If you want to get rich you need to go where the highest paying jobs are. The highest paying jobs come from the fastest growing, economically strongest companies.
Getting rich, like dating, is a numbers game. If you're in a room with 80 millionaires and 20 non-millionaires, you've got a better chance at meeting a millionaire than if you were in a room where the ratio was reversed.
According to a Deutsche Bank study of over 50 cities in the world, San Francisco is the #1 city to make money. Since 2018, average salaries in San Francisco have risen by 31% and by 88% since 2014.
Damn, since I live in San Francisco, I really should have kept working instead of retiring in 2012. I could have been so rich! Alas, there's always the next life to fix my current mistakes.
With company giants, such as Facebook, Google, Apple, Uber, and Salesforce, all paying healthy six-figure salaries on average, it should come to no surprise that San Francisco is #1.
In 2019, people in San Francisco can expect to be paid an average of $6,526 per month or $78,312 a year. Put two of these people together and you've got a healthy $156,624 a year in combined income. If you want to make over $20,000 a month, consider being a public transit janitor or a city government employee.
New York residents, on the other hand, make 29% less than San Francisco residents at only $4,612 a month. However, comparing New York to San Francisco is a little misleading given NYC has a 10X larger population. Comparing San Francisco to Manhattan is more apples-to-apples.
Let's take a look at the rest of the cities on the top 10 highest paying cities list. See if you can guess which other cities are on the list before proceeding.
The 10 Highest Paying Cities
- San Francisco, U.S.
Monthly salary: $6,526 - Zurich, Switzerland
Monthly salary: $5,896 - New York, U.S.
Monthly salary: $4,612 - Boston, U.S.
Monthly salary: $4,288 - Chicago, U.S.
Monthly salary: $4,062 - Sydney, Australia
Monthly salary: $3,599 - Oslo, Norway
Monthly salary: $3,246 - Copenhagen, Denmark
Monthly salary: $3,190 - Melbourne, Australia
Monthly salary: $3,181 - London, U.K.
Monthly salary: $2,956
The biggest surprise on this list is Chicago at #5. With terrible weather for half the year, bad local government, high state income and property taxes, and one of the highest murder rates in the country, I would have thought Chicago would be outside the top 25 for sure.
But there is a huge silver lining for Chicago residents: great value.
The median property price in Chicago is only $226,400 compared to ~$1.7 million in San Francisco. Yet pay in San Francisco at $6,526 is only 50% higher than pay in Chicago. If you can withstand all the negatives of Chicago, Chicago is a great place to make your fortune.
It's no surprise London is on the top 10 list. But I am surprised London is 10th and not higher. According to the Deutsche Bank study, income for London residents was 13% lower partially due to the ongoing Brexit debacle.
I've been to London several times, and each time I go I'm amazed by how much more expensive London is than San Francisco and New York City.
Cities With The Highest Monthly Rent
- Hong Kong
Monthly rent for average 2-bedroom apartment: $3,685 - San Francisco, U.S.
Monthly rent for average 2-bedroom apartment: $3,631 - New York, U.S.
Monthly rent for average 2-bedroom apartment: $2,909 - Zurich, Switzerland
Monthly rent for average 2-bedroom apartment: $2,538 - Paris, France
Monthly rent for average 2-bedroom apartment: $2,455
Everybody likes to complain that San Francisco rent is too damn high. But people who complain forget the other side of the equation: income.
The worst combination is when residents live in a city with high rent and low income. Hong Kong fits this bill perfectly. The social unrest there is becoming untenable.
I've been to Hong Kong over 20 times for work and it is congested, hot, and polluted. Average earnings for Hong Kong residents came in under $2,500 according to the Deutsche Bank analysis, but rent costs were $3,685.
Think about this for a bit. The average rent for a two-bedroom apartment is 47.4% higher than the average salary in Hong Kong. How is it even possible to live and start a family?
The only solution is to live with your parents or live in a one-bedroom or studio apartment. Certainly don’t have kids.
Below is an example of a “nano-apartment” measured at 128 square feet. The average cost of an apartment is roughly $3,000/sqft. Therefore, expect to pay over $300,000 for this apartment below. You're basically in a capsule!
The second poorest value city is Paris, given it is in the top 5 highest rent cities in the world but not in the top 10 highest paying cities in the world. Paris didn't feel nearly as expensive as London when I visited several times.
Cities With The Highest Disposable Incomes
Deutsche Bank calculates disposable income as income left over after paying rent. The highest disposable income list is what matters most. At the end of the day, it's what you keep and not what you earn.
- San Francisco, U.S.
Disposable income after rent: $4,710 - Zurich, Switzerland
Disposable income after rent: $4,626 - Chicago, U.S.
Disposable income after rent: $3,298 - Boston, U.S.
Disposable income after rent: $3,188 - New York City, U.S.
Disposable income after rent: $3,157 - Sydney, Australia
Disposable income after rent: $2,615 - Melbourne, Australia
Disposable income after rent: $2,485 - Oslo, Norway
Disposable income after rent: $2,342 - Copenhagen, Denmark
Disposable income after rent: $2,285 - Wellington, New Zealand
Disposable income after rent: $2,075
The analysis assumed two working people were sharing a two-bedroom apartment, and calculated disposable income by working out the difference between average monthly earnings and half the cost of renting a two-bedroom apartment.
San Francisco comes out on top with disposable income after rent at $4,710, which is a whopping 100% more than Oslo, Copenhagen, and Wellington, and 49% more than New Yorkers were expected to have leftover.
Being #1 on the disposable income list is the reason why I believe San Francisco is also the cheapest international city in the world. Prices tend to converge among international cities. Therefore, I'm also a long-term bull on San Francisco real estate.
Make Your Money, Then Move
If you want to get rich, you should probably come to a city like San Francisco. Yes, the cost of living is high, but you will get paid accordingly.
It's not like Hong Kong or Vancouver, where you have to pay crazy high real estate prices, yet get paid way below what a commensurate income level should be to support such high real estate prices.
Like every city, each has its problems. San Francisco has a traffic problem, a homeless problem, and a cost of living problem for those who do not make the average wage.
But overall, if you are a capitalist, San Francisco is clearly the #1 city for opportunity. Further, San Francisco is diverse, accepting, and has comfortable weather all year. I've lived here since 2001 and give the city a thumbs up for fortune hunters.
If you don't want to come to San Francisco, that's fine. Go to New York, the best city in America for six months of the year. If neither of these cities appeal to you, make your money in one of the other highest paying cities in the world. As you do, save aggressively, invest wisely, and leave once you've had enough.
We're planning on relocating to Honolulu once our boy is eligible for kindergarten. The average wage in Honolulu is much lower, but it doesn't matter because we're not working day jobs anymore.
Americans don't know how truly great our living arrangements really are until we live abroad. Let's appreciate all that our magnificent country has to offer!
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Related posts:
Housing Expense Guideline For Reaching Financial Independence
The Best Area To Buy Property In San Francisco
The People Who Make Over $1 Million A Year
Readers, if people want to get rich, why wouldn't they relocate to one of the highest paying cities in the world? How is your city for money-making opportunities?
Better yet: Move to San Francisco, get a $$ job, then negotiate to work remotely and move to someplace like Salt Lake City for the geographic arbitrage!
I also cannot understand why a place that has all the technological powerhouses are so bad at telecommuting/remote working. You would think it would be an easy case study to drop costs massively by using remote workers across the US/world. Guess it’s just better to work face-to-face despite the technological advances.
wish to SanFran tech corporates would let more remote working happen considering they’re tech companies.. wonder why they’re so keen to have face-to-face workers, rather than outsourcing globally to reduce wages?
This is exactly what is happening. And you are seeing firms like Google and Uber spend a lot of money expanding outside of the San Francisco Bay area. This is why I am bullish on the heartland of America.
When It takes almost $350,000 to buy the median home price in San Francisco, you know affordability is an issue. Company employee costs are rising out of control and that’s not good for business.
https://www.financialsamurai.com/focus-on-investment-trends-why-im-investing-in-the-heartland-of-america/
We bought a house in Lafayette CA in December 2012. Sold it July 2015. Moved to my Kansas hometown and became a one-income family with a toddler and baby on the way. Baby began sleeping more and breastfeeding less, as babies do, so when he was 18 months old I returned to work, negotiating my SF salary (which my partner kept, too), and a 4-day work week. I miss the Bay Area sometimes, but we have so much financial freedom. We have family close by. We can donate money to charitable causes, take simple or extravagant vacations, and visit SF whenever we want.
Hi Sam,
I am an avid reader of your blogs. I just want to say I am a young man who recently graduated and I’m living in Chicago. I have always thought Chicago delivered great value for the price of housing, and it was great to see you say that as well. Although I love the big city feel of NY, I plan on living in Chicago long-term, as NYC housing is just ridiculous. However I am in the field of finance, and sometimes I worry I won’t have the same opportunities as my peers because I’m not living in the financial capital of the world. Did you ever think about this when leaving NYC after only a short amount of time? By the way, thanks for another great post!
Thanks for another great post.
Good question. Not in the first five years after I left New York City to come to San Francisco. But after my fifth year, I began wondering how I could get promoted to managing director when I was in a satellite office. I would have to move to New York City, London, or Hong Kong to continue to ascend.
I could’ve gone to another firm in New York City for a really strong two-year guarantee. But I decided not to. And then ultimately after 13 years, I decided to retire.
It seems like most of the stats here are averages. I’d be curious if the overarching argument holds if inequality is taken into the mix. E.g., I could see SF’s average pulled up significantly by the fact that it has one of the highest billionaires-per-capita on Earth.
Also, I’d argue the cost of living in SF eats up a significant portion of whatever you earn. A super burrito at the hipster taqueria on my street was $10 after taxes and tip in 2010, and today it’s over $18. It’s one example, but it’s part of a pattern I’ve noticed.
My read on the situation is that “support-the-wealthy job” salaries (anyone who supports the top earners… many of these jobs are within tech companies, like accountants or PR reps, but some are outside, like barbers and burrito-makers) are just barely able to generate a healthy standard of living. Non-tech businesses who can’t support Bay Area wage inflation are leaving.
So, my personal hypothesis is that the Bay Area is a great place to have wealth, or attract VC wealth, but maybe not the best place to generate it, unless you have a very narrow category of skills. I wonder if the wage inflation (24 year olds with nominal coding skills making $150k/yr to move pixels) is actually a bubble that may deflate as tech agglomeration halts in the Bay Area (due to remote work or other tech hubs cannibalizing).
Hi Sam,
I’m an avid reader of your blog. What are your thoughts on San Francisco’s earthquake risk? Is this just a risk you take in living in a high income earning environment?
I think it’s OK. Since the previous big one in 1989, houses have been retrofitted and construction has improved to be compliant.
I’m more concerned yearly natural disasters like flooding, tornadoes, hurricanes, and fires.
I can’t see living in SF as a health care worker, other than a doctor perhaps. No way could the salary you’d receive match the cost of living. They just don’t pay nurses, etc. what they would need to live there comfortably.
A lot of nurses in SF make over $120,000 a year. That’s pretty comfortable living per person.
“If you want to get rich, you should probably come to a city like San Francisco. Yes, the cost of living is high, but you will get paid accordingly.” Couldn’t agree more with this.
I moved to SF from NYC in 2014, as a 27 yr old making ~$135k per year in Manhattan. Transitioned from banking in Manhattan to tech (SF’s biggest tech employer). Hustled in a couple promotions and switched two jobs (at companies mentioned in this article) since 2014, and have now been able to triple my salary from 2014 to 2019. I can’t imagine being able to triple my salary in 5 years anywhere else in the world. Particularly not in corporate.
These are exciting times for the Bay Area and San Francisco is indeed a land of opportunities. Think I have been purely blessed to have had an opportunity to experience such times in this great city.
To top it I am an immigrant, and could vouch for the acceptance and diversity of Bay Area. Not possible anywhere else in the world, not in my home country.
I’m impressed you were able to TRIPLE your salary moving from NYC. Usually, you hear that when folks come from a low cost area of the country.
What is it you do making $400K as a 32 year old?
Am a mid-level manager managing growth strategy & finance for a major software giant. The salary includes base+cash+stocks. Stocks estimated at actual allotted value while joining the firm and not market value.
Born and brought up in a third world country. Father went bankrupt when I was 10. Lived with 6 family members in a 500 sq ft apartment. Came to the US to pursue MBA during the peak of financial crisis (2008) while putting my family’s only asset (our house) as collateral, with no plan B. Somehow got an entry level banking job and have been hustling since.
Blessed to ride the wave and to be living in SF.
“Make your money, then move”
That is a good piece of advice. Glad to see few cities from Scandinavia on the list too! High salaries come with high living costs, so it can be a gift or a curse.
I live 45 minutes from Melbourne, Australia. I already take the train up during the week for University classes—and plan to move up there for work!
IMO best city in the world to make money is indeed san francisco – but not if you’re living there. It’s ought to be something like a software engineer who works for a silicon valley company, remote.
I always think one of the biggest life hacks is utilizing the cost of living discrepancy between different countries. You could be making $150K USD/year doing software engineering for a sillicon valley while enjoying life in Vietnam. I’d bet you would be able to easily save at least 80% of that after-tax money. 10 years of that and you’ll already have $1 million in savings, pre-invested money! And of course, we all know compound interest works wonders ;)
Sure, that is definitely a great lifehack. I think you can do it, but just not in Vietnam. In the heartland of America, yes. Time zones need to be tighter.
You just got to like where you live though. If you have no family in Vietnam, it might be tough.
yes – have done this hack while working for European firms from Africa. It works well, and especially at the moment with the strength of Euros, GBP and USD versus emerging market currencies. Works better for software though, as opposed to investment banking/private equity where I am now.
I live and work in NYC. I had a few of my coworkers, after a decade or two in the finance profession, decide to call it a career, pack up and move elsewhere (usually back to where they grew up).
They can live like kings and queens back home versus staying in NYC. I get a bit envious when people do that. I can’t see myself moving anywhere except after my kids leave the nest and when I retire.
Very good points.
On a side note- it would be interesting to do an article on what types of opportunities existed on this weeks armageddon day (Monday the 5th).
Recently we have been looking to refi our house that we recently purchased 3 months ago as rates have been declining. I was able to secure a 30 year Jumbo loan refi, 835k, in a 68% LTV, on a 30 year fixed mortgage through for 3.375% WITH credits towards closing, and 0 points paid and 120 day lock.
Disclaimer- I am depositing some money with them at closing to get a slight rate discount, but then I can pull it back out.
This was much better than what my existing bank was offering, and only slightly higher than the 10/1 ARM I was looking at. When the yield dropped like a rock Monday morning, I started making calls and saw lenders rates were dropping, took all day but locked my rate late Monday night.
I’m sure others made out by buying stocks, etc before Tuesday’s bounce back, but just remember there’s always opportunity out there.
Who else had a win this week?
3.375% is not bad for a 30-year fixed.
But I’m an anti-30-year-fixed guy b/c I believe in low rates for life. As a result, I go ARM to save.
But you got to do what makes you feel good!
Can you please let me know which bank you refinanced with? I am in the same bucket.
Thanks!
Remy
Hey John,
That sounds like a great refinance deal. Any chance you could share the name of the bank? I am currently in the market for a mortgage for an investment property.
Thanks in advance for your help.
Every single one of us will eventually become the victim of our successes or failures!
If I am young, single and just start out my life I would consider moving to San Francisco just to have higher probability of making more money.
But, just to move there to make money and then move somewhere else to live so I can find purpose and joy is such illogical. Long term, this strategy will fail miserably.
We must find a place where our family and friends are clustered (maybe just a few miles away) – and be the most useful person in that town or city and you will have everything you need in life…including money!
I find it amusing that people often cite diversity as a plus when talking about San Francisco. I understand the diversity in ethnicity or cultures but how about political diversity? Try wearing a MAGA hat in San Francisco or Portland compared to wearing a Bernie hat in Dallas or Spokane. You’ll get your ass kicked in the supposedly more diverse areas.
I understand its more comfortable living in a area with like minded people, but if a city is truly diverse you would think they would be more accepting of other people’s beliefs.
I think you’d be fine wearing a MAGA hat in SF. There’ no shortage of that here in Seattle, at least.
I don’t live in the USA and am not interested in politics but that’s an interesting (if controversial) point.
I don’t think you’d get beat up here. Maybe some stares since we are a sanctuary city and very diverse. But people are accepting. Now if you wear the hat in the workplace, it is probably a career limiting move.
Politics and work don’t mix.
The thing about those average salaries in San Francisco is it really depends on the industry you’re in. If you’re not in finance or tech, the higher salaries don’t make up for the higher cost of living. People outside those industries typically can do better in other areas, even with lower salaries.
I do agree with you, though, that the cost of living in America–even in rip-off San Francisco & New York, is lower than in other rich countries. Yes, I know our health care is a rip off; but still, other things, (including taxes for the middle class) are much cheaper. I took a recent trip down the coast a month ago and talked to people from New Zealand who mentioned (without my bringing up the subject) how much lower the cost of everything is here in high cost California compared to New Zealand.
And in NZ, what companies are paying the big bucks? Even though HONOLULU real estate is about 30% cheaper than SF, unless you are already wealthy or have an Internet business, on an income adjusted basis, Honolulu real estate is way more expensive than SF RE.
Btw, janitors and elevator technicians make $200,000+ here as well.
https://www.financialsamurai.com/abolish-welfare-mentality-six-figure-bart-janitor/
haha, big bucks in NZ.. yeah, no.
My Uncle’s family is from New Zealand and come every once in a while to visit (San Diego), and they literally did all of their shopping here and sent it back on a ship. They couldn’t believe how cheap everything is here vs what they have to pay at home
Well written and interest article. I would love to see an article with maybe the top 10 best cities in the US. I say this because where I live currently (South Florida), I feel as the salary appropriate for the massive increase in housing prices within the last decade or so.
Having lived and worked in Chicago for the past 20 years, I’m surprised they are #5 on this list as well. We do better than most and live comfortably with a home in the Lincoln Park neighborhood, but sky high property taxes and bad weather are reasons why we will eventually leave.
This is such a fun and fascinating post! I’m a little surprised SF is #1 worldwide but also not that surprised. The city has really grown like crazy. When I first moved here the city felt calm a lot of the time. Now it’s constantly busy and traffic is nuts.
Shocking to learn about how misaligned Hong Kong’s real estate/rental prices are with their salaries. I knew they had high RE prices but didn’t realize the incomes were that out of sync. Glad I don’t live there as that must feel so defeating.
I am currently living in Hong Kong
A small apartment (300-500 sq. ft) can cost 3 million HKD/ almost 400k USD. I even found one for 750k USD
And median household income here, based on HK gov, is only 28k HKD/ approx. 3500 USD
All my local friends are pretty much accepting that they have to live renting for whole life or live elsewhere
This is so misleading…
I work in IB in Houston. I make the same as my colleagues in SF and NY, yet my standard of living here is way better. Last year I hit half a million in income for the first time and none of it had it go towards state income taxes. Plus my rent is only $1900/month for a really nice 2 bedroom with a short walk to the office.
You know about average is right? Just because you make a good income in Houston, doesn’t mean the average person makes as much as those in in New York City.
Besides, not many people who want to work in investment banking want to work in Houston. There’s a reason why Houston and other Texas cities are called the armpit of America.
Go read liars poker by Michael Lewis where he talks about “equities in Dallas.”
Look Andy, that’s great and all, but… Making money is only 1 side of the equation. And yes it’s the average I understand. Averages themselves are misleading. I was not ripping on FS himself, of course not, he’s my hero! I happen to prefer to stay out of the cold. My only point was if the whole idea is to make as much as possible then move to the low COL city, why not just do both at the same time? That’s what I’m thinking at least. I realize it’s much harder to do in reality for a number of reasons. 1 clear reason that i see all the time with my friends is they love the theory of what I’m saying, but their positions are in Boston, NYC, SF and they already have an industry expertise so it’s difficult to switch to the O&G sector down here. Also, I’ve read multiple Michael Lewis books, he’s a tremendous author.
Houston is a great city for an average earning household. Our household income never went over $110k / year but because of low costs of living our net worth is close to $1 million, mostly in stocks (we are 41). And this is with childcare costs. I’m not sure we would be able to achieve this in an expensive city as our jobs are not in banking or tech.
We make $200k after tax in Africa working in finance, but CoL is only $35k. It’s definitely not average, but it’s possible everywhere in the world I guess.
I am really surprised that northern VA and MD (near DC) is not somehow on this list? I assume it doesn’t make it because it’s not classified as one city?
Anyway, incomes in Loudoun County (VA); Fairfax County (VA) and Howard County (MD) are very high when compared to the rest of the nation. And I imagine that cost of living is much lower in these areas than in San Francisco…
https://en.wikipedia.org/wiki/List_of_highest-income_counties_in_the_United_States
They are on the list. They are just not in the top 10. Let me see if I can get the top 50 if they rank them.
I don’t necessarily agree with SF, as I’ve seen a lot of struggling people in SF (I live in one of the wealthiest parts of SF, coincidentally, but know of people who are 10+ people to a co-op, in other parts etc). I don’t know why SF keeps being lumped together with other wealthy parts of the Bay on these lists.
However, other parts of the Bay, like Palo Alto, Sunnyvale, San Jose, Cupertino (with a good job) I’ve absolutely seen people make a killing (own two houses, etc). Chances are, if you live in those parts of the bay, also, you’re probably doing pretty well (and percentage-wise, pretty educated), too. Either way, typically 1/3 of your income is gone up here with taxes, but things like RSUs really help you make a killing, particularly if you stay with one of FAANG for years.
How are you doing living in SF?
Like you said, just own a property or two and work in tech, and you would have done very well over the past 10 years. It doesn’t take a genius to get wealthy if everything is going up aggressively. Lots of luck.
But the key is to be in a city that has such opportunities.
I am surprised Boston is on the list and not DC.
We are planning to make our money and move, as you suggested. We have HQ2 coming in four miles from us so that should help build equity in our home prior to exit.
Boston is a very intriguing city on the lists but absent from your write-up. I’ve lived in SF, Seattle, LA, Atlanta, and Manhattan (and Maui by the way), but now Boston is front and center on my brain presently because I’m actively considering a couple of different high paying opportunities there. High income, great schools (and colleges), diverse/vibrant city. Yes, it has harsh winters but the fear of those are overstated. The fall is beautiful, the summer is tolerable and the spring is a toss/up.
Boston does look pretty good as it is ranked #4 in highest disposable income cities and #4 in highest paying cities. I just don’t have much experience with Boston.
As someone who lived in NYC for work, I always thought that if you were going to suffer out on the east coast, then you might as well suffer in NYC where there are so many more opportunities.
The fall truly is beautiful on the east coast. I lived in Virginia for eight years as well. Thinking of going back to live a more unpleasant lifestyle!
I used to think that exact same thing when I lived in NYC (1999-2004)! But NYC has believe lost some of that luster it used to have IMHO (disappearing retail diversity for one thing). I’m seeing a lot of that vibrancy in Boston now. Also, we left NYC because we started having kids and the logistics seemed challenging. That seems relatively easily addressable in Boston. We’ll see!
Good luck! Boston is so cheap compared to NYC. Seems like a better place for raising a family.
I live between DC and Baltimore so the potential here is good. If I was younger and single, I would either continue to live with my parents or find roommates to reduce living expenses. That way you’re working in a major city and have the ability to continue to save significantly as well.
How does SALT taxes play into the equation? Has to have some impact on the disposable income number, since its a mandatory expense.
Absolutely a negative for the average home owning resident in SF who makes over $200,000 a year.
For the average income earner who doesn’t own a property, there’s not much impact given the increase in the standard deduction.
To your comment re apple-to-apple: NY Monthly rent for average 2-bedroom apartment: $2,909 is definitely not in Manhattan. You will never find a decent 2bd in Manhattan for less than 4.500. I live in a 2BD/2BA and the rent is 7.200.
Absolutely agree. Manhattan is outrageously expensive. It is more expensive than San Francisco.
Related: How Do People Who Make Less Than $100,000 Survive In New York City?
The data in the article seems to confirm the issue which I have heard is a serious problem in San Francisco… cost of living
Average salary: $6,526
Average 2 Bedroom Apartment: $3,631
DB calculates average disposable income at $4,710. I found one website that describes disposable income and what many may confuse it with, discretionary income this way:
‘The money you have left over from your salary after you’ve paid federal, state, and local taxes is your disposable personal income (DPI), also referred to as your net pay….
Disposable income is not to be confused with discretionary income, which takes it a step further. That is what is left of your disposable income after you’ve spent for necessities like rent, your mortgage payments, healthcare, transportation, and clothing.’
From The Balance – What is considered disposable income
So if the average salary is $6,526 and after taxes you are left with $4,710, you then have to pay $3,631 for an apartment you have $1,079 left to cover all other expenses. That does not sound very good and I can understand the many complaints from people who are earning a decent wage (even at a salary of a little over $100,000 you would be hard pressed to put much away living there).
San Francisco seems like a beautiful place to live but unless you are earning significantly above the average it does not seem like a great place to build wealth.
Normally in San Francisco, two people will share a two-bedroom apartment. Therefore, you can double $4,710 = $9,420 in disposable income paying $3,631.
Note, I’ve been a two-bedroom apartment landlord in SF since 2005.
Where do you live? And what city would you recommend living in to make more money if not for the DB lists?
I live in Houston and it has proven to be a great place to live and work. I imagine if someone is in the tech industry Austin would be a close analogue. I don’t know if I can post a link but I found a neat tool you can find by Googling “Nerd Wallet Cost of Living Calculator”. It seems to have access to an excellent data set and allows you to compare two cities to see what a comparable salary would need to be if you chose to move and wanted to maintain the same standard of living. Unfortunately, I don’t think you can see the raw database so making a definitive statement of where the absolute best place to live would be is not possible without a lot of searches.
But for our purpose a simple comparison between Houston and San Francisco is very easy and informative. I found one site that shows the average salary in Houston of being $59,717. If we are using the two average combination you describe for sharing the apartment the calculator says that to maintain the standard of living in San Francisco the household would have to earn $250,511 (up from $119,434 being the average salary x 2). For my purpose a household income of $170,000 in Houston would need to be $356,572 to maintain the standard of living in San Francisco.
I know the calculator is likely not perfect, but it does provide detailed estimates of the different cost of living factors and their variation city to city. Also, to buck the trend of Texans who hate on San Francisco and California I will admit that I think San Francisco would be a much nicer place to live than Houston, but financially it just doesn’t make sense at this point. If my household was comprised of two tech workers earning close to $200,000 each it probably would (but, it would be worthwhile to look for comparable salaries in Austin as the COL is still much more reasonable there).
It’s definitely popular to hate on San Francisco. That’s what happens when you reach the top of anything, which is why I advocate Stealth Wealth in day-to-day life. So no worries. Feel free to hate all you want, it’s all good.
I definitely believe the $170K in Housing = $356K in SF to live a similar lifestyle. See: Why Households Need To Make $300K To Live A Middle Class Lifestyle.
If you feel you have opportunities and can get financially ahead in Houston, then awesome!
I think a wiser strategy is to make as much money as possible, despite higher cost of living, save aggressively, then relocate to a lower cost of the country.
The sweet spot, of course, is making SF money in a different location. Not sure if that’s realistic in many professions, but in mine, it is elusive but possible (large law firm attorney).
Bingo. Or NYC or any of the other top city money and living in a lower cost area.
I think this is happening thanks to technology and a tight labor market. Hence my investment thesis of investing in the heartland of America.
I live in Austin working for one of the companies mentioned in the article. I have people on my team who live in SF and they pay difference they get is not nearly enough to convince me to transfer.
Instead I’m able to live with a very high standard of living in my own property and still save a bunch.
In the southeast wages may not be as high but neither is cost of living. You can literally still get a house under 300k. Ive lived North of atlanta for 20 plus years, and well if you cant find a job in ATL there something wrong with you:) The place is booming
My 2 cents
I wanted to go to Silicon Valley when I was in college, but I got a job in Portland. I should have transferred down there. There are a lot more opportunities in the Bay Area. That’s one thing I regret about my career. Who knows where I’d be if I moved there in the 90s. After a few years in Portland, I got used to the slower pace of life and didn’t want to live in CA. It’s way too busy there. People are high strung. Oh well, I can’t complain too much because life is really good now. I think moving to Honolulu is a great idea.
Yeah, it’s hard to go from a more easy going pace to a more fervent pace.
We’ve experienced the Manhattanization of San Francisco over the past 20 years. It’s kind of sad.
But I still think NYC is 2X more frenetic than SF.
Make your money in a high paying city and leave.
The trick with small living spaces is to think in terms of volume and not square feet. I called a 400 square foot studio home for 3 years and almost felt like the space was too big. Almost.
When you store things vertically, have a Murphy bed that folds up into the wall, and use a lot of built-in storage, you find plenty of space. That 128 square feet place looks like it’s got high ceilings, so maybe it’s 1,280 cubic feet! In that case, you need to invest in shelving, hangers, and collapsible furniture.
Regardless, since making the move to the Bay Area, the only two costs which have dramatically changed have been gas (double Louisiana’s cost) and rent ($2.50/square foot…or $0.31/cubic foot!). For reference, I’m renting my condo in New Orleans at $2.70/square foot ($0.34/cubic foot).
All things considered, I’m fine with the rent because the much higher compensation more than covers it.
Good to hear! I wonder why more people don’t focus on the income side of the equation and only the cost when doing analysis.
Costs are high because income is high. If income is not high enough, costs go down as people stop coming or relocate elsewhere. Basic economics.
“I wonder why more people don’t focus on the income side of the equation and only the cost when doing analysis.”
Cost of living can be compensated more easily when either your are single or have dual income (both spouses working). If only one spouse is working and they have a family with kids, cost of living is a major factor.
New York is great if you can own your own home within walking distance of a train into Grand Central. Even better if you don’t have to use it to get to work and, instead, work nearby. I see the folks around me going down to the train station at 7 AM and slogging back at 7 PM, long after I’ve been to the gym (just down around the corner), and had dinner, much of it grown in my garden during the growing season (I like growing fruits and vegetables), or possibly getting it from one of a couple of dozen restaurants and delis within a few blocks.
Crowds aren’t great, neither are property taxes, but 45 minutes to the North you are out in the country, and it’s beautiful. Even winters aren’t terrible. Gives me an excuse for not going outside all the time.
The state also will exempt my pension and social security from state taxes, and 40k a year from 401k plans and such starting at 59.5. Probably will still want to establish residency in one of those nice no-income-tax states before RMD time. Most of my family centers on Georgia, NC, and Tennessee, so that probably means eastern Tennessee. I’ts beautiful too, and we have a place in the mountains there. There will also never be a prohibition against watering your lawn during a drought, if you even want a lawn.
Feel like this article was written to promote San Francisco. Should we not forget that this city also has a huge homeless problem? Tent cities, etc? Areas that need clean up because of too much human feces laying around??Throw all the data you want about income being high and that it offsets rent prices, the reality couldn’t be further from the truth. There ain’t people coming to this city and that state and you know it. People are migrating to places like Houston, TX from California for these precise reasons. This is a plea for commerce because California knows they need it bad. Just sayin.
I can shoot Deutsche Bank your feedback why their methodology might be wrong if you’d like. I’ve just taken their data and put some light analysis behind it as someone who has lived and worked in NYC and SF for years, and Hong Kong for almost a year if you combine all my trips there.
Where do you live and what are your thoughts on the best cities to make money?
To your point on migrating to places like Houston, see: Focus On Trends: Why I’m Investing In The Heartland Of America
CA is also where many of America’s new ideas and companies are founded and coming from. Turn on CNBC, the ipos under discussion are almost always West Coast. Very little to no innovation coming from the middle of the country. The best they can often hope for is for foreign companies like Foxconn or domestic companies like Amazon is to open a facility, because they are not starting new businesses. Not to mention, we are massively over planted in soybeans and corn, which no one wants so the federal government is subsidizing to the tune of tens of billions of dollars. GM and Ford look like they are headed for a downturn and are closing factories.
I’m curious, what do property taxes look like for you in San Francisco and do you think there’s a chance they might go up?
It feels like you haven’t thought everything through.
The property tax rate in SF is 1.24%. That’s up from around 1.21%, 15 years ago. San Francisco has this law called Prop 13 where the assessed value for property tax purposes does not go up by market rate, but by a set inflation index. It’s one of the reasons why $5 million mansions are still taxed at $300,000 b/c the owner bought 50 years ago.
What are some other things I should think about? Please feel free to share and also share where you live and how your city is for opportunity. thx
Related: Property Tax Rates By State
I would not do what you did. The FI part was good thinking, not the RE part. From Financial Samurai Retirement Portfolio (2019), looking at the monthly income the parts that seem stable are Interest Income and your Real Estate rental income (before tax, which is why I wondered about your property taxes. And, also, “Real Estate Crowdfunding”?) The Alternative Income and Stocks and Bonds categories fluctuate (how could they not). So, your Yearly Passive Income figure is your Monthly Passive Income figure (whichever month you’ve picked, maybe the most recent one) x 12. In other words, it’s an expectation. If everything holds, you can expect $195,600 after tax. We’re 12 years into a bull market (which, there seems to be a building consensus, is coming to an end) these figures are going to change, and you’ve been out of the job market for, as I understand it, over 10 years so your ability to absorb a shock is limited. Most financial analyses I’ve seen don’t seem to take into account extenuating circumstances and downturns. There are echoes of “home prices can only go up” all over this thinking. Also, even not taking these into account, if you’re living in SF and have a wife and kid, “$195,600” is not really very much given the cost of living (if it even if you’re income DOES end up being that much when you get hit with shocks.)
For sure. I definitely made a mistake retiring too early. I’ve written about it and I’m now paying the price.
But I try to stay positive, move forward, and do the best I can to take care of my family. My goal is to get to $300,000 a year in passive income by the time my boy goes to kindergarten in 2022 in order to live a simple lifestyle in SF or Honolulu. But there are obviously no guarantees.
Do you think I should go back to work? I’ve been a stay at home dad now for 28 months and my boy is going to preschool this fall. Do you have kids? How does your budget look like and when did you or when do you plan to retire?
Thanks for the advice!
The biggest blind spot, in my view, is that you don’t have the ability to absorb shocks (things like your kid may need special schooling for whatever reason. These things do happen and these situations are often overlooked in an analysis), much of your income is variable, and your methodology hasn’t been tested in a bear market (which I must imagine will likely negatively impact your variable income; a huge chunk of your portfolio.) If you own your home free and clear, that’s a GREAT start because California’s too expensive and I would not live there. In my state, AZ, we get migrants from California. They sell their homes in Cali and buy castles here with the proceeds. AND their property tax bill is less, never mind the cost of living (and traffic). I’m currently FI, not planning on retiring. I knew twenty years ago when I started my career that I couldn’t accomplish my life goals if I was suffering at work. So, I focused on steering my career in directions that paid well and that I found fulfilling.
Got it. Now that you’ve pointed out my blind spot, do you think it is still a blind spot? What are some of the things you think I should do now to help prepare for financial disaster?
Related: https://www.financialsamurai.com/dire-movement-delay-inherit-retire-expire/
https://www.financialsamurai.com/a-bear-market-checklist-to-thrive-in-a-downturn/
It surprised to me to find out that San Francisco is a great value but I guess it is compared to other international big time cities.
I’m glad to infer that you have decided to go to Hawaii. I think Hawaii is one of the top places to live/retire to. Expensive but great locale/weather.