Raising a family is difficult enough, with the childcare costs, career sacrifices, sleepless nights, and constant worry. But raising a family in an expensive coastal city like New York, San Francisco, San Diego, LA, Boston, and Washington DC can be an absolute nightmare.
You will feel like you are always grinding, like this one couple in NYC who earns $500,000 a year and feels like they can’t get ahead. Or how about this $300,000 a year couple in slightly cheaper San Francisco who feel utterly middle class.
If you want to raise a family in an expensive city, you’ll likely need to earn more than $500,000 a year to save comfortable for retirement, pay for your children’s tuition, and own a regular home.
Here are some specifics on why it’s hard to raise a family in San Francisco where I’ve lived since 2001. I’m a father to a wonderful baby boy and I’m considering leaving to go to Honolulu, which is about 25% cheaper, and 100% nicer!
Specific Reasons Why It’s Hard To Raise A Family In An Expensive City
1) Property taxes. At 1.25%, the property tax is a never-ending wealth tax you cannot escape. With the median home price at ~$1,500,000, we’re talking a $18,750 annual tax bill if you bought a regular house today.
2) Public school lottery system. Despite paying $18,750/year in property taxes, you have NO GUARANTEE of getting your child into the public school system in your neighborhood. The public school lottery system asks you to list 20 schools for the hopes of getting your top choices. San Francisco does this for social engineering purposes.
3) Private schools are expensive. Given you likely won’t get into your top public school choice, you’re forced to pay $30,000+/year for elementary/middle school and $40,000+/year for many high schools on top of paying property taxes that go to public schools.
4) High cost of living in general. Besides high home prices and high tuition, you also have to pay state income tax that goes up to 13%. Thankfully, if you make under $100,000 a year per child, you qualify for financial aid at many private schools. Here’s a budget of a family of 6 that makes $390,000 who has a NEGATIVE $70,444 left over due to the cost of private school.
5) Major congestion and filth. When I first moved to San Francisco in 2001, it was a quiet and pleasant city where traffic and lines were manageable. Now, in 2018, the city has become like Manhattan, a nightmare to get around. It’s very difficult to get a table at a good restaurant and the competition to get anything is intense.
Public transportation infrastructure has not kept up with population growth. The city pays massive wages to its employees, yet the city continues to break down with a growing amount of filth everywhere. Growing filth on the streets is a negative sign for raising children. This means there are more deranged adults who don’t care about order and the safety of your children.
6) People always make you feel inferior. Because someone is always crushing it at work or at their startup, you constantly are made to feel like you’re not working hard enough. Even if you make a million bucks, you’ll know someone who made 10 million bucks. The feeling never ends because the concentration of go-getters and wealth in places like SF and NYC are the highest.
Even though I no longer work a day job for a living, I’m 50% less stressed when I return to Hawaii. Being constantly surrounded by super successful people is a drag.
You Need Too Much Money Here To Be Happy
If you want to own a home, raise a child, save for retirement, and not work forever, you really need to make about $300,000 a year just to live a middle class lifestyle today in an expensive coastal city. And given that you have to make so much, it’s only natural that you’re going to start getting burnt out or pissed off at the overall cost of living in the city, especially when you constantly hear about people making mega millions from their startups or their huge executive compensation packages.
The grind is what made me sell my SF rental house with a 2.4% cap rate and buy real estate in the heartland of America through real estate crowdfunding where rental yields are higher, valuations are lower, and people are happier.
There is no reason to be paying $6,000+/month for a crappy three bedroom in San Francisco or NYC when technology allows you to live anywhere in the world and geo-arbitrage. The world is big, go explore it.
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About the Author: Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate.
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