You need to compare the difference in CoL as the percentage of that salary that goes towards CoL. In other words, if you save 50%, to keep the same standard, you need to CoL adjust only the other 50% (and maybe a bit more to keep your emergency fund weighted).
Great insight. Here in NYC, I know a few frugal programmers who share a 2 bedroom with a friend such that he pays about 25% of his income in rent (that's A LOT of money to save/enjoy life with). Another is nearing 40% but because he prefers living alone. And there's always the "I want to live like they did in Friends/I want a 10 min commute" coworker that spends 60%+ on rent.
These kind of studies make it seem like most people live like the latter, when my personal experience as an engineer in NYC, the city is not unaffordable at all ... unless you want to own property ASAP. Honestly, what I've learned is that COL discussions are hard because people spend money differently and value different things.
If your basket of goods includes a few acres of land these estimates will dramatically underestimate how much more expensive NYC is than low COL areas.
If your basket of goods includes a lot of world-class arts and dining NYC would probably end up being less expensive than a lot of low COL areas because you would have to do a lot of traveling out of the low COL area for that.
People have widely differing preferences of life-style so it is very difficult to come up with a single number to describe COL differences that applies to very many people.
Not to mention that the rent in expensive cities only rises. It’s even more important to become an owner if you want to stay more than a little while.
Yes, but you aren't spending your entire income on housing. What type of housing you choose has a huge effect on the relative cost-of-living between two locations.
Let's take two hypothetical locations, L1 and L2. In L2, housing is three times as expensive, goods in the category G1 are 50% more expensive because you have to buy them locally and retailers have higher expenses and goods in the category G2 are the same price because you order them from Amazon. You make $100k in L1, how much do you need to make to have the same lifestyle in L2?
Scenario 1: In L1, you spend $20k on housing, $20k on G1 and $60k on G2. To have the same lifestyle in L2, you need to spend $60k on housing, $30k on G1 and $60k on G2 for a total of $150k. So for you, L2 has a COL of 150% of L1.
Scenario 2: In L1, you spend $60k on housing, $30k on G1 and $10k on G2. To have the same lifestyle in L2, you need to spend $180k on housing, $45k on G1 and $10k on G2 for a total of $235k. So for you, L2 has a COL of 235% of L1.
So, which one is the real COL? They are both are equally valid. COL only makes sense in the context of a specific lifestyle. The best these single number answers can do is to guess what the average person's spending patterns will be, but people naturally self-select towards areas that are more favorable to their preferred lifestyle which means that the average spending patterns are often not an accurate reflection of the preferences of people who have chosen to live in that area.
This particular article is even more egregious though. Having the "adjusted tech salary" in Austin be $200k is a little bit absurd. I don't understand how they possibly got these numbers, but the process seems even more flawed than just neglecting to talk about savings.
$200K in CA, for a single filer, has a marginal income tax rate of 9.3%; the total rate is 8.01%
You would be able to save a nominally higher amount in a high cost-of-living area, but if those funds ultimately would be spent in that place, then is it an important distinction?
Sounds like me. Just kidding, this is a really valid point, and I never thought about this missing variable.
This would only be a valid comparison if you don't plan to repatriate a substantial portion of your earnings to a low CoL city.
TLDR: Move to Montreal.
I personally live in a 3 bedroom apt I rent for $635 a month ($795 if taking into account the electricity used for heating) and the apt is located 25 min by public transportation (foot + metro) away from downtown.
Wow thats incredible. What are salaries like though?
Seniors can certainly reach 100k+.
edit Another offer I got, Entry level Production Support at a bank pays 60k with 3 weeks of vacations. Deloitte also had a job of customizing ERP for clients in similar $ range if you're interested in corporate stuff.
All of the above example are for <1 year of experience.
As far as actually getting a job I would say it's very easy, even with little experience. A LOT of companies (tech and non-tech) are looking for talent and you easily get offers, although top/elite companies are mostly similar to the US in term of selection.
It may still be a good balance of salary to cost of living, and probably is since most tech hubs are also very expensive. But, it's not like it once was (I first bought a house there in the early 2000s, and have rented, and shopped for real estate, there on a number of occasions since then).
On a side note, there are legit reasons why most people try to keep up their appearances as opposed to live frugally and save every penny.
Austin did best, but that isn't cheap.
Suppose NYC real estate is 8x the cost compared to my current city of Lehi, Utah.
* If I want a large house with a yard, I'll pay $500k with $1.8k/month mortgage in Lehi, or $4 million with $14.4k/month mortgage in NYC.
* If I want to share a smallish apartment, I'll pay $400/month in Lehi, or $3.2k/month in NYC.
Non-real estate items like groceries, gas, and gym memberships are not 8x more in NYC. (They're more, but not that much more.)
So.....what am I comparing? Good housing, or good transportation, or good hobbies, good savings, etc.? I'm assuming the measurement averages these, but people prioritize and consume these different than the average.
If you live in a cardboard box and save most of your pay check, you'll get an overall pay raise in NYC.
That's not even remotely realistic. $3,200/mo in NYC will get you a luxury 1bd in Manhattan. $1500 is more like it for a small studio or roommate situation.
(2) Perhaps I should have done the numbers with 4x. The idea is the same.
No, but they can't talk about something more reasonable, either; the price of the majority of the Bay Area's housing exceeds the income of the majority of Bay Area engineers.
(This assumes a median house price of ~$750k (cf, ), and an unwillingness to pay 45% of your after-tax income in housing.)