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I'm not sure I follow. Assuming the $1 million is post tax, it equates to $250,000 post tax and nearly entirely disposable income. Compared to, say, someone mak

I'm not sure I follow. Assuming the $1 million is post tax, it equates to $250,000 post tax and nearly entirely disposable income. Compared to, say, someone making $200,00 post tax and spending only 25% of that on rent it is strictly better. The point that the above commenter is making is that if the percentage of income spent on rent is higher, but the purchasing power adjusted income is higher it can cancel out. I'm not sure what transportation has to do with this. Someone could increase their commute time to reduce rent, but that's the case regardless of income.

BeetleB 8y ago
Is it better? Consider what happens if you lose that job. How much money do you need saved up to live the next 6 months in both scenarios? If I pay $750K/yr, I need $325K saved up to pay rent for 6 months. That will take me 1.3 years of saving to get to that threshold (assuming I pay for nothing else - food, etc). If I pay $50K/yr, I need $25K saved up to pay rent for 6 months. It will take me 4 months. Depending on how long you live, etc, I suppose there is a point where the former is better. But not in the short term. That's assuming you're paying mortgage and not rent. What if this is pure rent? Then you have to pay that much even in retirement. That means you have to save up a lot more in the first scenario before you can retire, and may have to work longer, despite the higher pay, and the higher savings. Of course, you can always retire in a cheaper place, but that's a matter of preference. I would rather retire in the place I lived much of my life in - not in some strange city.
- manfredo 8y ago
  You're assuming that people would have to live in the same place after their employment ends (you do bring this up later, though). This definitely isn't the case for me; I've moved every single time I've changed jobs. The point remains, in the first scenario the person has $250,000 worth of disposable income. In the latter it's only $150,00. The former is in a much better position to build up saving. Heck, even one year's worth of post-rent income in savings is enough to spend as much money as the average American annual income (~35k) for the next 7 years. > Then you have to pay that much even in retirement. That means you have to save up a lot more in the first scenario before you can retire, and may have to work longer, despite the higher pay, and the higher savings. Of course, you can always retire in a cheaper place, but that's a matter of preference. I would rather retire in the place I lived much of my life in - not in some strange city. Sure, but now you're talking about a drastically different scenario if the resident has concluded they will live the rest of their life in their apartment. In that scenario, optimizing for post-employment living is a more important factor. But until unless you've decided to retire in your current apartment, the first choice is strictly better.
  - BeetleB 8y ago
    I'm a glad your comment is more nuanced this time. Your original one had: >Compared to, say, someone making $200,00 post tax and spending only 25% of that on rent it is strictly better.
    - manfredo 8y ago
      I stand by the notion that the first scenario (making $1M and spending $750k in rent) is strictly better than the second. Of course I also agree that making zero dollars and spending $750k in rent is considerably worse than spending $50K rent. But that wasn't part of the original comment. Essentially, I claimed that Scenario X is better than scenario Y, but now you're saying "but! What if scenario X suddenly becomes scenario Z?".
nostrademons 8y ago
I think he's saying that as absolute incomes get higher, commuting cost as a percentage of income drops, because commuting cost is largely fixed regardless of income. And so it makes more sense to live in a low-COL region and commute to a high-COL region. For the average person, flying to work every day is unrealistic. If you are making $1M/year, it suddenly becomes very realistic. Same day roundtrips between SFO and Seattle via coach are about $200 when purchased 3 months out. Times 200 workdays/year, that's only $40K/year. You end up way ahead financially buying in Seattle and commuting by plane to your job in SF, if you're willing to stomach the ~6 hours/day of commuting time. Then if you don't want to spend an hour and a half in the terminal, you can fly private jet. Private jet time apparently runs about $5k/hour. At ~600 hours/year, you're looking at about 3 million a year to commute by private jet from Seattle to SFO. Still out of your price range at a million in salary, but quite doable if you were making say $10m, and your commute time isn't much worse than sitting in traffic on 101 between Google and the Marina. Replace Seattle with Las Vegas and all 3 of (housing, flight time, expense) get better. Round-trip to Vegas is about an hour and a half; coach prices go as low as $59 and private jet prices would be about $1-1.5M/year; and houses can be had for $200K, freeing up lots of money for flying.
- WalterBright 8y ago
  If you don't mind missing a flight now and then, you can shave down the time waiting in the terminal quite a bit. Flights run constantly, so you can just take the next one. Uber is a big timesaver too, as you can walk out the terminal and get picked up / dropped off and no futzing with parking/renting.
- nilkn 8y ago
  There are a variety of private jet subscription offerings popping up, including Surfair: https://www.surfair.com/us/membership-pricing/ https://www.surfair.com/us/membership-pricing/ That one is only $2k/month for unlimited trips between a few locations in California. I don't know how restrictive their scheduling options are, though (i.e., could you actually commute daily with the service?).
  - 8y ago

BeetleB 8y ago

Is it better? Consider what happens if you lose that job. How much money do you need saved up to live the next 6 months in both scenarios? If I pay $750K/yr, I need $325K saved up to pay rent for 6 months. That will take me 1.3 years of saving to get to that threshold (assuming I pay for nothing else - food, etc). If I pay $50K/yr, I need $25K saved up to pay rent for 6 months. It will take me 4 months. Depending on how long you live, etc, I suppose there is a point where the former is better. But not in the short term. That's assuming you're paying mortgage and not rent. What if this is pure rent? Then you have to pay that much even in retirement. That means you have to save up a lot more in the first scenario before you can retire, and may have to work longer, despite the higher pay, and the higher savings. Of course, you can always retire in a cheaper place, but that's a matter of preference. I would rather retire in the place I lived much of my life in - not in some strange city.

manfredo 8y ago
You're assuming that people would have to live in the same place after their employment ends (you do bring this up later, though). This definitely isn't the case for me; I've moved every single time I've changed jobs. The point remains, in the first scenario the person has $250,000 worth of disposable income. In the latter it's only $150,00. The former is in a much better position to build up saving. Heck, even one year's worth of post-rent income in savings is enough to spend as much money as the average American annual income (~35k) for the next 7 years. > Then you have to pay that much even in retirement. That means you have to save up a lot more in the first scenario before you can retire, and may have to work longer, despite the higher pay, and the higher savings. Of course, you can always retire in a cheaper place, but that's a matter of preference. I would rather retire in the place I lived much of my life in - not in some strange city. Sure, but now you're talking about a drastically different scenario if the resident has concluded they will live the rest of their life in their apartment. In that scenario, optimizing for post-employment living is a more important factor. But until unless you've decided to retire in your current apartment, the first choice is strictly better.
- BeetleB 8y ago
  I'm a glad your comment is more nuanced this time. Your original one had: >Compared to, say, someone making $200,00 post tax and spending only 25% of that on rent it is strictly better.
  - manfredo 8y ago
    I stand by the notion that the first scenario (making $1M and spending $750k in rent) is strictly better than the second. Of course I also agree that making zero dollars and spending $750k in rent is considerably worse than spending $50K rent. But that wasn't part of the original comment. Essentially, I claimed that Scenario X is better than scenario Y, but now you're saying "but! What if scenario X suddenly becomes scenario Z?".

nostrademons 8y ago

I think he's saying that as absolute incomes get higher, commuting cost as a percentage of income drops, because commuting cost is largely fixed regardless of income. And so it makes more sense to live in a low-COL region and commute to a high-COL region. For the average person, flying to work every day is unrealistic. If you are making $1M/year, it suddenly becomes very realistic. Same day roundtrips between SFO and Seattle via coach are about $200 when purchased 3 months out. Times 200 workdays/year, that's only $40K/year. You end up way ahead financially buying in Seattle and commuting by plane to your job in SF, if you're willing to stomach the ~6 hours/day of commuting time. Then if you don't want to spend an hour and a half in the terminal, you can fly private jet. Private jet time apparently runs about $5k/hour. At ~600 hours/year, you're looking at about 3 million a year to commute by private jet from Seattle to SFO. Still out of your price range at a million in salary, but quite doable if you were making say $10m, and your commute time isn't much worse than sitting in traffic on 101 between Google and the Marina. Replace Seattle with Las Vegas and all 3 of (housing, flight time, expense) get better. Round-trip to Vegas is about an hour and a half; coach prices go as low as $59 and private jet prices would be about $1-1.5M/year; and houses can be had for $200K, freeing up lots of money for flying.

WalterBright 8y ago
If you don't mind missing a flight now and then, you can shave down the time waiting in the terminal quite a bit. Flights run constantly, so you can just take the next one. Uber is a big timesaver too, as you can walk out the terminal and get picked up / dropped off and no futzing with parking/renting.
nilkn 8y ago
There are a variety of private jet subscription offerings popping up, including Surfair: https://www.surfair.com/us/membership-pricing/ https://www.surfair.com/us/membership-pricing/ That one is only $2k/month for unlimited trips between a few locations in California. I don't know how restrictive their scheduling options are, though (i.e., could you actually commute daily with the service?).
- 8y ago