I made 6 figures at my Facebook dream job – but couldn't afford the Bay Area
vox.com
vox.com
What‽ Selling capital in order to finance daily survival is terrible: the entire point of a working life is to accumulate capital in order to finance a retirement.
Not having a roommate was, literally, a luxury he and his family could not afford.
> But for a person with a family of four who has a certain lifestyle that they want to try to maintain (a niceish $40,000 car, the ability to go out once a month and leave the kids with a sitter, a house that wasn't last remodeled in ’70s, etc.) it can be difficult.
If you have a wife and two kids, then maybe buying $40,000 cars is a mistake. Maybe getting a fancy house is a mistake. True fact: children survived into adulthood just fine in the 1970s. Part of being an adult is knowing how to differentiate between essentials and luxuries.
Honestly, with his sort of (admitted) short-term financial mismanagement, I don't think he could survive on six figures in Dallas, Houston, Denver, Kansas City or anywhere else. He'd make the same sort of bad decisions, perhaps with a longer runway to ruin.
And yet people do it all the time. Not to mention the billions living hand to mouth.
Yes my parents drive a Prius. But growing up in a family with 5 other siblings, they pretty much drove beaters. And our house started with, as we so fondly called them, the seven ugly carpets of the world. And those were slowly replaced over time. The house we lived in until I was one had slanted kitchen floors - just throw a towel at the correct wall if you spilled.
The point is that our parents affluence isn't the result of a general rise in affluence - it's accumulated. But we often don't think about that when making our early financial decisions.
I don't think that's telling the whole tale.
Soon after my parents got married in '74 they bought their first home, brand new. It cost 5 years of my Dad's salary at the time (a new teacher). So with the two of them working, they paid it off in just over 3 years.
Go find me a house for sale now that's less than 10 or 15 years of an individuals salary.
The world is a much different place - so I think people want the nice things their parents had, and they'd be happy if it were even the same timeline, but it's much, much longer.
Are you living in the Bay Area? Is that why medium home prices are so high?
Canada/Australia.
Pretty much anywhere you want to live houses are insanely expensive. Upwards of $450k for a 2-3 bedroom built in the 60s.
My condo is worth 1-1½ times my salary.
'The Census ACS 1-year survey reports that the median household income for the Dallas-Fort Worth-Arlington Texas metro area was $59,530 in 2014, the latest figures available.'[1]
'The median home value in Dallas is $147,400.'[2]
$147,400 is 2.47 years. Double that, if you think the median household has two incomes.
U.S. median household income is $56,500. There are plenty of houses to be had for less than $565,000–$847,500.
[1] http://www.deptofnumbers.com/income/texas/dallas/
[2] http://www.zillow.com/dallas-tx/home-values/
[3] http://www.nytimes.com/2016/09/14/business/economy/us-census...
There seem to be a few houses in San Francisco for sale now that are under $600k: https://www.redfin.com/city/17151/CA/San-Francisco/filter/so...
Raising the limit to $1 million, which is less than 10 to 15 years of many tech people's salary, greatly increases the number available.
Note I've set the filter to only include houses. It excludes condos, townhouses, and multi-family dwellings.
Median American home sale price July 2016: $244,100 [1]
[0]: http://www.reuters.com/article/us-usa-economy-poverty-idUSKC... [1]: https://ycharts.com/indicators/sales_price_of_existing_homes
That being said, I'm making $115k in Dallas and have zero intention of having kids on this salary. One kid is expensive; I can't imagine having two or more. The sacrifice would be too much for me to handle. Even when I made $160k in New York I wouldn't have considered it.
The point of the article wasn't that I am poor you should feel sad for me. The point was: look the Bay Area is so expensive that it is impossible to afford unless you are making an extremely high salary. A good salary isn't enough, a high salary isn't enough, it has to be extreme otherwise you will need to make life style sacrifices to live in the Bay Area.
Especially with major cities, having a single income family is only viable if one person earns a lot and/or the couple has no intention of buying a property and settling down.
(To say nothing of the prudence in financing a depreciating asset)
I make 6 figures, drive a 16yo car (2000 accord FTW!), take public transpiration to work, brown bag lunch. My partner works part-time to take care of our child. My home is the right size for what we need.
Why does this guy have to live in a Bay Area? No one is going to weep for you, buddy. You made bad life decisions and you need to deal with them.
EDIT: spelling
ish.
High on the list of signs that you've bought far too much into lifestyle inflation is thinking that a car costing 70% of the US median household income is only "nice-ish."
Henry Ford back in the day raised wages and cut hours because he noticed not even his employees had money or time to enjoy his product.
I think Silicon Valley is at this same point. Work your butt off to not enjoy life. If your single I think the economics work out but for families the area is very hostile.
I make more than 100k, and I have never bought a car for more than $14,000... why? Because I choose my family over my lifestyle.
The guy doesn't work at Tesla, but if the average employee in Tesla can't afford their standard model and have enough money left over to live they are not a viable company, as Henry Ford figured out more than a century ago.
It's capitalism 101, you cut labour costs only to find that you've cut demand as well.
I thank God every day that I don't live in California, so my standard of living at the same income is awesome and times are great for my entire family. All because I won't work in CA.
I have a cushy tech-job yet still drive the hatchback I bought fifteen years ago for $2000. Choices...
Perhaps you wouldn't consider spending $40k on a car. But I'm sure that there are items that you would splurge on, even if you didn't.
Some people really enjoy cars. I mean, yeah, you're not going to get sympathies from people about the Bay Area being "so hard" to live in (let's be real: it is really fucking expensive to live out there), but at the end of the day, it's your cash.
Then again, I'm biased; I would never drive a cheap beater car. Too uncomfortable, too unreliable, too much sadness. I like cars.
There's a large gap between a $40k car and a "cheap beater." It's full of ... nice cars. There've been plenty of other examples in this thread.
The author of the article didn't want a nice car. He wanted to indulge an expensive passion for high-end cars. I'm not going to criticize the passion - I'm in the middle of a hideously indulgent kitchen remodel (which is costing quite a bit more than that car, alas). Where I disagree is with the implied lack of awareness that these expensive hobbies are one of the underlying factors that rendered his lifestyle incompatible with his salary.
"I love expensive, fast cars, and found that by getting a good job in a low-cost-of-living area, I could feed my family and still indulge my passion" -- good on you! Three thumbs up for making that move. I just moved back to Pittsburgh from Palo Alto. You'll get no disagreement about the cost of living in the bay area in general. Housing is offensively expensive there.
That sounds like me as a part time student / part time grocery store minimum wage shelf stocker around 1990 in the greater Chicago land area (well, within a very distant orbit of Chicago). I suppose most people would have considered me very poor at that time. I was on no government programs (other than uni student loans like everyone else). I had no medical insurance but I ate good food when I wanted. On the other hand I couldn't afford good steak, it was cheaper, but good and healthy, food. I was financially very hand to mouth no savings couldn't afford to "go out". Probably why I don't go out drinking now, never got in the habit when I was young. There are certainly poorer people, but the best case scenario being I'd have to downgrade to a starving student lifestyle is incredibly unappealing.
In summary it sounds like if you work full time plus at Facebook in CA (admittedly in 2016), your standard of living will be the same as working part time as a grocery store shelf stocker outside CA (admittedly in 1990). Of course my commute was better, but the CA guy has already graduated so he doesn't have to balance work and school like I did, so it kinda balances out.
I don't know by direct experience, but I hear even entry level hires are doing significantly better than $100K at Facebook.
On that same note, the author should count his blessings. He received options. He was able to sell those options (a move many of us are criticizing) to buy a luxury car. Most people don't, or leave before they vest years later.
Live by yourself, and you won't find a decent place for less than $2k/month anywhere. Accounting for taxes, that's about $40K/year, which is more than someone with a $100K income should be paying for rent if they want to stay financially stable.
And while Facebook might have East Bay shuttle buses (though I don't think they do to any meaningful extent), what about all the other companies that aren't Facebook?
If you're saying that he does not deserve an upper-middle-class lifestyle with a higher-than-median-price car, then we've been sold a bill of goods.
If I wanted to live in a tiny apartment with roommates and never get married and have a family (because what woman is going to do that with you when you can't afford your own place?), then why would I bother going to college for a difficult degree, racking up student loan debt, and working hard in a difficult profession to build up a professional resume and quality work experience? I could just go work at a grocery store, and/or get on welfare, right?
What exactly is the point of striving to accomplish something if you're not going to be rewarded for it at all?
The good ones.
> We could finally rent a house for just our family, no roommate. It was great, but that also meant even larger housing costs. In order to afford that, selling stock became necessary every quarter it vested. Obviously, this is not the path to financial security, but when the sum of money that lands in front of you isn’t life changing, you look to the short term and what it can do for you right now. In many ways, this follows exactly with the Silicon Valley hustle that many startups fall into. The path in front of you isn’t always clear, so you hedge your bets.
WTF? If your day to day financial survival depends on selling stock as it vests you're either a) an idiot or b) backed into a corner. In this guys case, it should have been obvious when he started the gig that it wasn't sustainable. If not immediately, then when he moved out and started selling stock to cover renting a house.
A pretty simple rule is that you should be accumulating capital, not spending it to cover operating expenses. Sure if shit hits the fan, and it invariably will at some point, you will be spending from capital till you get back on your feet. But it shouldn't be a day to day thing.
"Matt Kulka works for Local Motors in Phoenix, Arizona. He loves to drive cars around race tracks, his expensive hobby that he just doesn’t want to kick."
"My salary was about on-par with what I was making at my last job in Phoenix — just barely breaking into the six figures — but housing costs were significantly different."
Who in their right mind would move to the Bay Area on a Phoenix salary?!
Stock Options
Work at Facebook
I think this article is speaking out against this narrative that techies are incredibly well paid while in reality we mostly work in over priced cities with awful commutes and have a government and industry openly trying to suppress wages.
Any time one of us says "hey, we aren't that well paid" there is always someone to say we should move further away from work, or downsize, or skip having a family, or stick to rice and beans and it's getting old.
No "ifs," "ands," or "buts." That's just bad financial planning. It's a totally unnecessary luxury that holds the potential to burden the entire family.
Additionally, your definition of "middle class" is quite peculiar. The median wage in the United States is less than $30k. The median household income is less than $60k. Do you really think "middle class" families are buying cars that cost as much as one of their salaries?
The narrative is that we are so well paid that we should be able to do that. But we obviously can't.
I'll concede that software engineers are overpaid and in such high demand when that is the case for the median case.
Just caught your edit. Middle class is relative to cost of living. Most of us work in cities where the CoL is much higher and so is the middle class income. It'd be better if we can both stick to comparing apples to apples and I think in this case sticking to cities is our best bet. SF median income is 100k [0]
[0] http://www.deptofnumbers.com/income/california/san-francisco...
If "the narrative" indicates you "should" be able to spend that much, you need a new narrative. Ideally one that will not send you into penury.
In any of the prime real estate markets it's hard to live on one salary. That is not a problem unique to the Bay Area. Furthermore, barely breaking 6 figures is not a generous salary in tech (he even says it was on par with his salary in AZ).
Middle class families are basically priced out of Silicon Valley.
At least that's what I'm beginning to notice anyway.
The fiscally responsible thing to do would be to move to New York City, take a $100k+ job, live about 45-60 minutes away in Brooklyn, Queens, Staten Island or the Bronx, create an emergency fund, get promoted a few times and spend a good while finding a high-paying job in the area you actually want to live in that has a significantly lower COL.
The thing about SF is that it isn't just the rent that kills you. You also get taxed like crazy for everything and, from what I've heard from coworkers over the years, you'll need to have a car to be realistically mobile outside of the Bay (unless you never leave the Bay, of course). Insurance premiums cost more there and CA gas is the most expensive in the nation.
As much as we like to complain about it, public transit in NYC is amazing. You legitimately don't need a car to live there. It's darn convenient in the outerboroughs, but it isn't a necessity and, in many cases, it's a pain in the ass. Speed limits are low city-wide. Expressways top out at 50 and are usually set at 40 because of population density and shitty road conditions. People are super aggressive. NYC is not fun to drive in. Manhattan is much much worse.
Nearly the entire city is reachable by train and/or bus. You can save a lot of money this way.
On a side note the Bay areas' affordability problem could be greatly reduced if more dense housing stock was pursued. Sadly, I fear too many of us demand living in houses as an unassailable demand.
Then again, it sounds like tat guy's spending was way out of line. Like many people, he probably blew his money on expensive toys(and a penis car) to gain a feeling of status.
I kinda stop reading and just started skimming after that.
In NYC, there was formerly a politically induced scarcity of taxi medallions (limited to 13,000) with the result that medallions had a market value for $1.2 million and taxi riders paid higher fares to help cover the higher taxi leasing prices of drivers. Once Uber/Lyft came to town, the politically induced scarcity was no longer occurring as there were many more taxi-like vehicles. The result: taxi medallions dropped in value to $700,000 and Uber/Lyft rides have been getting cheaper (but still far higher than LA, Chicago).
See (Harvard Economist) Edward Glaeser: Build Big Bill http://www.nydailynews.com/opinion/build-big-bill-article-1....
and Financial Times columnist and BS, MS Economics Oxford Tim Harford: The Undercover Economist https://www.amazon.com/dp/B007NIDW1Q/
Many people complain about the high cost of living, but the issue is simply political. High tech people, particularly need to get involved in politics to help make housing more affordable for all. Simply fix the "rent seeking" laws that restrict zoning density.
In the 19th century, David Ricardo wrote about the "Corn Law" which placed high tariffs on all grain imported to England with the result that landlords that owned land that grain was grown on realized far greater "economic rents" amounts of money for their land while other people paid for for basic food such as bread. Ricardo went into politics to help reverse the Corn Laws with the result that landlords no longer realized their regressive tax on consumers while food prices decreased.
The housing problem is simply another case of "Corn Laws."
In particular, Google (Alphabet) has a profit making subsidiary called Sidewalk Labs for improving cities.
From the website: "Sidewalk Labs is a new type of company that works with cities to build products addressing big urban problems."
City Labs is in a position to use Google's resources to make housing more affordable. Google owns one of the largest office buildings in NYC and Sidewalk labs is located in NYC, so NYC might be a good place to start.
Like Ricardo's case of reversing the "Corn Laws" this is simply reversing unfair laws that benefit landlords over renters and make housing unaffordable. No increase in taxes are required.