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I recently moved from TX to CA (Bay Area). I had a 3k s.f. house and an all-in monthly cost of ~$2k/mo (including mortgage, insurance, pest control, etc) for h

by ramses0 10y ago

I recently moved from TX to CA (Bay Area). I had a 3k s.f. house and an all-in monthly cost of ~$2k/mo (including mortgage, insurance, pest control, etc) for household expenses. I recently had a soft offer (verbal discussion of salary ranges) of around ~$150k to move back to TX. To match that in CA dollars, it requires ~$200k/yr+ compensation. Method: Use the following two tax estimators: https://smartasset.com/taxes/texas-tax-calculator https://smartasset.com/taxes/texas-tax-calculator https://smartasset.com/taxes/california-tax-calculator https://smartasset.com/taxes/california-tax-calculator ...count ~$1500/mo => $20k/yr for housing in TX/Dallas, ~$3000/mo => $36k/yr for housing in Bay Area. ...count ~$12k/yr for living expenses in TX, $20k/yr for Bay Area ($1000/mo for restaurants, etc, in TX, $1500/mo in Bay Area... this accounts for increased food / restaurant / drink / entertainment / parking prices in California). TX: $20k housing + $12k living => $36k mandatory expenses CA: $36k housing + $20k living => $56k mandatory expenses Include a mandatory savings rate of 50% of yearly housing costs (insulate against layoffs / economic downturns) and you're at: $46k/yr for TX and $74k/yr for CA. An offer of $150k in TX gets you income after taxes of: ~$108k minus $46k living expenses for a savings rate of ~$62k/yr. To get to a $62k/yr savings rate in CA, you need $62k+$74k after tax income which is $136k total. That requires an offer of ~$200k/yr in CA. Obviously these numbers are very hand-wavy, but it is instructive to go through this exercise. Running these numbers at a more modest $100k salary in TX and keeping expenses the same (leading to a ~$12k/yr savings rate), you need ~$86k in after tax income which is a ~$130k CA salary, which is ~30% increase over a baseline $100k in TX for a transfer to make any kind of sense (plus relo expenses, one-time-costs, etc). A $12k/yr savings rate in TX for 10 years will get you $120k and a house. A $12k/yr savings rate in CA for 10 years will get you a down payment and nothing more (ie: you cannot live/retire where you work/earn).

krschultz 10y ago
Sounds about right to me, and I think your numbers are more accurate than most "cost of living" calculators because it doesn't sound like you got exactly the same house in CA that you had in TX. Most cost of living calculators assume if you have a 3k sf house in one place you'll do that again in the more expensive area, which is just not how people actually live. When you move somewhere more expensive you generally downsize a bit so the increase in spending is not as extreme. Finding only a 25% difference between CA & TX is pretty conservative.

by ramses0 10y ago

krschultz 10y ago

Sounds about right to me, and I think your numbers are more accurate than most "cost of living" calculators because it doesn't sound like you got exactly the same house in CA that you had in TX. Most cost of living calculators assume if you have a 3k sf house in one place you'll do that again in the more expensive area, which is just not how people actually live. When you move somewhere more expensive you generally downsize a bit so the increase in spending is not as extreme. Finding only a 25% difference between CA & TX is pretty conservative.