It takes a net worth of millions to be comfortable in Silicon Valley | Hacker News Reader

It takes a net worth of millions to be comfortable in Silicon Valley

businessinsider.com

30 pointsantimora47 comments

> Helen Dietz, a certified financial planner and the director of wealth management for Aspiriant, told Mercury News that a family may need an annual income of up to $1 million — so, a much larger net worth — if their financial priorities include sending their kids to a top school, living in a larger home, buying a new car, and saving for retirement. That number only increases when goals such as travel or funding a future inheritance are accounted for.

Consuming luxury goods requires excess funds. Groundbreaking.

They make a lot of money, but they spend a lot of money. Also, they have to be able to feed their families, to paraphrase a couple of former NBA players.

Only in the US things like giving your kids proper education and saving for nice retirement are considered luxury goods. In Europe they are treated almost as human rights :)

Proper education and attendance at an institution that shows you can compete and/or belong with the top x% are different things. The latter is what the article is referring to.

No, it's not. Why is "being able to compete and/or belong with the top x%" in any way dependent on money? Europe has world-class universities which are essentially free. You get into them by proving qualification, not wealth.

The original quote was attendance at a "top" school, not just a decent one.

> You get into them by proving qualification, not wealth.

I think the context indicates that we're talking about kids who couldn't get in by proving qualification, so their only way in is wealth. You want your kids to attend Harvard, not because they're smart enough but because you can pay full price tuition? Well, it's going to cost rather a lot.

> The original quote was attendance at a "top" school, not just a decent one.

I realize that.

> You want your kids to attend Harvard, not because they're smart enough but because you can pay full price tuition? Well, it's going to cost rather a lot.

Why is that even an option? The point was that there is no tuition in Europe (at least in the countries I know). If your kid is unqualified, it is unqualified, you don't get to override that just because you have money.

Why is that even an option? Because Harvard likes money. (And Harvard is a private institution, not run by the government.)

Let's talk about that state provided retirement money in 10 years again...

I don't think this is necessarily about the poor state of public education. Two of the top three school districts are in the bay area, and 9 are in the top 20. https://blog.pacificunion.com/silicon-valley-again-earns-hig... I'd expect that an engineer could find a decent public school for their kids ignoring any special circumstances.

I think it's more to do with the cost of private education. I found a couple of private middle schools that charged between $30k and $35k per student per year.

The top SF Bay Area school districts are all in areas with high housing prices (big part of the reason why the housing prices are high to begin with).

Unlike other parts of the US, there are few or no "magnet" schools in lower-income areas. Public school assignments are solely based on your residential address.

So in an indirect sense, sending your kids to a good public school is still costly. In some cases, even sending your kids to a top private school while living in a cheaper area may save money in the end.

  Public school assignments are solely based on your residential address.

I don't think that's true at all for SF.

The interesting thing is that items with nation wide prices (like cars) are more "expensive" in low cost of living areas, because they are worth a higher fraction of the median salary.

What really drives bay area prices are the real estate prices, which then impacts labor pricing.

That is a good point that many people ignore. Living costs are much more in wealthier areas, however consumer goods generally stay the same price regardless of area and don't scale with relative pay of the area. So unless your housing expenses scales faster than the pay increase scales from working in those wealthier areas, you have far more luxury and consumer spending available to you by living in that wealthier area. Not to mention the many other benefits of living in a more "expensive" area like having greater availability, competition, and choices for consumer services, or economic opportunities and luxury services.

Obviously this would still have to be evaluated on a place-to-place and person-to-person basis, but I think more often than not living in a wealthier area increases your quality of living; but we also can't expect our entire nation of people to move around like a bunch of migrant workers all the time. I think we should worry about how this ends up economically punishing people who didn't predict the next 25+ years of economic changes when they try to find somewhere to settle down and build a business or buy a home and have a family.

Moving from Dallas to San Francisco, the prices at Trader Joe's and CVS, Mc Donald's and other nationwide chains were the same. Eating out and entertainment seem roughly 50% more expensive here (service and food quality has decreased, oddly though). All of the cost of living calculators seem to assume that day to day costs scale roughly linearly with housing, but that hasn't been my experience at all.

  Mc Donald's

So in other areas of the country, the McDouble went from $1 to over $2 in less than a year?

I don't think that's the point. The point is that the required income in SV is an order of magnitude larger than what is required in most of the country to do those same things.

Isn't that the same thing as what OP said? Why shouldn't "living in SV" be considered a "luxury?"

You know where you don't need millions to do all of that? Literally most of the country.

If someone was complaining to me about being unable to live in, say, Beverly Hills, I'd say the same thing: there's nothing stopping you from moving to any other state and living quite comfortably - in fact, probably having a much _better_ standard of living.

I interpreted OP to be referencing things like school, home, car, etc as luxury goods, not living in SV. I do obviously agree with the rest of your comment though.

Beverly Hills has a population of 35,000. It's a neighborhood. Silicon Valley has a population of a few million (depending on how you define it). A luxury city is more absurd than a luxury neighborhood because a city requires people who don't receive luxury salaries to function.

> a city requires people who don't receive luxury salaries to function.

That is such a key, and overlooked, point. People are so busy imagining themselves in the shoes of one of the luxuriating few that they forget about the entire human ecosystem required to make a city function.

All these "you need to make a gazillion bucks to live a middle class life in SV" articles fall prey to the same fallacy.

Comfortable !== Luxury

Yes, SV is one of the most expensive places in the country (maybe the world) to live. But if you're willing to live even a 20th percentile lifestyle instead of a 2nd percentile lifestyle, you don't need 2nd percentile money, even there.

I think most readers will correctly interpret your comment. But it should be "80th percentile", "98th percentile". 98th percentile means 98% of observations are below that level.

OK, good point. I was kind of thinking of "the 1%". Debating whether to edit and fix, but leaning towards leaving it.

I can't picture what percentiles look like, but $120k in SF was a hard life compared to the $90k in Seattle I get now. And I consider myself plenty rich.

Sv is expensive, and id believe it’s the most expensive city in the USA.

but definitely not the most expensive place in the world.

I think cities like Hong Kong, Singapore, Tokyo, and others have a higher cost of living.

Yes, normalized in usd.

Is this supposed to be satire. Quote "Many people assume they will be able to keep working indefinitely until they are 90 or 100 years old but in real life that rarely happens," I don't think there is a human being in the bay area who wants to or expects that they will have to work into there 90s.

Additionally what lifestyle are they aiming for. The Bay area is made up of millions of people. Maybe 5% of that are millionaires. The rest of us are living here on sub 200K a year family incomes and making it work and its mostly comfortable. I think this article is basically saying if you want to live the upper middle class lifestyle you now need to be a millionaire. Even in the rest of America only a small percentage of people live the upper middle class lifestyle. Who is buying a new car every year, going on multiple vacations and savings extra money for inheritance. I'm sorry but the average person saves through home equity, goes on one vacation if they are fortunate to do so a year, and tries to maintain a car for several years if possible.

I'm guessing part of this is inappropriate expectations for living space. How much would you say it takes to be "comfortable" in Manhattan if you moved there expecting it to be like the suburbs?

There are lots of definitions of comfortable. It seems like this article uses "Similar financial resources to your neighbors'", so the number sound right to me.

I went to grad school with someone who grew up as a subsistence farmer in Nepal. He has a much different idea of comfort/luxury than I do, but still likes to buy big TVs, etc. because thats what you do here.

My definition of comfortable is being able to afford 6 acres within a 12 minute commute from work. That really limits the jobs/locations that would be comfortable for me.

A home in Palo Alto costs 3.5 megabucks, but without Prop 13, property taxes are around 85 kilobucks/year. Over 30 years, assuming 2.5% inflation, that's another 3.8 megabucks just to stay in said house. And add basic cost-of-living, say 40 kilobucks/year, adjusted for inflation over 30 years would be 1.8 megabucks. Throw in an extra million for miscellany (3.5 + 3.8 + 1.8 + 1.0), a net balance sheet (after maturation of investments) should target around 10.1 megabucks to stay in Palo Alto if not splurging. It's possible to move elsewhere in the US and only need around (0.5 + 1.8 + 1.0) 3.3 megabucks. (Assumes buying a house for cash right now.)

     > def over_time(years, inflation, amount)
     >   years.times.inject(0) { |acc,y| acc + (inflation ** y) * amount }
     > end
    => :over_time
     > over_time(30, 1.025, 85_000.0)
    => 3731729.7688780855
     > over_time(30, 1.025, 40_000.0)
    => 1756108.1265308638
     >

EDIT 0: Refactored using inject()

EDIT 1: An engineer salary of 200k inflation adjusted over 40 years is 13.5 megabucks.

     > over_time(65-25, 1.025, 200_000.0)
    => 13480510.707119755

If you actually dive down into the study by Charles Schwab that this article is taking their numbers from, it doesn't look unreasonable at all. $1.1 million dollars is the figure stated to be financially comfortable in San Francisco and the exact same number that was polled for New York City. It is approximately double the $540,000 average response from Charlotte, North Carolina. It's also definitely worth noting that this is net worth. If you have paid equity into a home, have other savings, own a car etc. you'll likely be hitting this number living in the Bay Area - this would easily fall into my personal definition of financially comfortable. I would go on to say that this number is likely only double that of somewhere like Charlotte because of real estate costs.

As for the quotes from financial planners... In my experience, they have no idea about the finances of a normal American and deal exclusively with farfetched wealthy individuals. One of my friends in Seattle making $200,000+ was told he could never afford to retire on such a meagre salary by one of these financial planners (note: he was referred to this financial planner by their father who happens to be quite wealthy).

"$1.1 million dollars is the figure stated... you'll likely be hitting this number living in the Bay Area"

This is only true for certain values of "you", unless we all start paying $40 for a couple of donuts.

I'm unsure as to what counterpoint you are trying to make. If you were implying that I thought anyone could manage to be financially comfortable in the Bay Area, that is patently false. To respond your apparent reading of my comment, the "you" that you appear to be referring to is an example of a person who is financially comfortable in the Bay Area and why that would amount to a net worth of approximately $1.1 million.

I understood your original point to mean that the $1.1M figure is not unreasonable, because it is correct.

My counterpoint is that it is unreasonable in spite of being correct, because that number represents how much a family starting from zero needs to make to reach financial "comfort" in the area.

Define comfortable?

I drive a shitty 2001 Saturn. I change the brakes myself. I work on my house myself. I just spent the last weekend digging a 35ft long 4 in wide ditch to replace my main water line.

I am comfortable.

Important note: I live in Seattle not SV.

If you lived in SV, and had a house with a garage and lawn, you've likely spent multiple millions of dollars for that house (and probably spending more on lobbying to keep that house with a lawn from being re-zoned into dense housing).

I bought a house that requires a remodel. I'm doing it myself. I agree with you, but you don't need a turnkey house either.

In SV you would have spent millions for the land itself.

I have a net worth of $1m and I still live with 2 roommates and watch every dollar spent...

Which is probably a big part of why you have a net worth of $1M instead of $1K!

Why? How old are you?

I live in SF?

I'm 30.

how do you calculate personal net worth?

I live in Redwood City, don't make millions but am comfortable.

When did you buy your property if you don't mind me asking?

Not the OP but if someone bought 10 years ago, they would have bought at 50-65% less than the current prices. I have neighbors with low end jobs who bought in the 80s-90s in the $100k range.

Totally. One of the things that people seem to forget is if you bought a house for 50% less just a few years ago, you have a insanely significant amount more for your retirement. This is not including the bump in property taxes that hurt quite a bit too!

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