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geggam

Single income, Alameda county ( Fremont ), family of 4

No car payment, No credit card debt,

130k will let you live and eat with a bit of room to go do things once a month.

If you have a car payment and or credit cards kiss that once a month thing goodbye

150k will let you have a car and do things

Source : I left that area recently

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As a counterpoint, my family of 3 is living in San Bruno (San Mateo county, on the peninsula) on a budget of $50k[1], and enjoying life immensely. We do without a lot of things that other people probably take for granted, but it's by choice, not necessity. And even within that limited budget we can afford some great perks that most of humanity can only dream about, like a reliable car for getting around town and the two trips we took to Europe last year. I don't blame anyone for making different choices -- our lifestyle probably isn't a good fit for many people -- but I do think it's important that everyone realize that life doesn't have to be as expensive as what the median consumer spends in the developed world. Once you know that, you can make a deliberate choice about how much each additional luxury is actually worth to you, taking into account the opportunity cost of spending a dollar now vs having it available later.

[1]: This number is not related to my take-home pay, the balance of which is automatically invested and ideally forgotten until retirement. One of the great mysteries of human nature is that the average individual living a perfectly happy life on a salary of X will, upon finding himself earning 1.5X, naturally increase his expenditures to 1.5X as well, and yet find himself no happier than he was when his spending was just X. Don't be the average individual!

Given the effective tax rate in CA and the outrageous rents I would assume you have no housing costs to manage this.

That or you live on the streets

You're right, I was unclear. $50k is our after-tax spending (including housing, which we're renting at market rate). For a couple making $130k like you mentioned above, with the worst-case scenario of 0 deductions or tax credits, total state+federal income tax should come to about $40k, leaving ~$90k after-tax to play with.

Same for me. At $130k I was paying off debts at $2k/month but otherwise living paycheck to paycheck. At $160k I now finally have a little extra, replaced my old broken car and have a little cash to save. Rent is $1450 for a studio with no kitchen. I am 32 and single but want a home. I grew up in this area and I feel like I'll have to work forever and start saving aggressively to be able to buy a home and have anything for retirement.

Over the next few years I will travel and see what other areas of the country are like.

Answer: you live like a king at 100+ in lots of major cities.

Honest question. I just looked at Redfin and the average house costs around $1.2mm. How would anyone making $130k with 4 dependents buy a house? You seem to fit that criteria so I'll ask you. How on earth did you afford that? Because based on my simple math there just isn't enough money for it to be possible.

My wife and I work full time, combined income is just below $400k. With a mortgage on a 3 bedroom in Oakland, daycare and after-school care costs, student loans, et al, we have never been more broke in our lives. I was living large when I was making $75k and not living in the Bay Area... now, it's beans and rice most nights, and hoping the early 2000's honda doesn't break down on the way to school.

Wait a second. You and your wife pulled in ~$30K per month pre-tax, so I'll be generous and say $15K per month after tax. Any you have never been more broke? Even with kids I'd be hard pressed to call that broke unless you had ridiculous student loans. And in that case, you're screwed where ever you live.

That's what I was thinking too. If your mortgage on your 3br in Oakland is $1MM, your payment is $4,728/mo (interest portion is tax deductible but let's ignore that). Let's say your place is $1.5MM, that's another $1500 in property tax (also tax deductible but again, let's ignore). If you're bringing home $15K/mo, then you're still left with ~9K per month. That's a lot of rice and beans.

yeah, ridiculous student loans (med school), and some of it is definitely unrelated to being in the bay - a lot of debt related to the substandard paid maternity/paternity leave when having a kid in the USA (shoulda got that job @ netflix in retrospect...).

but kid-related costs here are also out of control, accredited infant daycare is insane, and you pretty much have to take what you can get into. same with after school care. this alone is >$3k/mo.

CA self-employment tax is nothing to sneeze at either, especially if you're a contractor in an industry that makes having an s-corp unfeasible.

Coming from a state where even $50K/hh is quite comfortable (maybe slightly less so with a family of 4, but still beyond "rice and beans" level), I have to ask: how is this even possible? It strains credulity.

OK, sure, rents/real estate are higher. A LOT higher. But other than that, you're not going to pay substantially more for a car, computer, or any other consumer good in CA than anywhere else. Gas and food are somewhat higher, although some of that, based on my visits to and relatives in CA, seems to be based on more picky eating preferences than inherent logistical problems (but you say you don't do that).

It seems outlandish on its face: you know that a $400K household has to be way above the median, even in Oakland. So how is everyone else surviving?

Simple, you don't buy a house. At least, not unless you can afford to pay cash. For most people, buying a house on a mortgage is financial suicide. It only makes sense to buy a house on a mortgage if the price-to-rent ratio is under 25. Anything over that and you could rent the same house and invest the money you save and come out ahead. The price-to-rent ratio in San Francisco is 45.88, meaning that a house that rents for $1000/month costs $550,560 to buy. Your monthly payment on a $550,560 mortgage would be $2,603. Conservatively investing $1603/month in an index fund for 30 years would yield $1,122,003 after inflation.

https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci...

Something seems way off on those SmartAsset numbers. There is no way you are renting a $600k place in Manhattan or a $195k place in Dallas for only $1000/month.

Ante for renting a standalone place in Manhattan right now is around $2500/month, but I can buy places for as little as $500k (if I don't care about space). Some condos in Manhattan don't even allow rentals.

We just sold our house in Dallas for $220k, and I guarantee we would have been renting it out for a hell of a lot more than $1100/month if it came to that.

I believe that their number is an mean of all properties weighted equally. So if you're only looking at single-family homes you could be paying much more, and if you're only looking at apartments you could be paying a lot less. They're also not considering factors like brokerage fees, property taxes, insurance, maintenance, or depreciation.

Not the OP, but based on living here for 15 years- you bought a house 8 years ago, when prices were half what they are now. Or you had an IPO/acquisition/bonus that netted you a downpayment large enough to bring the mortgage into affordable range.

You are right. You dont buy a house there.

I left

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