high or low Cost of Living area, whats your preference?

[bigdaddybus]

So another thread was slightly hijack with a discussion on cost of living and if its worth it. I have always struggled with this, wondering if I should "make the leap" to a big city with higher pay.

My situation: My wife and I both work and make 100K each in the midwest in a low cost of living area. I have checked PHX, San Fran, and Denver in cost of living calculators and found an increase of 36%, 186%, and 35%. Atlanta is the closest I have found with just a 5% increase over our current cost of living.

What is your take? I would love to hear from those in high cost of living areas and wouldn't want it any other way.

To me, the longer commute times, crowds of people, high housing costs have outweighted the higher pay, more activities, more job opportunities in my decision making thus choosing to stay put.

[bigdaddybus]

Also, are the cost of living calculators out there very accurate? Which is the best?

[phantom]

Regardless of how much it costs to live where I do relative to other areas, I'm not going anywhere because I value living close to family too highly to seriously consider moving.

But, hypothetically, if I were starting out in my field today with no ties to any particular area and thinking strictly about money, I'd pick a HCOL area (but not the highest) somewhere pay is high but rent isn't through the roof. I'd live there as cheaply as I could throughout my 20s and save like crazy. Then sometime in my 30s, I'd move to a less expensive area where my savings could go farther. Of course, the plan would probably backfire as I developed ties to the area and didn't want to move away.

As it is now, I'm currently in my mid-30s. While I think my savings is pretty good for the LCOL area I'm in, I would feel like I was taking a huge step back if I moved to a HCOL area, even if I could double my salary by doing so.

I think cost of living calculators are nice for a quick comparison, but if I were actually making a move, I'd look up the big expenses individually. A cost of living calculator doesn't know what house I'll choose and how I'll weight the size of it verses the exact location. It doesn't know whether or not I need to pay for child care. It doesn't know whether or not I might choose to go without a car in one city but not in another.

[sv2007]

What is your take? I would love to hear from those in high cost of living areas and wouldn't want it any other way.

To me, the longer commute times, crowds of people, high housing costs have outweighted the higher pay, more activities, more job opportunities.

I live in a high cost of living area (SF bay area) and in the past have lived in a lower cost of living area Austin, TX. I moved from SF bay area to Austin, TX, partly because of the cheaper cost of living (I kept the same base salary); then moved back to the bay area.

After the experience, I have decided that location is a major part of lifestyle, and there's no right or wrong to me from a financial standpoint as long as your decision is sustainable long term.

Living location is highly personal and affects a person in more ways than just income and living costs, like changes in hobbies (I wasn't surfing/skiing as much in Austin), adjusting to different political views (better gun laws in TX), closeness to family, way less Chinese food/grocery, etc.

If one cannot afford the higher cost of living area (e.g. cannot live close enough to work), then it is a no brainer, moving to a lower cost of living area is required. Otherwise, it would just depend on the lifestyle.

[rennigade]

Its all about quality of life...simple as that. You can move anywhere but if you do not like the area does it really matter how much you make?

Do you like being around tons of people? How bout sitting in traffic for 20 minutes to go 3 miles? Do you like being separated by 5 feet from your nearest neighbor? If those sounds like fun to you then move to a HCOL area.

[corn18]

I like living in a LCOL area and making VHCOL wages.

[Nika]

That depends on what you value.

If you value a large house (or a house - you may have 40 million, but if you want to live in Manhattan, chances are you will still be in a coop apartment, but a very nice one) HCOL is not the way to go.

If you are fine in a small apartment but value endless entertainment, food and shopping options, than HCOL rules. There are also more options in a large rich city, so that if you do not like your new work environment, you are not stuck with one employer or a small network of employers who all know each other.

For example, for some, there is an unshakable belief that kids need a yard. Others are willing to get off their a* and take said kids to park/playground/downstairs pool. That requires more energy and time investment that putting them to pasture in a yard and watching from the window, but it works out.

But bottom line is - sometimes HCOL are high for a reason. People are willing to pay this price and not everyone is striving for the same lifestyle.

[MonkeyMama]

As with anything, we fall squarely in the middle. Did not see HCOLA (where we grew up) as a viable place to live and raise kids in our 20s, but we didn't have the *right* jobs. So we moved somewhere more moderate, which seems to be the best of all worlds.

(OP: If you are making six figures each, I'd stay put! I have friends in SF area that don't make that much, as commented on the other thread). Though at this point in my life I could maybe add $30k to my salary (if I took a similar job in SF), the difference would mostly be eaten up by taxes. The small bump in salary wouldn't make up for cost of housing, much less other increased expenses.

That said, I've always lived in the center of a large city (in the suburbs, but just a few minutes from downtown), and have always lived in California. There are certainly many perks. The weather is amazing. We don't have "weather expenses". Cars last longer than average in the mild weather. College options are good/plentiful and inexpensive. The higher wages of a sole breadwinner may be kind of moot if the higher wage pays for higher expenses. BUT, second income is just gravy to us and we have access to bigger pots of gravy. Our kids will also be able to make good money in high school and college, like we did. (These are just a few things off the top of my head. Not a complete list by any means).

We've never done the commute thing. We are picky about that but there are always jobs in our backyard. That's been true anywhere we have lived.

[LivingAlmostLarge]

I am a BIG proponent of LCOLA! I think people in general get farther ahead in a LCOLA because they don't make that much less but cost of living is so much lower that your income goes farther.

That being said I've only lived in HCOLA so I'm one to talk. I probably am making LCOLA seem better than they are since I have no idea what it's like. I know I should say HCOLA but I personally if I had no ties would live in a LCOLA.

But for us family is the #1 thing so where we live is heavily influenced by that. That being said we chose where we chose because it's cheaper than everywhere else, not cheap, but cheaper. And it's closer to our families.

And from the current experience money goes A LOT farther with a cheaper COLA. Also we got a pay raise, which DH was due for anyway but probably not this much. But it's hefty. So we can now buy a house for less money. We make more money. We live one flight and driving distance to our families. Win-win-win.

So I'm all for LCOLA and moving to a LCOLA. I think you are doing fabulously with 2 six figure incomes and LCOLA.

I think where the HCOLA comes out ahead is if you are a saver. Why? Because I think in a LCOLA if you make a reasonable salary you are used to spending very little on housing and other stuff. So you are able to instead spend all your extra money on travel, eating out, cars, etc. I think in LCOLA you can go hog wild and live like a king on say $100k. But if you make $100k in SF, NY, DC, Bos, it's barely middle class. So you are used to living lean with paying 50% of your salary in rent and nothing else to live on.

Where we live now families making $100k are in 4 bd homes with 1 parent at home, good schools, vacations, eating out, families of 3-4 kids, etc. Where we moved from? $100k bought you maybe a townhouse/condo, not a great neighborhood, longer commute, few vacations, few luxuries, 1-2 kids. People think nothing of the sacrifice.

So i think in LCOLA it's very easy to get caught up making $100k and living like the Joneses.

[Singuy]

I am a BIG proponent of LCOLA! I think people in general get farther ahead in a LCOLA because they don't make that much less but cost of living is so much lower that your income goes farther.

That being said I've only lived in HCOLA so I'm one to talk. I probably am making LCOLA seem better than they are since I have no idea what it's like. I know I should say HCOLA but I personally if I had no ties would live in a LCOLA.

But for us family is the #1 thing so where we live is heavily influenced by that. That being said we chose where we chose because it's cheaper than everywhere else, not cheap, but cheaper. And it's closer to our families.

And from the current experience money goes A LOT farther with a cheaper COLA. Also we got a pay raise, which DH was due for anyway but probably not this much. But it's hefty. So we can now buy a house for less money. We make more money. We live one flight and driving distance to our families. Win-win-win.

So I'm all for LCOLA and moving to a LCOLA. I think you are doing fabulously with 2 six figure incomes and LCOLA.

I think where the HCOLA comes out ahead is if you are a saver. Why? Because I think in a LCOLA if you make a reasonable salary you are used to spending very little on housing and other stuff. So you are able to instead spend all your extra money on travel, eating out, cars, etc. I think in LCOLA you can go hog wild and live like a king on say $100k. But if you make $100k in SF, NY, DC, Bos, it's barely middle class. So you are used to living lean with paying 50% of your salary in rent and nothing else to live on.

Where we live now families making $100k are in 4 bd homes with 1 parent at home, good schools, vacations, eating out, families of 3-4 kids, etc. Where we moved from? $100k bought you maybe a townhouse/condo, not a great neighborhood, longer commute, few vacations, few luxuries, 1-2 kids. People think nothing of the sacrifice.

So i think in LCOLA it's very easy to get caught up making $100k and living like the Joneses.

Hmm..not sure if I agree to this. You spend 50% of your paycheck on your rent or mortgage..I feel like that's worst than spending more of your income on traveling or living the Joneses life. At least you have a bunch of junk in your house or experiences from traveling. If you pay a huge portion of money toward rent or toward interest/property tax...that money is GONE. You have nothing to show for it.

[LivingAlmostLarge]

No but I've noticed in a HCOLA people tend to have their biggest asset be their house. In 30 years even the lower wage earners get lucky. Then they can cash out their equity and move somewhere cheaper and that's their savings account. That savings account that a higher wage earner in a LCOLA doesn't have to fall back on.

Like I said most of my family is using that method for buying a house say in the 80s for $200k that is now worth $900K+. Have they save much outside? No. But the house is going to mostly generate their retirement savings. Not saying it's right but it's what happens.

[Singuy]

No but I've noticed in a HCOLA people tend to have their biggest asset be their house. In 30 years even the lower wage earners get lucky. Then they can cash out their equity and move somewhere cheaper and that's their savings account. That savings account that a higher wage earner in a LCOLA doesn't have to fall back on.

Like I said most of my family is using that method for buying a house say in the 80s for $200k that is now worth $900K+. Have they save much outside? No. But the house is going to mostly generate their retirement savings. Not saying it's right but it's what happens.

I think that has a lot of do with the huge spike in house prices that made these places HCOLA. Other parts of the country are experiencing a slow mo 2.5% appreciation, while places like silicone valley experienced a 10-15% appreciation a year. I think that's more or less luck. It wasn't always that HCOLA priced the average earner out of the market until lately. If you were to live in these places NOW, expect to have nothing in equity (unless you want to make that huge downpayment) since most of your mortgage will be heavily front loaded with interest ..also I think bulk of the appreciation is done..but I don't know the market that well over there so I'm not sure.

[bigdaddybus]

Thanks for all the responses

One thing I have taken from them is that HCOL areas tend to have much more real estate appreciation than I have ever seen in the LCOL Midwest. I think this should be considered as a "potential" advantage to some HCOL areas. (assuming we don't have 2008-2009 again)

I will add that living in a LCOLA I easily have more value in my 401K and pension than equity in my home, since home values don't appreciate much here.

[Fishindude77]

Big fan of getting more for your money in LCOL areas.
You can buy a nice house in my town for $60,000.

[MonkeyMama]

Thanks for all the responses

One thing I have taken from them is that HCOL areas tend to have much more real estate appreciation than I have ever seen in the LCOL Midwest. I think this should be considered as a "potential" advantage to some HCOL areas. (assuming we don't have 2008-2009 again)

I will add that living in a LCOLA I easily have more value in my 401K and pension than equity in my home, since home values don't appreciate much here.

True.

When our parents retired their houses were their biggest assets, hands down. & I mean, my in-laws paid $30k for their house in the 1970s. It just appreciated 2000% since that time. Our parents are aggressive savers who retired very comfortably. & they bought modest homes in their 20s. It was just impossible to out-save their home appreciation. They have no plans to move or sell their homes.