Ask HN: Financial independence in high cost of living city? | Hacker News Reader

Ask HN: Financial independence in high cost of living city?

5 pointsicki13 comments

Hi HN,

I'm a recent grad with about 2 years of professional experience, currently working as a software developer. Even though I think my salary is higher than average for where I work, I am still struggling to come to terms with the high cost of living in my city.

The average cost of a detached home in Toronto has just passed $1M Canadian dollars (~$820k US). Even if I were to commit to a commuter lifestyle and live outside the city, a 20% down payment could require upwards of $100,000. Some say that a recession in the housing market is inevitable, but with so much foreign investment and insatiable demand for detached homes, I just find it hard to believe. Worst of all, with real estate prices having climbed ~10% each year for the past few years (faster than the average salary, and at a higher rate than a typical mortgage), real estate ownership is getting further and further out of reach.

When I look southward, I see such vibrant cities in the US where developers are getting paid more, and the cost of living (and real estate ownership) are much lower.

I fear that I am coming off sounding as entitled, as many of my non-techie friends are struggling to find jobs relevant to their studies, while I am in a situation where I am quickly paying off my student loans and trying to increase my savings. I'm still young, and perhaps I am just asking for too much. I would very much like to spend more time working on my own projects, and would like to one day do that full-time. However, I can't imagine that happening without a large safety net (not having to worry about a mortgage, or rent).

I guess I haven't really asked a question yet ... I was just hoping to discuss this topic and hear your stories.

I'm older (54), live in San Diego, CA. San Diego is also high cost with a 440K median house price.

I was employed as an electrical hardware engineer for a computer peripherals company until November 2014. The job market for electrical engineers in San Diego is currently in an awful state.

While I was employed, I managed to buy a vacation home which I converted to a rental property after I became unemployed. I also was able to build a large nest egg of investments and cash. I am using these to live off of at the moment.

I am Financially Independent to the point where I can pay for basic living costs, but not for fancy stuff like eating out or vacations.

When I became unemployed, I updated my home engineering lab with a new test equipment by selling items on Ebay which I no longer needed. I currently spend a lot of my time developing open source hardware,firmware, and software and upload my projects to Github.

If the job market in San Diego improves, I would consider going back to work, but it would have to be on my terms. I have enjoyed not having to commute to work every weekday. Any new job would have allow 80 to 100% telecommuting.

Financial independence can be achieved, but it requires sacrifice and dedication. For details on how to do this I recommend visiting the Mr. Money Mustache blog: http://www.mrmoneymustache.com for ideas and support.

Thanks for the reply. I'm saddened to hear about the tough job market you're facing, but I'm happy to hear about your garage hacking :) I personally wish you the best of luck. Your GitHub repo's are neat!

San Diego seems like a great city, with much nicer weather than Toronto - I've heard a lot of nice things about it. While the housing prices are equally high, it seems like tech salaries are much higher there, compared to Toronto.

I would like to one day be in your situation, but I feel like starting an independent adult life is harder than it used to be (mainly from accumulating student debt) for graduates in previous generations.

Do you think you could elaborate a little more about your early career?

Thanks so much!

I have been passionate about electronics since I was 6 years old.

In my senior year in high school, I landed a part time job as an electronics technician. When I graduated, I worked full time for that company for 10 years as a self-taught electrical engineer. I started working on my college degree (Computer Science). I was able to take advantage of tuition reimbursement offered by the company to pay for college. Student loans were not really needed back then as college costs were reasonable. I bought my first house.

I switched companies in 1989 and worked for almost 26 years as an Electrical Engineer. I finished my Bachelor's Degree in Computer Science at the second company using tuition reimbursement, and my own funds. I really wanted to do a Bachelor's in Electrical Engineering, but there were not any evening classes available for EE at the time. Sold my first house, bought my second house and my vacation home. Paid off my vacation home, refinanced my first home several times.

I think the main things which got me to where I am today are the following:

1. Think of debt as slavery. It should be paid off as quickly as possible. 2. Have as few children as possible. (I have none). 3. Don't spend frivolously. Live way before your means. 4. Try to do as many home and car repairs as you can yourself. 5. Make sure you are adequately insured. In the US, you need medical insurance to cover medical costs and liability insurance to protect from lawsuits. As your assets grow, you need to adjust your liability insurance accordingly. 6. Invest regularly and often.

Thanks again for the reply. It sounds like you've always maintained some level of financial independence, even at a young age, which is awesome.

Have you ever wanted to work on your own startups? It seems like you have some personal projects - why work a traditional career?

If you could do it all over again, would you do anything differently?

Things I would have done differently:

1. I should have started earlier. I didn't start working towards financial independence till my second job. 2. I should have bought more rental properties.

Regarding startups:

For hardware products, startups involve a lot of effort. You usually have regulatory things to deal with and that is a big burden. Also the capital requirements are more than a pure software startup.

It doesn't sound like you're looking for financial independence. It sounds more like you're looking to buy all the same things that everybody else buys and otherwise act like all the other adults you see, but be able to do so now with your entry level salary.

But that's what everybody wants. And it's why people end up living beyond their means.

If you want actual financial independence, that's pretty easy to pull off. Even in a place with million dollar houses. Just convince yourself that you don't need a million dollar house. Or a nice car. Or your own place without roomates. All you really need is to pay that debt down to zero over the next year or so then find an equilibrium where you can live on about a quarter of your take home pay.

Then you're done.

At a developer salary (even a canadian developer salary), that will start you down a path of saving a lot of money in a hurry. Enough that were you to lose your job entirely five years down the road you could happily coast along another five years before really needing to worry about money.

That's what you're shooting for. Notice that at no time do you do any of that coasting in a million dollar house. But if you keep at it, you'll eventually get to a place where you can buy that place in cash.

Nothing wrong with wanting a detached home. Wanting one where it's too expensive, or getting one far away because it's affordable while continuing to work where it's expensive, probably requires a rethink.

Right now you're building experience, knowledge and savings/investments, so you should probably focus on that. So live as cheap as practical where you are.

At some point the curves will cross. If you still want a detached house, and you haven't become rich relative to where you work, then move to somewhere that you can work and live cheaply. Then buy your house.

This is definitely the pragmatic choice, and it's what I keep telling myself. Thanks for reverberating the message :)

If I may ask, how do you feel about your personal situation right now? Are you living in an expensive city?

I don't know about the OP, but living in a city where the average cost of a detached house is well over $2M (CAD), I can assure you that flats and terraced houses can be quite pleasant too :)

Denver's not so bad. It would be a great choice after you've done whatever you're doing where you are now, there's a reasonable amount of tech work. Lot's of telecom (but that's not all), something to do with being at 105 west I've been told. Boulder is nearby, and lots of tech jobs there. Also the skiing is great, and only when you want to. :)

Ah, here we go, "Denver's west-central geographic location in the Mountain Time Zone (UTC−7) also benefits the telecommunications industry by allowing communication with both North American coasts, South America, Europe, and Asia in the same business day. Denver's location on the 105th meridian at over one mile (1.6 km) in elevation also enables it to be the largest city in the U.S. to offer a "one-bounce" real-time satellite uplink to six continents in the same business day. Qwest Communications, Dish Network Corporation, Starz-Encore, DIRECTV, and Comcast are a few of the many telecommunications companies with operations in the Denver area." https://en.wikipedia.org/wiki/Denver

EDIT: s/east/west/

I'm a startup founder living in Toronto, and thought I'd post in counterpoint. I live in a small apartment, and pay myself using any money I can cobble together from grants, contracting, investment, etc. I have no interest in buying a house, and I'm actually pretty sure that committing to that would be counterproductive if you're founding your own startup. If you think it's necessary to have a paid-off house before you start something, then you likely don't fit the risk profile of someone who would successfully be able to do so. No first time startup founder I know owns their own house, and most pay their own rent, and most have jumped off to do their own thing because they simply cannot wait any longer and hate working on anyone else's stuff.

On the other hand, you're right about developer salaries being low here, comparatively. It's partly a function of the startups that exist here, and of Canadian cultural tendencies to just sit and simmer. If engineers are unlikely to jump ship, it's likely going to mean that salaries are lower than they could be.

So if you just want to get paid more, interview at a bunch of places and get higher offers, then tell your boss. If you want to be a startup founder, then quit your job when you've got six months' runway saved up, incorporate your company in London, ON, and do your best to get NRC IRAP and OCE SmartStart, and expect the rest to work out.

Hey thanks for your reply! How do you like being a T.O. startup founder?

I'm not 100% committed to buying a house, but I don't have any runway to start out with my personal projects full time. What I meant to say was that I would never want to be in a situation where I can't meet my financial obligations (rent as a part of a longer-term lease, or mortgage payments). I am doing my best to get out from under my student debt and build my runway/rainy day fund as quickly as possible.

Do you think that low salaries might also be a function of brain drain? There are a lot of tech workers in Canada on visas, and it might be because a lot of Canadians leave the country to work in SFBA, NYC, Seattle, etc.

Could you point me to any resources for information about starting companies in Ontario, and receiving grants? You seem like you've got quite a bit of know-how :)

No problem! So far it's decent, but for the stuff I like (consumer-facing businesses) it's definitely nothing like the Bay. There's a lot less money for early-stage startups, there's a lot more government money (which is good and bad), and there's a more risk-aversion on behalf of founders and investors alike. Here's an instructive read: https://medium.com/toronto-tech/toronto-d0ea5da434e

I was fortunate enough to not have student debt when I graduated, so that's one thing that made my leap easier. Agreed, though - I don't wanna go broke either :)

I think braindrain probably plays a role... But ultimately, the issue is that there aren't even enough (successful) startups in the province to employ all those grads if they stayed.

Actually helpful resources are scarce but we could grab coffee or skype if you wanna talk about your options! My email link is in my profile. It's always best to find someone who has done exactly what you intend to do, so just keep talking with folks.

-Andrew

Reply on news.ycombinator.com