is going to make me filthy rich. Putting 50k+ a year into savings and then moving to real estate and index funds are quite profitable. Since i started working at 14 I’ve never saved less than 80% and I plan to keep that trend up investing like a champ. However, for grad school I’m going to UT so my savings rate won’t be as impressive (only 1000-1500 a month compared to the 5000-6000 a month I’m used to) but it’s only a 3 semester program so for the pay raise and not costing me anything it’s a good investment in the long run.

        Low cost of living with high paying jobs = optimal. I’m in a travel group as well so as I build free hotel stays, airline miles etc. vacations will be free besides food and the points will cover everything else. But what I’ve also felt is if you allocate 5% for vacationing the person with the larger salary in SF will be able to have a more baller vacation than me, but I guess I don’t care so every work trip I slightly consider a vacation. Also I agree with you Sam, if I can find another engineer wife here we can make 250k+ by 24. A power couple truly has the ability to get rich very quickly! That’s the only thing I can think of, on how I could increase my wealth quicker. Maybe I’ll meet her at UT or at my company!

  42. No Nonsense Landlord

    It is amazing what some people find are a ‘need’, rather than a want. Many of my friends have high budget lifestyles, always the latest phone, car and home maintenance… And season tickets to all the big teams. And no savings.

    When I was a Section 8 landlord, I found it amusing that many of my apartments were rejected by the prospective tenants as they only had one bathroom. Imagine that, a free place to stay, and it wasn’t good enough because it only had one bath.

    Much of the world does not have drinkable water, and we have LOTS of it. Even in CA, where water supplies are tight, you can turn on a faucet, drink the water and not get sick.

    You need to look around you and appreciate what you have. Strive for more, but realize there is a person somewhere, that might have lost their life or limb protecting what you have.

  43. Sam,

    There are good opportunities everywhere. An individual whom prefers quieter (and less congested) cities, has plenty of employment options.

    And when you feel like bumming around a big city for awhile. Not a big deal. Hop in your car and drive there (or fly/drive). Spend a weekend. Get your fill.

  44. Why not just try and get the highest paying job you can, independent of where you live?

    And if you can get that in a lower cost of living area that’s just a bonus!


    1. Sure, that works. But I would also add that making good money in an environment where there’s not much to do may not be optimal. Depends on what stage you are in life.

      I do enjoy the quiet and peaceful life nowadays with less people and more temperate weather.

  45. “One reason baseball players swing two bats at a time before going up to the plate is because it makes swinging with one bat easier. They’ll be able to swing faster and with more force.”

    Great article, but for accuracy purposes, this statement is not actually true. It has been proven that swinging a heavier bat prior to swinging a normal bat will actually decrease swing velocity.

    Thanks for all the great reads.

      1. I played from age 5 through high school and dabbled in some wood bat leagues after my career ended. I would chalk it up to being a habit that was ingrained in batters prior to the studies showing it decreased swing velocity. I am guilty of it myself.

        As for the article, I live in the heart of downtown Cleveland and it definitely makes some interesting points that I have thought about it the past. I am 24 with a job in Corp. Finance and pay ~$700/month sharing a 2BD/2BA apartment. I am lucky to have no student loan debt, or any other major obligations outside of rent. Even though I make good money for my age/city, it is still a challenge to max out my 401k, get some money into the stock market, and have enough to comfortably spend on the weekends. I enjoy the more laidback/affordable lifestyle that Cleveland offers, but would also love to make more money in an expensive city, then move back to a cheaper area once I made my nut (a point you have made in a number of posts). At the same time, I am in a position at my company where I should be making a comfortable six figure salary in the next 3-4 years, so there is some incentive in staying in the area.

        As for the mandatory travel abroad point, I went to Europe and Israel the past two years, staying in hostels and visiting towns outside of the major tourist areas. It definitely opens your eyes to how good we have it in America (and how big everything is here). I would like to make a similar trip every year, but as you pointed out, the airfare is much more expensive to me than if I were earning similar wages in NYC/CA.

        As always, the post puts ideas/questions in my head about my future, which I always appreciate as I think they make me more aware of my finances/environment/goals, etc. Thanks for engaging.


        1. Sorry, but your insight into bat speed with weights is incorrect. Adding weight helps when the weight is removed. Otherwise, drawing from your logic, sprinting with sleds or any resistance would make you run slower. Or lifting weights would make you only be able to lift less weight. Common knowledge supports the fact that doing something more difficult (i.e. swinging a heavier bat) will make a similar but less difficult task easier (i.e. swinging a “normal” bat). If it truly hurt performance, no one would be doing it (literally at least one player wouldn’t to get an advantage).

          1. There’s a difference between training with more resistance/weight to build muscle in a training session (or in the off-season) and doing it right before you go into the game. With such a short time frame, your neuro-muscular memory system will have a hard time adapting. Drawing from your logic, you should warm-up in basketball shooting with a heavy ball or warm up in tennis prior to the match with a heavy racket. There’s a reason while you want to practice in-game conditions as much as possible to build up the right habits and fine tune your “feel”.


        2. I do like the idea of working in corporate finance in a place like NYC, getting one’s butt kicked, saving as much money as possible, and THEN going to a more relaxed lifestyle when one is older. You’ll enjoy the relaxed lifestyle even more after all the pressure!

          But, whatever makes you happy is what you should do at the end of the day.

          GO WARRIORS! :)

  46. Great article! I lived in Sao Paulo for 2 years and it made me more thankful for everything I have. Also, I will NEVER complain about Bay Area traffic again.

    1. Lol, São Paulo is so massive, I couldn’t believe it! I love Rio and would move there for a month in a heartbeat.

      SF downtown traffic is now horrendous, as is rush hour over the bridges. I am so thankful not to have to commute during rush hour anymore.

  47. theofficialjohnandre

    Awesome post! I lived in NYC my entire life and you can easily commute to Manhattan from the other boroughs without killing your pocket. Where I am from in Brooklyn (Bay Ridge), you can easily get a two bedroom for $2,000 a month, same with almost all of Staten Island, Bensonhurst, Dyker Heights, some parts of Queens, etc.

    And although I am only middle class for NYC, I DO feel a lot wealthier when I travel. It makes me feel less anxious for my eventual retirement.

    P.S. I know you love the west coast, but how about a NYC/DC comparison?

    1. I like NYC due to the energy. DC has some nice suburbs for family life though, that’s relatively cheaper I think.

      If I didn’t live in SF, I would probably choose Honolulu or NYC for six months of the year.

  48. Hi all,

    Im mostly commenting so I can read future comments. So far the poll shows an almost even spread between all three options with the middle route winning. I lived in Denver for 11 years and I agree that it is a very nice happy medium. You can make a really good wage and retire early in style. Mr Money Mustache lives up in Longmont and he made the short commute to Boulder to make a nice living as an engineer.

    I am currently thinking hard about moving to DC. Im 35, single, semi-retired, and looking for some more action in life. DC seems to fit the bill for me.

    So out of DC, NY, and SF which one would you recommend someone move to? Disregarding their work expertise. I have friends in DC and SF, but not NY. Although one of my friends is also talking about moving to NY just to experience it.


    1. Hands down San Francisco. Temperate weather all year around, meaning you can do things outside to your heart’s content whenever you want. Great diversity, the #1 food place in the country, and close to Lake Tahoe, Carmel, and Hawaii.

      Can you share your semi-retirement journey at 35? What was it you did to get you to where you are?

      1. I lived frugally, saved aggressively, made some money on real estate, and continue to live frugally while traveling around visiting friends. I certainly can’t retire yet but I am looking at building an online income like yourself so I can continue traveling.

        However, I may have a decent job offer in DC with some nice pay so I may consider taking a break from traveling and building my savings back up again.

        1. I live in DC and I highly recommend it. I, like you live frugally and have some RE investments which allow me to not have any housing expenses. Since DC is a small city you can find a place to live for relatively cheap which is close to all the hot spots in the city. And you can do all this by bicycle, which is what I do.

          So in general one can live in not a “Hot” neighborhood for relatively cheap and still be close to the hopping areas and work, and be able to access both by bicycle and public transit.

          Also, as it is mentioned here there is a ton of money in DC and if you are capable person with ideas and work hard you can really do something for your self.

    2. I’ll cast my vote for DC. I’ve been in DC for five years and love it. While there are lots of cultural and social opportunities in SF and NYC, DC has the advantage that most of it is free. Smithsonian museums, parties and open houses at Embassies, outdoor movies on the National Mall or in front of the White House, outdoor fitness classes in one of the many beautiful public parks–if you’re bored in DC, it’s your fault! My husband and I are able to live relatively frugally without ever feeling like we’re deprived. In fact, we could pack our schedules with free or very low-cost events and still never scratch the surface of what’s happening here. It’s allowed us to aggressively pay down student loan debt and still feel like we’re living the good life. Additionally, I grew up near NYC, and DC is far less workaholic that even the NYC suburbs, in my experience. While there are some people in DC who are obsessed with work, these people seem to be commuters who are either always at work (so you won’t run into them) or =<22 years of age and interning somewhere prestigious (also easy to spot and avoid, if you want to). There's a good mix of people here from different areas of the US and abroad, so you'll find a good mix of attitudes and life philosophies.

      The biggest downside of DC has historically been that it's tough to build community because so many people are just passing through (for school, a prestigious but short-term jobs, etc.), but that seems to be changing quickly. DC drew so many recent grads during the recession that there's a great cohort of 30-somethings who seem to be sticking around. Even our friends with kids have purchased homes and are putting down roots here, which is having a very positive impact on the sense of community and improving schools and services, too.

Leave a Comment

Your email address will not be published. Required fields are marked *