When people compare salaries / the cost of living in different cities, they often fail to account for the fact that many people don't spend their entire salary in the local economy. If you are trying to save money (or pay for college, donate to a cause, or buy a Ferrari) this costs the same no matter where you live. You should only apply the cost of living adjustment to housing (and maybe food). When you do this, living in the Bay Area starts to make more financial sense.
I agree 100%. Right now in SF and get paid relative to SF. If one day I return to the Midwest (or almost anywhere else) what I have in the bank has more buying power.
Seattle has no income tax, and sales tax doesn't apply to most food from the grocery store, so taxes in Seattle really depend on how you choose to spend your money.
Never thought of it that way. Percentage of income consumed by state and local taxes, housing, etc compared and average gross income would show the whole picture.
We lived in the Bay Area for 3 years. Prior to that, I agreed with you. Living there changed my mind.
More of our salary went to the local economy than I expected. We have a bunch of kids, which amplified the effect, but I am astonished at how much money it took to not feel like we were struggling to stay above water. Babysitting, gas, food, clothing, activities were all extremely expensive. Even insurance was high.
The things that didn't go to the local economy still cost more — because taxes. We bought a car from Minnesota and paid a huge amount of excise tax to the state of California. Almost everything we ordered from out of state was subject to high local sales taxes. Income tax didn't help either — our higher salary put us in a higher tax bracket. The top $50k of salary only netted us $25k in buying power, which was eaten up by rent.
There's a stage-of-life effect. Bay Area is great for young people, where cost of living is a much lower proportion of income. All the excess goes straight into savings or discretionary consumer goods, where a Bay Area dollar is worth just as much as a Rust Belt dollar. It's much less great for a family, where you have additional food, housing, childcare, and health costs that rise along with cost of living.
I don't think that's entirely true. Housing and food are still the highest spending categories. Most of the excess goes to taxes, I think. Families just make it more obvious that's happening.
NYC is much more reasonable than the SF Bay. Manhatten itself is incredibly expensive, but it's fairly easy to live frugally in the NYC area. There's basically nowhere to go "in the bay area" to save much money.
You're not wrong about NYC, but the bay area is really broken.
Yes, this is absolutely true. Your car, clothing, computers and gadgets, and most of your groceries will be a lower percentage of your discretionary income in the Bay Area than in most other places. Your housing and gasoline will cost more, and maybe your car insurance.
However, the caveat is that housing is so expensive here that it's difficult to save up for a down payment on any kind of housing on a single engineer's salary. A 20% down payment on pretty much anything is more than $100k, and even a highly paid engineer will need a long time to save up that kind of money while also paying high rent. An 80/10/10 mortgage or some kind of mortgage with PMI is easier to achieve, but those have significant drawbacks.
So, if you have significant cash savings, or a home somewhere else you can sell, you can achieve home ownership in the Bay Area (but it will probably be a smaller home than the one you have now). If you don't aspire to home ownership, you'll be fine too -- a software engineer with an average salary can afford to pay rent here, and people who say otherwise are simply incorrect. But if you are just starting your career and move to the Bay Area planning to buy a home anytime soon, you're going to be disappointed.
Given that many people predicate their quality of life on home ownership, that's a pretty big caveat.
It takes about 2 years to save up $100K on a typical Bay Area engineer's salary, if you're fiscally prudent. Figure that $150K/year after taxes is about $110K/year, and live on $60K/year. That's eminently doable even in the Bay Area.
The problem is that $100K is a very low estimate for a down payment in the Bay Area these days. Most people I know are getting parental help to put down $500K down, because with housing prices running around $1.2M, that's what's necessary to get under the $700K jumbo mortgage threshold.
A single person does NOT need to spend 3600/month in SF. That's crazy. A studio/1 bedroom can be had for 2500. And if you're willing to compromise on location (i.e. "the ghetto") you can get under 2K.
Families that need 2+ bedrooms and a good/safe neighbourhood are screwed though.
Even San Mateo, which is not very far away, costs a lot less. And if you work in SF and commute from the East Bay via BART, which isn't too bad, you can save even more.
Yeah, a lot of times people seem to talk past eachother because to them, SF = bay area. In reality it's a small portion of the population and even smaller portion of the land mass of the actual bay area.
> It takes about 2 years to save up $100K on a typical Bay Area engineer's salary, if you're fiscally prudent.
I'm not sure what you think an average salary is. If you think an average engineer can save $50k cash per year out of his/her net income, you're way above the average I had in mind.
Let's assume an average salary of $120k per year gross. That's about $6k per month net for a single person who takes the standard deduction, assuming no 401k contributions. That's a net income of $72k per year. If that engineer saves $50k, that leaves only $12k for everything else. Saving $100k in two years on that salary, which I think is pretty close to the average, is just not doable.
EDIT: Should have been $22k left over, not $12k. Still not enough to live on considering the cost of rent.
Why? Fully contributing to a 401k (assuming no company match) would put your "take home" at ~$79,200 instead of $72k following your tax rate (which I assume is roughly correct).
> That's a net income of $72k per year. If that engineer saves $50k, that leaves only $12k for everything else
$72k - $50k = $22k, not $12k.
So with no 401k, you'd have to live on $22k to save $50k/year. When contributing to a 401k, you'd have $29k to live on, which sounds pretty do-able. Add in the fact that you would probably invest these savings, and you can hit $100k after 2 years by saving a bit under $50k each year.
Saving $100k in 2 years is not as outlandish as you make it seem.
How exactly do you figure increasing your take-home pay by contributing to a 401k? Did you forget to subtract the money that's actually going to the 401k instead of your pocket? Even at 90% tax rate, all you are doing is sparing that 90% on the money you are contributing. In other words, you are only actually paying $10 for every $100 you put in, because that other $90 would have gone to the tax man anyway. But you are still losing $10 of your take-home pay.
> How exactly do you figure increasing your take-home pay by contributing to a 401k?
I guess it depends what you mean by "take-home". The original premise was "saving 100k in 2 years". I hope we can agree that saving money in a 401k is saving money, regardless of whether we agree it's "take-home".
I assumed we were talking about money for a home down payment, which would not normally go into a 401k. Getting it out would require a 401k loan, and a 401k loan for a six-figure amount is almost always a terrible idea. The only other way to get it out would be to take an unqualified distribution and get hit with a significant fine.
Most 401k loans become due in full if you leave your job. That traps you in your job until you pay it back, because if you had enough cash to pay the loan outright, you would not have needed the loan in the first place. Unless you have an unusually good severance agreement with your employer that would enable you to pay back the loan if you leave your job or get fired, taking out a 401k loan is a bad idea.
When talking about saving, if you're working somewhere established, you also need to take into account bonuses and RSUs or whatever longer-term retention plans are in place. The size of these boggled my mind coming from the middle of the country as much as the base salary numbers. You should never plan on living off of them, but if you can toss 15k or more (and I've seen much more than that) into your savings just from non-base-salary comp, you're pretty nicely ahead of the game.
Whether or not the established places will toss so much money around if the hiring competition from startups dries up if there's a crunch there, well, that's probably a legitimate question, but I'm not sure that job losses of that size would only hit the Bay Area.
Yes it's expensive, but also yes there really are quite a lot of jobs that pay more than well enough to make up for it.
I disagree that $22K net is not enough to live on. It is if you go the multiple roommate/1+ hour commute (i.e. East Bay)/never go out lifestyle. It's not a ton of fun, but it's doable.
Sorry, I live here. I have an average salary for my experience. I can barely save $20k/yr.
My rent+util is about $2000/month. I live in a very /cheap/ 1-bedroom with creaky carpet floors, no insulation, and near train tracks that's far outside SF. (Belmont)
Altogether I spend close to $4000/month if I don't do anything special. /Everything/ is more expensive in this region. Food is expensive for no apparent reason other than to gouge customers. ($6 for a few sticks of butter? When I was in Seattle, it was $2-3.) I eat less fruits here because the prices are high year round. My job doesn't provide lunches, so I have to eat out everyday I'm at work. I mean, even cars cost more here just on Craigslist. In the same way there's an Apple tax, there's definitely a Bay Area tax.
I cannot possibly save $50k/yr for a house. Oh and $150k/yr is not $110k/yr after taxes. It's more like $94k.
I'm saving maybe $20k/yr right now. Ain't even contributing to retirement. Just trying to save for who knows what until I can get a job that pays 50% more.
It's cheaper to live in a larger place with roommates. You pay a premium for single bedroom and living by yourself. I lived in a warehouse with 5 other people for a while to save money.
From a certain point in life living at your own place (no matter if rented or not) with no room-mates is non-negotiable, given the financial means to do so. I'd rather live in a studio apartment at the edge of the city (been there, done that) rather than sharing a villa in a beautiful neighborhood with 5 other strangers. If it matters I'm in my mid-30s now, but started feeling that way immediately after I broke up with my wife 5 years ago.
Huh. We just moved out of a 2/1 in Belmont, 1 block off El Camino next to the Safeway, where we were paying $2050. Sure, once you add utils in it's more, but not a lot more. Splitting the rent with my wife, my share was basically what I was paying in rent for a 'fancy' apartment I shared with a roommate in Santa Clara 10 years ago.
Granted, the house was a good deal, but should be able to swing a 2/1 for 2500 or so.
According to PayScale[1] and Glassdoor[2], average/median salary for software engineer in the Bay Area is around $110K, so it's tough to believe $100K is "the bare minimum".
EDIT: And to add more to the conversation than that curt response:
When I compare take-home pay among various jobs I tend to ignore bonuses (because they're subject to your employer's whim--you don't necessarily get them) and I tend to ignore equity (because it's typically temporary--once you vest it no longer adds to your yearly take-home). To compare apples with apples you can only really compare base salary.
I think it makes sense to discount those factors, but ignoring them entirely is disingenuous.
A company offering $100k in salary + $20k in bonuses and $80k in RSUs is paying significantly more than one offering $120k in salary with no bonus or RSUs.
Also, Glassdoor tends to skew low. Here's a more reasonable database of new grad offers which average $109k base for public tech companies. [0]
That is nuts to only compare base salary. At the big 4, base salary will be <60% of total comp. It's possible that Goog will hit really tough times and no longer pay the annual bonuses and it's possible they don't offer equity refreshes. But it's much more likely that Goog's business will hold steady (or grow) and the company will want to continue attracting candidates. It's much more likely that employees get refreshes so that their pay in years 2,3 and 4 are higher than the pay they were promised at sign-on. However, it's possible for pay in the 5th year to drop if the initial grant is huge.
Like I said, $4000 on a regular month. I spend more many months because of trips, stuff breaks, etc.
Most new grads here make $90k-110k from what I've seen. Yes, you can make more. Yes, there are companies that pay stock on top of that. Those people are not me.
I make ~$110k. Minimal benefits. No stock. I happen to work for a big company too. Not every company here pays well and many low ball as hard as they can. (And succeed at low balling)
Before this job, I made $65k. Companies low ball hard and if you can't interview well, you take what you can get.
You claimed that you make an average salary for your experience, now you're admitting to being lowballed. Which is it?
If you're not a new grad and you're only making $110k, then yes you are making under-market. I'm not disputing what you make (that'd be ridiculous), but your assertion that you're making a standard salary.
Your comment doesn't really make any sense, because there is no benefit to having a conforming loan. In fact, there are drawbacks. Recent data showed that jumbo loan rates were LOWER than the equivalent conforming loan. We bought with 10% down on a jumbo and because it's not federally-backed you don't have to pay PMI. Mortgage, taxes, insurance, that's it.
Also, I don't know anybody who got that kind of parental help or put $500k down.
That was the reasoning given by a coworker who did this, and he put $500K down. I personally know at least 3 people who've bought Bay Area houses/condos in the $1.1-$1.2M range with multi-hundred-K parental help.
From TFA "the jumbo loan is supposed to come with a slightly higher rate". IMO the rate should be a LOT higher; otherwise PMI is always a losing proposition. Bizarre market forces indeed.
It was certainly surprising/counterintuitive that jumbo rates would be lower than conforming, but even when they're not, it sounds like they're incredibly close.
That said, if someone wanted to throw $500k at me to buy a house, I wouldn't turn it down :)
Even with generous wages house prices are rising faster than salaries. And let's be frank about this, when well-paid sw engineers are feeling the squeeze, imagine how awful the economic situation is for anyone in a less fashionable job. There are lots of people who work just as hard as any coder and whose jobs are just as necessary to a livable economy but who face certain economic ruin if they lose their lease - hence all the pressure for a $15 minimum wage. Meanwhile a lot of people who already own property fight tooth and nail against any large-scale building. It's a vicious circle.
I agree with your premise but I suspect your numbers are a bit off.
Regardless, whether it's 2 years or 3 years, to do the lifestyle you're suggesting takes and incredible amount of willpower to be willing to sacrifice and prioritize. It's passing up that cell phone upgrade. It's cutting discretionary spending to zero. It's passing on happy hour and bringing lunch every day.
While feasible, it's hard.. but suffering for two years to benefit for a decade. Quite possibly worth it.
It's worth pointing out that is just for the down payment. If you want to get ahead in life you need to be "saving" that much and more every year. And oops, your expenses just shot up dramatically because now you're a home owner.
BTW everybody knows about mortgage payments/rent but many forget about property taxes you have to pay as a homeowner. That's about 1.5% of your house purchase cost every year. Of course, there are tax deductions for that but even after them it's still non-negligible chunk of cash on homes approaching $1M.
Don't forget about home repairs and renovations, HOA, and services like gardening, etc. depending on what you buy.
It is easy to end up spending double rent on a comparable place. The difference is for now at least the home you buy can grow nicely so you need to do the math on rate of return for that vs other uses of that cash.
Those are all expenses your landlord has to pay if you are renting. If those costs plus mortgage is double rent than either landlords are hemmoraging money or something is seriously fucked up with the housing market.
True, but when you rent, the cost is obvious and stated upfront, however ownership has many hidden costs that are not apparent when you consider only purchasing price.
And closing/financing fees! If you end up taking a job out of area and decide to sell(understandable as now isn't the right time to be purchasing a rental) you're out the fees.
Oh yeah, those. You pay through the nose when you buy and when you sell. Can easily knock several percentage points off the price you thought you're selling for, or add the same to the price you though you're buying for. One has to be very careful to include those in all calculations. Renting is mostly flat-rate experience, and owning has much higher variance of payments. But owning has its own benefits :)
When I bought my first home my loan (P+I) payment was $1300 per month on average (paid every 2 weeks), which was not only affordable but cheaper than what I was renting at once you accounted for interest deductions! But the taxes were somewhere around $500 a month after the township raised local property tax by the maximum year after year. Due to average daily balance laws and escrow regulations, we often had a substantial amount of money "invested" in to our escrow account.
There was no amount of deductions to make this home an asset. It pushed a good quality home at a great price to something that now remains completely unoccupied.
My situation is 100% atypical - but I more meant to illustrate how big of an impact property taxes can be.
> It takes about 2 years to save up $100K on a typical Bay Area engineer's salary
Have you actually done this? Know anyone who has?
This seems completely implausible, outside of some extreme frugal lifestyle cases (I'm talking "eating garbage dumped by grocery stores" level frugal)...
I actually saved up $100K in about 18 months, working at a large Bay Area tech company and living in Mountain View. I don't feel I made significant compromises to do so, either: I had roommates for 6 of those 18 months but lived in a 1BR afterwards, I had friends (many of whom I still keep up with), I owned a car and got out on weekends. I did cook the majority of my (non-employer-provided) meals at home, and my friends tended to like relatively cheap activities like LAN parties, board games, and hiking rather than expensive meals out. I didn't go on any major vacations, but my family lives back East, and so that includes rather expensive airfare at Christmas, Thanksgiving, and 4th of July to see them.
Paycheck calculator shows me that $120K [1] in CA leaves you with $6,220 after-tax monthly income. If you really made about as much, and managed to save ~$5.5K a month, then you spent only ~$660 a month, which is just impossible, sorry. Even if you're sharing a 1BR with several roommates, which, by the way, is not really an option for many.
[1] Googling "average software engineer salary california" shows figures ranging from 107k to 135k, 120k seems to be more or less the median of Google's figures.
It was 2009-2010, so rents were lower, but my paycheck was lower as well (I started at only $100K/year base, compared to the ... well, much higher amount a few years later). After taxes and 401k, I netted $5400/month. 18 months encompassed 2 bonus cycles, so about $40K of that was bonuses, after tax. My rent was $900/month with roommates, and then $1400/month in the 1BR, and total monthly expenditures were about $2K. I was packing away about $3.5K/month; 18 months of that is $63K, +$40K from bonuses = just over $100K.
Well, good for you. I don't think your situation was "average" really, but kudos on the savings :) Coming from a guy in NYC whose monthly expenditures are through the roof...
You must admit that $40k bonus after tax is a huge, atypical amount of money. It makes your effective yearly income to be about $156k.
It reminds me of the mrmoneymustache.com guy, saying "anyone can retire early! Just look at me, all I had to do was get $1M in stock from Cisco!"
No disrespect intended for you; I'm sure compared to some of your friends you lived frugally. The point I'm making is that to duplicate your living standard today, very few comparable developers would be able approach your level of savings.
It's over 2 years. $20K or so after tax per year. A bit over $30K pre-tax.
Not sure what typical bonuses are these days, but I don't think that's out of line for a big tech company. Certainly stock grants can be much more than that, but it usually takes more than 18 months for them to amount to anything.
Thanks for sharing numbers. Wow, that's an amazing bonus, and you should feel fortunate! This is coming from someone who does work for a big tech company. I've never seen anything remotely close to that.
These are completely normal numbers for the Bay Area. I got substantially higher offers when switching jobs recently, so these numbers from 2010 are not surprising. I am not a rockstar or anything. I just applied to a lot of companies to get multiple offers, and negotiated aggressively. Lots of people are being paid less than this because they don't know they should be asking for more.
Check paysa.com for user-reported total compensation in recent offers. If you don't believe them, check http://h1bdata.info for lawyer-reported salaries of h1b employees (base salary only and probably biased downward by h1b abuse).
The h1b data is mind blowing in the huge disparities within the same company. Let me tell you: the people getting paid 50% more with the same title are not 50% better. I increased offers by 50% by telling the recruiters that's what I would need to accept an offer.
I will unequivocally state that a total comp of $150k+ for a new grad is at the very least, the top 5% of software development salaries for that level of experience.
was the op a new grad? sorry, I missed that. yes, $150k for a ncg in the first year is high. but honestly not that high, and for a 2nd year... doable from my experience [1].
Yes, doable at Google, a company known for being at the top of the market in compensation.
The whole point of the original statement was "I made $X and saved $Y, it's not that hard." But when you examine the X and the Y, they are not representative at all!
It has similar merit to a lottery winner saying, "why can't you win the lottery too? All I did was buy a lottery ticket."
Google pays substantially more than that - matching that number does not put you at the top of the market. Companies paying that much include many of the largest tech employers in the area. Compensation for job switchers has been increasing rapidly since the no-poaching ring was busted, but you have to know to ask for it. Lots of people are anchored from that period and don't know what they are missing.
Sure, I did this (and more if you count my 401k). I don't think I was that frugal: I certainly didn't want for anything, and ate my fair share of sushi.
Like the article mentions, saving a lot is easy if you're fine with a roommate and living in a non-luxury apartment, but if your housing standards are higher than that then it's tougher.
This is, of course, at the compensation levels talked about in the article. Some companies (early stage start-ups, banks) pay much less.
- rents $2000K/mo 1BR apartment (single but wants some comfort in the Peninsula, no hellish commutes from East Bay)
- transportation $200/mo
- free lunch (and possibly dinner) at the company - eating out and groceries $300/mo
- entertainment $200/mo
That's $2700/mo. Let's round it up to $3000/mo because you're a well paid software engineer and can spend $300/mo on top of what I listed whenever you feel like it.
So far, $36k expenses + $50k savings and you still have $8k left to go on ski trips to Tahoe, Outside Lands and other non-frugal lifestyle expenses.
A decent 1BR on the peninsula (in San Mateo, Redwood City, Mountain View, etc.) is likely closer to >$2,500 a month plus $200/month for utilities/renters insurance. For transportation, I pay $200/month for a 15 year old Civic with liability insurance. If you have a moderately nice car that isn't paid off, you are going to pay >$200/month (especially if you commute daily). If you cook moderately nice meals and drink some alcohol, that food budget is likely going to be >$400/month. Plus going out to happy hour once a week, which isn't that uncommon, can easily cost you an extra $30-50 a week (or more). A good number of people have college debt as well, so add a monthly payment for that. I agree with you that saving is definitely possible when single and making >$100,000. I just think you low balled most of your numbers to prove your point.
If we're talking about low balled figures, I guess we need to consider the income side of the equation as well. The original question depends a good deal on what kind of job you're doing in the Bay Area. If it's someone coming to the Bay Area to work for Google/Facebook or similar, the figure I used is way too low, for example.
"A decent 1BR" - It all depends on the definition of decent. I pay $2k for a 1BR walking distance to Redwood City downtown/Caltrain.
But forget about renting an apartment, if you want to save and you're single, having roommates allows you to rent in the Peninsula for much less than $2k/mo.
Also, I added $300 discretionary spending which lets you to cover some of the things you described, and you're left with $8k at the end of the year.
Can you easily save $50k while spending $3k on rent+utilities to live in a fancy apartment in the Peninsula ? Maybe not, but you certainly don't need to be "eating garbage dumped by grocery stores".
> Maybe not, but you certainly don't need to be "eating garbage dumped by grocery stores".
Nice strawman :) I was specifically talking about the situation conditional on saving the 100k in 18 months, my comment was a response to the comment above it.
Separate point: your figures seem very low. I thought SF is roughly equivalent to NYC in terms of cost of living. In which case 300/mo is a zero off as an estimate for all food expenses.
I did it, paying $3400/month rent & supporting a family. Salary took care of living + unexpected expenses, and stock grants/purchase plans took care of the saving + knowing where to keep the money (thanks, years of scraping by on non-SF-ludicrous pay packets).
edit I don't know what a 401k is good for (I already have two retirement saving schemes in other countries), mostly did staycations since SF is such a tourist destination.
I went from a net worth of <$50k at age 20 to >$150k at 22, while never being particularly frugal at all. Heck, I didn't even have roommates. My monthly spending averaged $4k/m.
NYC, not SF, but the difference isn't huge.
Most people are atrocious with their money by either overspending or under-optimizing.
OK, it all depends on what the cash flow looks like :) You're leaving out that one very important piece of the puzzle...
Also, the average apartment in Manhattan (if you do rent without roommates) is pretty close to your cited figure for total monthly expenses. Which means you either lucked out, or seriously compromised on your living arrangements.
> OK, it all depends on what the cash flow looks like
I was making $150k/yr, which is pretty standard for a developer in NYC.
> Also, the average apartment in Manhattan (if you do rent without roommates) is pretty close to your cited figure for total monthly expenses.
I take it you don't live in NYC. The average is a useless metric because it's distorted by millionaires and billionaires. Just go on Craiglist and you'll find plenty of suitable apartments in the $2-3k range.
Nobody I know pays more than $3k/m for their apartment. Heck, my friend just rented a beautiful luxury single-bedroom for $2.8k.
In my case, I chose to go for a non-luxury apartment for $1.8k/m. This was definitely a deal, but even though it wasn't luxury there was plenty of space and I even had a back yard.
> Nobody I know pays more than $3k/m for their apartment.
Few people I know pay under. We live in parallel dimensions I guess.
> In my case, I chose to go for a non-luxury apartment for $1.8k/m.
I don't know what NYC you live in, but this is non-existent AFAIK. I know someone who went all the way to Rego Park (this is really far from Manhattan) to rent a 1BR for $2.5k.
When you say a typical engineer's salary, I feel like you mean a high performer at Google with a rich family.
I make about that much, at a company without free food perks that doesn't give me amazing stock bonuses (my social skills are too bad to negotiate them…) and I live frugally but could never save that much after $2k/mo rent! And there's no huge parental loans for me.
You would have to be extremely well paid and frugal to save $100K in two years. Sure, it's do-able, but wow. Of course, this is HN, so there's always someone who knows someone's brother's roommate who makes $150K/year at Google but that's a pretty high salary. And to be able to keep $50K of that given the cost of everything? I don't see how it's possible unless you are single, have no kids, no existing debt payments, don't put anything away into IRAs, 401ks, etc. and are are extremely frugal.
But if you do and are, you have $100K. Congratulations. That does you no good when homes are $1M+. Keep saving.
You should not buy a home unless you are going to live in the same place for 10+ years. Especially if you get a rent controlled apartment, owning a home does not make financial sense in the bay area.
The other big thing to help with home ownership is to get married. With double the income it is a lot easier to save for a downpayment.
If you're a HENRY (High Earner, Not Rich Yet), and have a good credit score (>740), you might qualify for a mortgage with 10% down payment without PMI/second mortgage.
With a frugal lifestyle, 10% should be doable in a couple years, especially if you're okay with living in the East Bay (so the house price is somewhat reasonable).
I'm certainly not agreeing with the value prop of the Bay Area, but PMI is actually not such a bad deal if you have prospects. It's not very much extra a month, and now you can get it removed after you have 20% equity in your home by request.
Lyman Stone has a good blog post[1] suggesting that it's rational for Millenials loaded down with student loan debt to live in high cost-of-living regions, for exactly this reason. The high nominal incomes give them more power to repay their student debt, which is not cost-of-living adjusted.
This worked for me. I borrowed way too much money going to school. As a fresh MBA grad in the suburbs of Los Angeles, California, with few marketable skills, I couldn't find any career options that would offer a starting salary that came close to covering my costs.
My big break was finding a job in San Francisco. I charmed my way into an entry level sales gig with a base salary of about 35K USD (in 2004), and was soon making at a 70K-ish "annual run rate" (stealing that from startup PR lingo). And that job did all of the lead generation for me. I wasn't able to find a job like that outside of a big city.
Even when I was homeless for a bit a few years later, I chose to stay in San Francisco over moving in with my suburban LA parents because there I saw more opportunity in San Francisco. For me, it was riskier to play it safe in the burbs than hustling in San Francisco. It's better to burn out than fade away.
The way I see it, if you wanna make it as a professional, and you don't have a reasonably understood career path to follow, it makes sense to go where the money is. You can live financially cheaply in most places, and you'll have to decide how much you're willing to work for it. For me, living in San Francisco is, and has been, worth it.
Which leads to a funny observation -- I have never seen so many expensive German automobiles in cheap apartment complexes in my life. Driving elsewhere makes you wonder where all the fancy cars went.
[3] We find that engineers often under-value startup success
(growth rate, revenue) when looking for jobs, and instead
place an emphasis on brand-recognition, or whether they find
the subject area exciting. Now, I don't mean to judge anyone
for this — working in an areas of passion may be great
choice. But if your goal is to maximize your financial
outcome, looking at startups more like an investor and
picking a company in a big market on a promising trajectory
is likely a winning strategy. The Bay Area, with a large
number of startups, is probably the best place to do this.
You might expect that companies in big markets with great growth would be more competitive (more people would want to work there, and it would be harder to get an interview / offer). But we see that this is often not the case, making it a great strategy.
Our next blog post is going to be about this (how engineers decide between offers, and how they can perhaps do it better)
When I, as an engineer, look for a new job, I never even run into growth/revenue figures. Companies like to put those numbers into the decks they show investors, sure, but I've never seen a company put them into the job ads they run. It's hard to compare what you don't know.
Also, a lot of the time when I'm working at these startups as an employee (rather than a founder), the ongoing success and cashflow of the business are made utterly opaque to me and every other employee. Which means, if a potential hire came and asked me whether the company I'm working for has good growth/revenue... I wouldn't be able to tell them. I'd have an impression, but it'd be just that: an image created by the salesmanship of the business side of the company. Which means that asking others when I'm looking is just as useless.
Investors diversify their portfolios by investing in a number of startups and also in more reliable investments like well-established companies. You can't treat a job that way - there's no way to diversify the hours of day into several different companies with different risk levels. What the author describes is gambling. You bet all your resources (time, in this case) on one horse and hope it pays off big. That's not a good strategy. If you want to "invest in startups", then do that. Use Republic or start a VC. Don't gamble on a single startup and lie to yourself that it's an investment - treat it as a gamble, and only bet as much as you can afford.
> Investors diversify their portfolios by investing in a number of startups and also in more reliable investments like well-established companies. You can't treat a job that way - there's no way to diversify the hours of day into several different companies with different risk levels.
It is definitively possible to diversify: Just do an agreement with other programmers to put all (or, say, 50%) your incomes into a common pot and distribute the content of the pot among all peers. Just set up terms and conditions and let everybody who is part of this agreement sign them.
The parent wanted to diversify. Diversifying means that one gets a smaller part of the winning ticket - not nothing, but also not the complete piece (just as the investor only gets some smaller part of the profit than if he invested all the money in the winning company). If this is not what one wants, one should not claim that one wants to "diversify the job among many opportunities", but instead honestly say that one is simply jealous of the success of other people that got the better ticket.
I am not sure it is a good idea to pick your employer like an investor would.
An investor in startups is going for high risk, high reward investments. For every individual investment they make, the chance of any sort of return is quite low; they make up for this because the rare startups that succeed make enough to compensate for this low success rate. Since they are making a lot of these high risk/high reward 'bets', they can be fairly assured they will receive the expected value in return.
As an individual, you only get to place one bet on your employer. For most startup employees, that means they are very unlikely to get any sort of payout because of company success. It doesn't matter that the 'expected value' of working for a more-likely-to-hit-it-big startup is higher than for another company, since the probability is that you will not hit it big.
As an individual, you are more concerned with things like salary, working conditions, and personal enjoyment of the work. Those are the things you are CERTAINLY going to experience; the tiny chance of huge success is most likely not going to affect you.
I think there is a good analogy to poker here; in Texas Hold'em, two aces are the best starting hand. There is almost no situation where it is best to fold them before the opening flop; your expected value is always positive against ANY other combination of opponent hands.
However, there are a few cases where even though you have the highest expected value for your hand, it is in your best interest to fold. One such case is if you are playing in a tournament, you are in the money, and two people with much larger stacks have already gone all-in. In that case, your best bet is likely to fold; even though you have the highest odds of winning the hand out of everyone, if you LOSE, you are out and can't keep playing. Even if you win, you will still have the smallest stack and are unlikely to move up any spots and win more money; if you fold, though, someone else is likely to be knocked out and you can move up.
It seems counter intuitive, but this holds because expected value only works as your primary decision making point when you can make many bets; if you only get one bet, lower risk with lower reward is often better for you even if the expected value is lower.
Think about it this way; lets say you only have $1,000, and you need it to pay your monthly rent (if you don't pay, you will be kicked out and be homeless). Someone comes up and offers you a bet; you bet $1000, and you get a 1% chance of winning $200,000. In terms of expected value, this is a great deal! If you made the bet many times, you will expect to win $1000 for each bet made! However, 99% of the time you are going to be homeless. For most people, the choice is to go against the expected value and play it safe.
I had a friend who moved from start-up to start-up every 12 months after his initial tranche of options vested. He knew how much cash he required to live (with a little buffer for emergencies) and then traded cash for more equity in his salary negotiations with a view to building a diversified portfolio via sweat equity. He did this for 5-6 years, and one of the companies has already exited with another looking likely within the next 12 months. He obviously left a lot of (potential) money on the table by walking away at the one year mark, but he figured having a handful of smaller bets was better than going all in on one company and it looks like that strategy is going to work out pretty well for him!
That sounds smart! It would take a stern constitution to cope with such frequent changes, but it sounds like a decent way of diversifying if you can stick to the strategy.
Towards the end he did admit that he was overlooked for a number of roles because of the "flight risk" warnings on his resume, but the market was frothy enough that it didn't impact him too much given he was damn good at what he did and companies needed talent.
I never understood this mindset here, maybe because we didn't have it in Houston where I grew up before moving out to the Bay Area for an engineering job. I found a nice small but profitable company and am quite cozy here, but people are always telling me I need to do the 2 year startup hop. It seems like gambling to me - 2 years of my life again and again in the hopes I'll strike gold? I'd rather slowly and steadily squirrel away savings and grow my 401k and other investments while actually enjoying my work.
> I'd rather slowly and steadily squirrel away savings and grow my 401k and other investments while actually enjoying my work.
I call this the startups::"active investment" versus slow-and-steady::"index investment" comparison. For the majority of software engineers who are not rock stars with commensurate 400K+ total annual compensation plans, it's not clear to me participating in the startups/SF-Bay ecosystem is statistically worth the financial instability risks, just as for the majority of retail investors, index investing is currently the most statistically consistent path to wealth accumulation.
If you are a "retail" engineer (perhaps there is a signaling indicator like if you aren't negotiating a compensation package directly with VC's or founders and not their representatives, then you're "retail"), then like most retail products, the vast majority of your value, half and more, is reserved for capital holders. It is your call whether or not if there is any statistically increased long-term job precariousness involved with accessing that startup/SF-Bay ecosystem, and if the tradeoff is worth it to your personal situation.
The way I look at it: Your career is time boxed like a baseball game. You only get a few at-bats then you're done. So you can use your chances to swing hard for the home run, or you can go for the safe base hits. But you don't get 100 chances.
Investors on the other hand get thousands of at-bats. They're only limited by the amount of money they want to invest, so they can diversify all they want.
> The Bay Area, with a large number of startups, is probably the best place to do this.
This is the bit I take issue with. I've done the whole startup thing, worked for 4 different companies in under 2 years, and it worked out great for me, but I did it in the Tennessee Valley, not Silicon Valley.
The Bay Area is not the only place with startup jobs. It's just the place with the biggest multi-national corporations still pretending to be startups.
I ended up in Los Angeles because, despite being an expensive city, rents were cheaper than the Bay Area, and the salaries being offered were equivalent. I have a great place in LA that would easily be 50% to double the price in the Bay.
This wasn't the only reason but it was one of the biggest. Another reason being that I wanted to work in tech as it relates to media and content, and there were many more options to choose from here.
Same, but I bought a house. Just outside of LA there are cities with some of the best public schools in the state (and some the country), and you don't have to pay $1.5 million+ for a house in the district.
I'm seriously considering moving to the San Gabriel Valley for when I have to move next year. Specifically, I intend to rent a house.
Monterey Park is basically my ideal location, though I'm plenty willing to live in some of the other nearby suburbs. For example, I saw a really great house in Temple City listed on Zillow, and I came really close to asking for a transfer to my company's LA office because of it (and the only reason I didn't is because our LA office is at LAX, and I'm not looking forward to that commute... I'll have to change jobs or go remote if I want to live in the SGV).
for those who don't know, quality of life in LA is entirely dependent upon your commute. your life can either be the single best big-city experience in the country, or a hellish, dystopian nightmare that will send you into a suicidal depression.
your life can either be the single best big-city experience in the country, or a hellish, dystopian nightmare that will send you into a suicidal depression.
My plan is to find a remote job to avoid having to commute, rent a house in the San Gabriel Valley, and then spend my free time enjoying delicious Asian and Mexican food.
Totally fair point. CA state income tax may take an additional 13% out of the Bay Area numbers. I'm adding this into the post now... Thanks for pointing this out!
Paragraph 2 -- if you pick a winning startup (uber, etc) then the bay area is great! Well, yes. The problem is picking that winning startup, and really, if you're good at that, stop wasting your life as an engineer and go invest money for a living. We shouldn't expect eng to be able to pick better than vcs, and their hit rate isn't great.
It also uses pre-tax salaries, not after tax salaries, where Seattle has a large advantage; even at $120k, you get $5k more in cash in Washington state. Which may not sound like much, but you should view it not as 5/120 but as 5/80 (roughly your take-home pay).
The discussion of housing (where exactly is that sub $800k housing in sfbay) ignores commute times and costs. Sure, if you want to live in outer sunset or east bay and deal with horrid commutes, there's cheap housing. If you want to live within 30 minutes of work, housing will likely be much more expensive.
The author also pays no attention to the effects of having to reset your social network / family to exploit moving to sfbay, banking the higher salary, then moving away. That's a large price to pay if your plan is to get to your mid 30s then move elsewhere. And hard to achieve buy-in from significant others who may similarly not be stoked about losing all his/her friends.
And finally, it finishes with a discussion of the two most generous employers, google and fb. Who, yes, are generous but also not representative.
I don't know if the article was really talking about "winning" startups. Growth+revenue aren't really representative of whether a company is "winning"—they're just representative of a company that's properly doing the thing investors want it to do, growing at the expense of all else.
If you're an investor, you need a company to succeed in a long-term sense: to pay out at the other end of the bet that started it. That's hard to predict: it's like looking at the fitness of animals in an ecosystem and trying to predict which one will end up with the most great-great-grandchildren.
But if you're an employee, you just need a company to be growing, and to be throwing money around in the process of doing that. You aren't looking for a fit animal, you're looking for a fat animal. Animals might get fat before they get fit, as before puberty in mammals—and investors try to encourage startups to "bulk up" to kickstart their metaphorical puberty. But unhealthy animals also get fat, and to a predator, they're just as edible.
If your goal is to "eat a lot of salary", you just need a company who's known to be throwing their fat around, not a company who will dominate their niche and sire a thousand children.
That is a good point. I do think though that even growing startups prefer to pay in equity though, at least until you get to the pseudo-IPO ultra late stages. As recently as a couple years ago, AirBnB gave me a fairly cash poor offer, but wanted me enough that when I turned it down both my future manager and a VP eng tried to get me to reconsider.
I, myself, moved from the Midwest to a very high COL East Coast city 7 or 8 years ago. My salary has pretty much doubled, though I imagine at this point it is about $40K more than I could get back home.
But I live very frugally, and I have saved a lot of money. The plan is to soon get out of here and buy a nice place somewhere cheaper (South or Midwest) with cash and not worry about making the same salary.
OTOH, I think many people end up losing out financially in places like NYC and SF. If your salary is only $40K more than it would be in Omaha, after taxes, you're probably looking at only $30K. If you rent a typical corporate apartment, you're probably now underwater.
I think we're going to start seeing more and more people refusing to move to SF, NYC, and DC if salaries don't allow similar lifestyles as $20K less in middle America.
I have already blacklisted SF, SV, and NYC for cost of living reasons, DC for typical job quality, and Chicago and Detroit for corrupt and bankrupt local government. The spouse has blacklisted St. Louis for arguably insane reasons, but it's out of bounds nonetheless.
That leaves plenty of places to live, but not very many that are well known for having a lot of good software jobs.
I don't really want to live in a broom closet with 3 other people that already get on my nerves in the space we're in now. It doesn't matter if you are willing to pay me more if I can't maintain the same standard of living on that.
Arkansas and other places where land is effectively free work differently than California. You buy a starter home straight out of college, maybe you improve it, it'll probably increase in value marginally over the next 5 to 7 years. Then you sell it and put what you've "earned" into your next house.
My friends back in Oklahoma are on their third or fourth houses (we're all around 35) at this point.
In the Bay Area, you probably don't buy a house until you're 35. In fact, you have to get a bit lucky to be able to do it then.
Houses aren't retirement plans in most places. And I think that's good.
If you have ever seen hermit crabs do a multiple shell swap, that's about how it works. In areas where housing is cheap enough to have younger homeowners, the sale of a big home can often depend on a chain of other sale contingencies that depend on whether a first-time homebuyer can scrape up a $15k down payment.
So you have the 1/1 homes for young singles, 2/1 homes for young couples, 3/2 and larger homes for families, and then maybe a step-down option for empty-nesters.
My chain broke in 2007, when I got canned in a buyout, had to move to find work, and couldn't sell either the 3/2 or the previous 2/1 (rented out) at a decent price, and all my accumulated equity vanished. I would probably also be on my 3rd or 4th house by now if I hadn't been busted back down to tenant.
I definitely can't afford SV home prices, even with a higher salary. I need at least a 3/2, and don't have enough millions in the bank to get one anywhere near SF Bay.
Homes aren't the retirement plan around here, but the retirement plans definitely factor in not paying rents or mortgages after about age 55.
Yeah, but in the bay area you can live in a small apartment, save a ton of money that you put into stocks, and then eventually use those investments to buy a house outright in a cheaper part of the country when you move.
> Houses aren't retirement plans in most places. And I think that's good.
Absolutely; the fact that they've worked that way in some places is completely poisonous. For one thing, it's obviously not sustainable; you can only have the inflation-adjusted average value of a home double so many times before it's literally impossible for anyone but the actually wealthy to afford. Secondly, it creates a strong incentive to oppose building more housing, which causes all kinds of problems.
> At Triplebyte, we help engineers around the country (and world) get jobs at top Bay Area companies
I admit that I stopped reading at this point. Maybe I read that wrong and they meant "in addition to other areas", but from the way it's written it sounds like a conflict of interest. It's going to be difficult to make an objective assessment of the pros and cons of living in the Bay Area if your business depends on people wanting to live in the Bay Area.
> Examples of topics we would like to cover include the salary differences between the SF Bay Area and other locations (does it make sense for engineers to move to SF?), the prevalence of remote work (is it harder or easier to get a remote job?), gender/age bias in hiring (How common is it?), and how credentials impact hiring decisions. We have insightful data on all these topics.
Reading the article, they analyze data they show on charts. You could make the same conclusions they're drawing by also looking at the charts. Sure it's a shameless plug, but it definitely doesn't discredit their analysis.
I paged through - the rent price estimates in Seattle strike me as low. Obviously I don't have strong statistics to back this up but when I looked for one bedroom apartments a year and a half ago everything was at least $1700 and many were not in the city center. Prices have increased considerably since then.
Because you're working for the same company, in the Seattle office. Additionally, a lot of the difference is from income taxes that you no longer pay - something that companies take into account when making the initial offer, but not generally when doing transfers.
If you got a boost from transferring from San Fran to Seattle, overtime it would even out during merit pay-raises. Companies that are large enough to support development offices in both Seattle and Bay Area, are large enough to have a very formalized process for raises, which take into account your current pay vs the local market rate for that position.
From what I've heard from friends at big companies, the primary variable in the merit process is your current Salary - it does take the other things into account, but almost never enough to make as much of a difference as your current Salary. That's why people stress that it's so important to negotiate your starting salary higher, and not expect to get paid better once in the company.
If you are going to transfer somewhere at the same pay rate, transfer somewhere cheaper and nicer than Seattle. Lots of options (I'm partial to northern New England, personally, as I like having proper winter).
Nashua has a lot of tech companies if you would be ok with a smaller urban area close enough to Boston to enjoy the city too.
Personally I just moved from Seattle to Boston. I'm conflicted on the two places. I really liked the outdoors areas in Seattle, commute was shorter and rent was also cheaper. But Boston has a lot of cool things too, food better, more interesting activities todo (other than outdoors but you can find it NH) and cycling infrastructure is poor compared to Seattle.
I'm not native of either place (from Montreal) so my experience is based on a few years of living in both.
Boston isn't exactly better in terms of winter sunlight that's for sure. Both are grayish in winters but summers are great (less humid in Seattle).
What did it for me is proximity to family. Being in the same timezone is huge.
Cool fact I learned recently, Boston-Cambridge-Nashua, MA-NH area has one lowest unemployment rate for any metro area at 2.6%.
The problem is salary for tech workers in Montreal are way lower than other NE cities. 5 hour south and you make 2-3 times the salary you could make in Montreal (from personal experience) but cost of living does match that increase. You are better off net in the US. I know a few people that spent time working in the US and returned to Montreal with a good amount of savings which lets them live very comfortably.
Providence has been perpetually on the cusp of having a tech scene for about 20 years now; it's starting to take off a bit, and still reasonably cheap even in the beautiful areas around Brown/RISD.
There's a lot going on just under the radar in the smaller college towns. Amherst/Northampton MA, Burlington in VT, Hanover/Lebanon in NH. A lot of what's going on is in fairly small shops that don't have job postings, but would create a position for the right candidate, which makes it hard to find them if you're not in the area, unfortunately, but there are definitely some medium-size firms, too. These have a very different feel from Boston, though, so maybe not what you're looking for.
I also know a few folks who live near me (Hanover/Lebanon) and commute to Boston or NYC (2-3 days a week, WFH the other days). This is a pretty sweet deal if you can make it happen.
It's much easier to justify keeping the salary with a move to Seattle, since the pay rate difference isn't as large. It's also much easier to then find a new programming job if you lose one in Seattle.
Funny, when I saw "nicer", I sure as hell didn't expect it to be followed by "New England". Fortunately, there's a region for everyone, but man, as someone who moved out of Seattle for better weather, New England would be a huuuge downgrade.
Chiming in to respectfully disagree that New England winters are better than Seattle's. Seattle has a more temperate winter with fresh powder 90 minutes to the east, if you're into that sort of thing. Snow should be on a mountain with ski lifts, not in your driveway :)
I know someone who bought a house near Seattle, and they've accepted that they're pretty much guaranteed to die if they're home at the time that it hits due to the home being built on a hill.
Yes because the bay area doesn't have earthquakes... Honestly, you are much less likely to die in Seattle's only real weather threat, then the myriad of unsafe conditions in other parts of the country.
I do not understand the obsession the software industry has for locality. Wouldn't it make sense for people to work anywhere? Haven't Bay Area companies heard of something called the Internet?
If you have to have people in the office to make sure they're working, you already have a fundamental hiring problem.
> I do not understand the obsession the software industry has for locality.
For many types of problems, collaborating in person works far better than collaborating online. Lower friction, easier to have a conversation, easier to sit around a computer and experiment, and generally easier to handle things in a few minutes that would take longer otherwise.
Yes, let's all keep believing that. If companies realized that all programmers can actually work decentralized, we might not be able to command a decent salary as it becomes a global race to the bottom...
Most programming is work that can be done in a decentralized fashion. Some can't be. In either case the salary commanded is influenced by a number of factors other than supply (quality of the supply, for example). So I'm not sure a "global race to the bottom" of the apocalyptic kind you imply would result in such a realization.
As a developer, I've specifically pushed to maintain a co-located team, precisely because the type of work my team does works far better when co-located.
I do decentralized development regularly, and for some kinds of work it works fine. For other kinds of work, it makes simple tasks take an order of magnitude longer.
The Linux kernel does distributed development quite successfully, and scales extremely well. However, it does so partly by sacrificing some forms of coordination between developers; for instance, kernel maintainers don't consider duplicated effort to solve the same issue a problem, because the overall process still scales even if some individual developers end up wasting their time.
On the other hand, the development of any one individual patch series to implement one feature typically occurs either by one developer, or by a set of co-located developers in one organization, not by geographically distributed developers. And some other kinds of work, such as backporting or rebasing a series of patches, doesn't work well when geographically distributed.
Supposedly this has already happened with offshore development, and yet, here we still are, paying top salaries for US developers in the midst of a tech shortage.
I worked at a 100% telecommute shop local to Chicago for 10 years. We also used offshore development firms on some projects, and I can tell you, if anyone ever seriously had the idea of replacing us with them, they were quickly dissuaded by the experience of working with these firms.
You can work decentralized but it's not particularly great, especially because remote communication isn't a solved problem. You communicate a ton of stuff in an actual face to face conversation through a variety of different ways and even video calls don't really capture that.
Really? Debugging a kernel is hard yet the people building Linux are located all over the world. You don't really have the option to "screen share" when testing some kernel features, yet Linux is one of the best kernels in the world.
I want to work with my team in person. That has nothing to do "making sure they're working". It's just easier, for me, and presumably many others, to be able to collaborate in person.
Maybe there's a future where seamless video conferencing, Beam robots, and better text communication could replace in-person conversation, coffee and lunch chats, and other office-place experiences. I've tried, and I don't think we're there yet.
But that provides a better incentive for remote teams. I agree that teams work better in person, but when you have separate teams, working on only tangentially related things, it makes sense to separate them out.
Obviously for small startups this doesn't make sense. But mid to late stage, opening a satellite office for development somewhere else seems like a no brainer. I assume I'm missing something though.
Our secret sauce is one thing. Exactly one thing. What do you mean "tangentially related" we'd outsource anything unrelated.
The exit strategy is to be bought by a multinational megacorporation not to have two offices, or even ten. There's sort of a financial fund raising dead zone between having one office and being purchasable and having 500 offices and buying little companies. Very few companies jump that gap and its safer to try and get bought that to try and become Google2.0
It does make sense to separate teams who do different things but these teams do have to align and communicate occasionally. Meeting up in person in a meeting room is an incredibly convenient way to do that.
Satellite offices do make sense, however, I wouldn't want to be in one at this point in my career. I'm only a few years out of school, and not 100% settled into what I want to do. Being in a bigger headquarters (or a major non-HQ office) is important for me to socialize with other teams, find out what they're doing, and possibly switch to those teams.
Having people in the office supports communication at much higher frequency and much lower latency than any video-conferencing method, not to mention that video-conferencing is uncomfortable and sometimes hard to hear. It's also vastly easier to simply walk over and look at a coworker's screen rather than trying to screen-share, and it doesn't require you to stop anything you're doing. Additionally the sense of camaraderie supports motivation and helps to assuage the crushing boredom of what is for most of us a profession of financial convenience after we failed at our actual dreams.
I don't know about that. I've done hundreds of hours of pair programming with Google Hangouts and usually it's pretty good.
Google Hangouts is decent for every type of sharing except "let another user control my computer directly".
I can press a button and usually within a few seconds I can see the chat recipient's screen on my end. Now I can watch his screen and we can pair with voice chat. I have my own screen to do occasional Googling and pasting info to chat if needed.
Basically I would find that far more efficient than unplugging my laptop, walking up to someone's office, plopping down, having to Google something while we pair, and now show him my laptop because there's no way to get it on his screen without duplicating the search work on his machine.
I'm a big proponent of remote working, but I can see how some early-stage startups need a lot of face to face interaction, not just with other devs but all the way up to the CEO.
But yeah, your everyday, run-of-the-mill corporate coding job can easily be done at home. The problem is a trust factor with these companies: they don't trust the tools that enable remote working as much as they don't trust their ability to manage their remote people.
Today, the internet can't compete with face to face communication. Even with Skype etc. I think this is the reason rather than keeping tabs on the work you are doing. This may change in the future of course if we can get VR to a real level of fidelity.
> If you have to have people in the office to make sure they're working, you already have a fundamental hiring problem.
It is possible to be remote and have your screen recorded to make sure you are typing for 8 hours, vs. being local and just being trusted to get on with it.
It looks like the salary differential of $33k listed in the article is gross earnings. After taxes this would just barely cover the rent differential of $1.5k/mo ($18k/year). Note that this is the best case scenario according to their estimates.
What troubles me is the use of median rent to compare housing costs. As rent increases, renters are likely to downsize offsetting some of the rent increase. I'd be willing to bet Seattle renters are able to get more space for the area's median rental. Accordingly, the salary increase probably doesn't cover the rent increase for a similar sized home.
Compromise on neighbourhood. If you're in SF instead of living in the nice areas, go to Tenderloin, Hunter's Point, etc. You can find great deals in those areas.
I incorrectly multiplied the tax rate to the salary difference, and said that this was a 5$ difference. This is totally wrong (as multiple people point out below). I'll leave my original embarrassing comment as a cation to not write stupid things :)
==
I just added in a mention of the tax difference. But the numbers are 13.3% in CA vs 0% in WA. That's significant, for sure. But 13% tax on $33k is about $5k. I don't think that changes the conclusion that the salary difference does (in many cases) cover the housing costs.
You're likely correct about the price for a similarly sized home. People who want large homes should probably not move to the Bay Area.
Thanks for adding the note on the tax difference! That doesn't address my point though.
If the salary difference of $33k is the difference between gross salary, that $33k is going to be taxed at the marginal tax rate. My guess at a marginal tax rate would be ~40%. Accordingly, that $33k becomes closer to $20k after tax.
Edit: to clarify, consider a Seattle salary of $100k and a Bay Area salary of $133k. The take-home salary for each location would be:
Seattle : $100k*(1-0.4) = $60k
Bay Area: $130k*(1-0.4) = $78k
Leaving $19.8k in additional income to cover the median rent increase of $18k annually.
Works out to $9k according to this for a single filer: https://smartasset.com/taxes/california-tax-calculator#8TRRj... -- so your additional income is more like $11k, or just under $1k / mo. In my experience, the difference in housing is far more than $1k/mo, so you come out ahead in Seattle.
EDIT: Looks like I forgot about California's other taxes on payroll, so it's actually even more in Seattle's favor.
If you move to CA, you need to pay state tax on your entire earnings, not just your raise. 13.3% of 140k is more than 18k, which is certainly significant.
I believe you can deduct state from federal tax, which would save ~2.5% in marginal tax. In addition, social security phases out at ~120k so that's another 7.5% savings. So the difference is almost a wash if I understand correctly?
Taxes can be complicated but tax brackets aren't a complicated concept. Especially for programmers. Not understanding and planning around taxes is extremely unwise and inefficient. If you understand taxes and finances you can cut another 10-20 years off your working life.
You should write a primer. A lot of programmers get into the game pretty young and figure they'll deal with all of the financial planning stuff when they're older.
One nitpick: the 13.3% bracket only applies to taxable income of >$1M/year. The marginal rate that actually applies to most of the numbers being thrown around is 9.3%, which corresponds to the 51-263K bracket if filing a single return (103-526K if married filing jointly or HOH) - plus you can deduct these taxes on your federal return, to boot.
Where are you getting 13.3%? Most likely a software developer is going to be in the 9.3% bracket. And it is also a graduated bracket system so you are only paying that 9.3% on income over $51K.
13.3% is the marginal tax for people making over $1 million/year in CA. People in that income bracket are not worrying about whether they should move to the Bay Area.
For clarity, I wrote up my thoughts here [0]. The issue I pointed out applies to Federal as well as State taxes. By my calculations, it looks like it's clearly not worth it to move to the Bay Area.
A peculiarity of "median" is neither my income nor lifestyle are median. I'm currently thousands of miles from SV and earn and live at the 90th to 95th percentile depending on who's fuzzy math and crazy definitions you trust. So its interesting to know median expenses for something like coffee or restaurant food, but I'd never live in a median real estate so whats the standard of living like at the 95th percentile assuming I'd get a raise? Its pretty good for me and my family where I live...
Median would be relevant if you were talking about moving to CA to sell car insurance to tech people.
Where do you imagine you're going to park it? It's 2 hour parking in resdidential areas unless you have a resident permit (not that there'd be any available), no overnight parking in commercial areas.
A paid parking space will run you the price of a 1-bedroom in a sane region.
That said, RV parks are pricy and many have waiting lists.
I have known guys who try to find cheap/free parking; and it's a constant battle.
"You can'park here". Cops that are beyond vigilant. I could go on forever.
If anyone is considering living in a vechicle; I honestly think a converted commercial van is the way to go.
I've lived in the Bay Area my entire life, and housing is just cruel.
The problem is so bad I would like to see state/federal/local county land opened up immediately for campers. Plus--companies should provide low rent/free areas to camp. Why is Walmart the only business that saw this a need for overnight parking?
All your bosses want to live in the nice parts of the Bay Area, and they can.
For everyone else housing is just a nightmare. If I was an employer; I would have a hard time looking my employees in the face.
(I know I not going to solve anything, but I'm right now sitting in my truck on Bush street; and there a lot of building--luxury condos. Since as long as I can remember it's been just expensive condos. Something most of us will never be able to afford.)
Downsizing is a plus, not something to be baked into estimates. If down sizing to having roommates in the Bay Area, then the only fair comparison is the same roommate situation elsewhere.
The idea is to normalize salaries by cost of living. If you have more specific information for each area (you have actual offers), then you can use that. However, using a lower rent for the Bay Area, for example, because you'll have roommate, may set you up to take an equivalently lower salary.
For example, if you're going from $100k/$2000 location to $100k/$3000 (salary / rent), but you set it back to $2000 because that's your rent with roommates, you've foolishly/ignorantly accepted a lower equivalent salary.
1. Bay area is extremely tolerant of immigrants and of different people.
2. Bay area is an excellent place for raising kids. The opportunities for your kids to learn are simply endless. There are excellent colleges near by and some of USA's best high schools.
3. Your experience as a programmer in bay area will always be valued more than your experience in Denver other things being same.
4. Job hopping is easier, finding another job when fired is even easier.
5. Skewed gender ratio means women might get more attention.
6. Networking opportunities are unparalleled in the world.
Disadvantages:
1. If you don't like racial, ethnic diversity then you might be uncomfortable in bay area.
2. If you are a single male finding a girl would be harder in bay area.
3. Competition is cut throat and sometimes it is stressful.
4. Job security is less as there are more people out there who can replace you.
5. California's tax policies and other government policies are very tyrannical and sometimes pure nonsensical. The Liberal state is far too liberal with your money.
6. Housing is bad.
7. Everything is expensive.
This article seems to assume you're single and not in a hurry to start a family. I'd be interested to read an article "Does it make sense for a programmer with a wife and kids to move to the bay area". I secretly suspect the answer will be "no", since no matter how you slice it, a 4-bedroom house in the Bay Area won't be reachable until you are well on your way to, say, 40 or so.
Yeah I agree. I am single, healthy, and car-less. I pay $1500 a month rent for a pretty nice place, and have a avg software engineer salary, and I feel very comfortable, even paying for a large student loan. The real kicker is that I was living in this same situation for $50k salary before it doubled, and still felt I had some disposable income that I could save up. However, I can't imagine still feeling comfortable having all of the expenses that come with a family. I think that's what triggers the threshold for that extreme cost of living in SF. But again, for a young person with a tech salary and the very minimum in financial obligations, I think living here is easily doable.
I interviewed over phone and skype with a Bay area company not too long ago. In between interviews, since things were going well, I started looking for places to live. I have 2 kids, and currently live in a 4200 sq ft house in Texas. I was more than fine with downsizing, but not at the cost of eating up all my salary to live with my family in an apartment that was barely acceptable when I was single. My kids are currently in a top school district here, and to send them to a top (public) school in the Bay area was insanely expensive. The salary I would have received ($130k range) was no where near enough to get me into a 2k sq ft home near good schools. As I researched areas, I just couldn't understand how the salaries were so low, and the cost of homes/apartments so high. But if you have no family to support, take on roommates and are fine with 500 sq ft to live in, then it will be mostly ok to live there.
I had almost the exact same situation, except I'm up in MN. Top notch schools and no crime, 4200sqft home, etc etc. The salaries in SV are way too low to ever consider a move.
Not disputing your conclusions, but I wonder what the hell people do with 4200sqft houses. I grew up in a very normal 5 bedroom multi-level house, 4 person family. It was 2400sqft. So were everyone else's houses. My house in the valley is about half that size, for 2 of us. Given infinite money, sure I'd like a bigger house. 2k, maybe 2500. I just cannot fathom why anybody would even WANT 4k+. I hear of people living in 6000sqft mansions and it just seems so insane. Especially when they're paying $500/mo on A/C in AZ or TX. Just all seems so wasteful in a way that expensive real estate isn't.
I get what you're saying, we were in a 1800sqft home before this and a 780sqft home before that. After the first month or so in a space this size, it doesn't feel that big. You just get kind of used to it, although you kind of appreciate the space. The only time we notice the size of it is when we get back from a vacation. Also, once you have kids, homes feel much smaller. Before kids, we lived in a 600sqft rental duplex and a 800sqft loft and they both felt like more than enough room.
As for energy costs, in MN homes are very well insulated, you frequently have a fair amount of trees providing shade, and you have a basement that's 30-40% of your sqft, so heating and cooling costs aren't quite as dramatic, even when it's -20F like it will be this weekend.
> After the first month or so in a space this size, it doesn't feel that big. You just get kind of used to it, although you kind of appreciate the space.
Who does the cleaning, you or your partner? I never got used to cleaning a larger space. It is definitely a huge waste of time, vacuum bots only help marginally. Also annoying is walking or especially moving something from one end of the dwelling to the other.
We finally gave up on cleaning our 1150sqft house ourselves and hired cleaners. I feel like a failure, being unable to keep my own personal space clean, but the extra time is nice.
Went to an open house once in a huge ranch. When we decided to leave, I noted how long it took us to walk from the bedroom to the front door. Man I'd hate to dash back in the house "really quick" for something I forgot. I guess that's a first world problem though!
You fill it full of junk. If you are a single male not addicted to vanity you can likely fit all your belongings in the backseat of a car. My largest belongings were the computer and the truck load of military clothing. Women tend to accumulate more stuff than men regardless of vanity. When you get kids people just give you more stuff than you need (or want) for the kids. The only limitation on the ever increasing accumulation is the space available.
Honestly, the two biggest rooms in this house just store stuff. I can absolutely live without that space. I do enjoy having an extra bedroom to use for... fill in the blank. I bought my house as a foreclosure for 125k and now Zillow lists it for 235k (a bit inflated). The value of my house is about the down payment on a house in San Jose and what I paid is half that.
I have a 2900sq ft home in Texas and we spend next to nothing on heating and AC. Our electric bill per month averages around $160 and peaks around $200 in the summer when we run the AC a bit harder. More than half the expense there is all the electronics in the house, primarily: kitchen utilities, computers, and large screens.
Personally, we wanted the neighborhood, and also both my wife and I grew up very poor (i.e., we'd never lived in a really nice house). So we bought a mid-size house in a really nice neighborhood (over bought a little). That's why I am personally very happy with downsizing. But not at the cost of paying 4x what I am paying now.
But as already said by others, you fill the space and get used to it. There are times it's really nice to have so much space (holidays with family, birthday parties), and other times it's not (cleaning, a/c). Having a dedicated movie theater room is nice too.
I lived in a 600 sq ft. mobile home in the bay area with my wife and son. It was a bit cramped but not too bad. Now we're in Munich in a place that's...maybe 900 sq ft.? And it feels like a pretty good size, just wish we had a garage. 4200 just blows my mind. To me, I think having that much space would feel like a burden.
No, 4200 isn't mid-size to me, it's mid-size for the neighborhood. It's a freaktastic mansion to me. I grew up with 6 people in a 1000 sq ft space (we moved a lot, so sometimes more, sometimes less).
But, you are right, this much space does feel like a burden frequently, which is why we are moving and I plan on downsizing. A little.
Dedicated movie theater WOULD be nice -- I realize if we had kids combining a living room + entertainment room + playroom is all a bit much. And it would mean either no office or no spare bedroom, if one of the room was taken up by kids.
Of course, it wouldn't take 4x the space we have now to get all that, but I definitely get it a little bit.
> but I wonder what the hell people do with 4200sqft houses.
tools & supplies for a variety of hobbies that involve the physical world. guest bedroom(s) for visitors. a decent kitchen so two can do real cooking at the same time. book cases. a laundry room that doesn't involve limboing under ducting.
Yea, you have to set your expectations lower here in the Bay Area. A 2K square foot home is absolutely ENORMOUS out here, especially for a single family. And good school neighborhoods are extremely expensive. You're not going to afford that combination working at ANY tech company besides maybe a few outlier high-salary companies.
I'm a senior engineer. I don't want to move to the Bay (not even in the US, and I love where I live), but I really wish I could make the money I can make there.
I'm somewhat pondering an Evil Scheme where I start a one-to-one "subcontracting" firm, where a plain-bad programmer who would never otherwise make it in a startup environment can hire someone [me] to do all their work for them—and maybe even guide them through their interviews with a concealed earpiece. Basically, the company would have "actually" hired me, and the person in the startup's office would just be serving as a human proxy for my skills.
Of course, that's effectively just a hack to get around the idiotic policies companies have against hiring remote workers for local salaries; and one that would cost quite a bit of salary (the proxy would still have to get paid, after all.) But I bet it would still turn out better than a non-Bay-Area wage.
We (family of four, parents 40ish years old) are fortunate enough to be somewhat location independent with the stipulation that we have to be in US/Pacific timezone to keep sane hours. We looked at the Bay Area one more time this year before choosing Reno. Much lower taxes, much better housing choices at our affordability level, general convenience and outdoor recreation in and around Tahoe were the attraction. This area has long been a landing spot for retirees from the BA but it's now booming with younger people and families. It's improving quickly. For someone who owns a business and has some location independence, it's a great choice. Also commercial rents are much more startup-friendly if you need offices and such. A meeting in SF is only a 4 hour drive away. Daily flights to SF and San Jose if you're in a hurry.
It's kinda bad that the article fails to mention the possibility of working at Google or Facebook in Seattle. You can get nearly as high comp without the taxes and high housing costs.
I laughed too - but also wouldn't mind working professionally in a Clojure-oriented shop despite having some freedom to use Clojure now. But I'm a lone wrangler of parentheses in my current role and if I could (in my location) join a team of better Clojure hackers, I think I could take my skills up a level or two even if all I had was the opportunity to talk shop in the hallway.
The answer "it depends" is a cop out. There's no analysis, because even a cursory look gives a logical answer.
Moving to a high cost area to gamble for a position that might help your career in the future, given any unemployment for more than a month makes the living arrangement untenable, is a high-risk gamble. The idea that working for a big company changes your employment chances is about the same as what school you graduated from. It gets you an interview, you were probably going to get anyway in another geo-location. In a lower cost area (even relatively lower like Los Angeles) you end up with lower chances for a startup (with a brand that might eventually become household) but the experience isn't much different and landing your interviews are a cakewalk…talent pools are smaller everywhere else in the world. The positions you might qualify from, are about the same from some no-name sports gambling company as "I worked at uber for a year". Your experience at your role is what matters, you're a worker not a business consultant. The answer is a definitive no, and the headline is baiting a false equivalence, hence Betteridge.
Interesting that Bay Area hackers make more than local hackers when they relocate outside the Bay Area.
FTA:
A 2015 report by Hired found that when engineers from
the Bay Area relocate to other areas, they out-earn
engineers on the local market. Experience in the Bay
Area seems to advance careers. Engineers moving from
San Francisco to Seattle make an average of $9,000
more than others who get offers in Seattle. This Bay
Area premium is even higher in other cities: $16,000
in Boston, $17,000 in Chicago, and $19,000 in San Diego.
Bay Area hackers are more valued in different markets than local hackers. I would love to see the raw data for the "relocating" hackers and local hackers. Is it a question of applied experience opportunities in the Bay Area hackers? Is just startup afterglow? Are relocating hackers better than average pre-Bay Area experience to begin with and this shows up when they migrate away from the Bay Area?
It could be as simple as Bay Area hackers being accustomed to higher salaries and negotiating higher (or not accepting lower offers) even in places with cheaper living expenses.
There is that, and the fact that in the eyes of prospective employers Bay Area experience is highly valued.
Honestly I don't think experience in Bay Area is necessarily better, there are great teams in Europe/rest of US and shitty teams in SV, but for some reason there is this Bay Area "halo".
Source: I've relocated to Europe after 3 years in Silicon Valley.
Maybe European companies see a Bay Area "halo," but I wouldn't say the same about American companies.
My company has software developers in Los Angeles, Boston, Dallas, and Sunnyvale. From what I've seen it's a lot easier to bullshit your way into a senior software role in the Bay Area than it is elsewhere, so the rest of us tend to be a bit wary of the ones we don't yet know well.
It's easy to get a senior role at a random company in SV. There are many companies looking for senior people, provably more than there are candidates. However you have to check if they stick, and what they do. It's actually fairly easy to weed out the bad ones with a 45 minute interview if you don't let yourself be seduced by their ability to talk well. In my entire career I have only once heard of someone who seemed senior doing really well at coding exercises and then turning out to be horrible. I have frequently heard of people not coding as awesome as you expected but talking a good line and then being disappointed after the hire.
This could also be an artifact of the metric. I call this the "Geico" fallacy.
Geico advertises that "People who switch to Geico save 15% or more". Notice that people who would lose money by switching to Geico should rarely switch. Accordingly, this metric will usually be positive.
Consider that people moving to a new city for a job may need more incentive to move.
I've always found those advertisements weird. If consumers are rational and have good information, then the average savings from switching is the same as "how much do you have to pay someone to switch to Geico?". The higher it is, the worse you should expect service to be!
Exactly! "Customers pay us more than our competition. They clearly love us and we're doing something right" is a nuanced point hard to make in an ad, but it needs to be made somehow. That's probably why Statefarm et al focus on their customer service in their ads, but those ads don't sound so catchy.
Consumers don't have good information; applying for car insurance is a big pain, so they usually don't know. They probably apply once, then have the same car insurance for years... which might mean that they are paying too much.
Same basic problem as an employee who has worked at the same company for 10 years, and gotten their 3% raise every year - the market may have changed radically, but looking is a burden (emotionally, and otherwise) so they are unaware of that.
Enter a tremendous flood of car insurance advertising... to get people to actually evaluate if they are paying too much.
Most insurers actually increase premiums over time regardless of whether you make any claims. In the past they offered longtime customer loyalty discounts but as some point some bean counters looked into consumer psychology and noticed exactly what you're talking about so now it's up every year.
In practice it's quite difficult to compare insurers in this way since it's not that often you need to make a claim and online reviews are overwhelmingly biased toward negative reviews so they're all like one-star. As far as I can tell the correlation between price and service is not that strong.
For what it's worth, when I had to make claims with Geico it was fine. But I was clearly not at fault in either case so it was not a difficult process.
I also think part of their ability to offer lower premiums is generally having lower human involvement -- no independent agents, claims routed through Web site or call centers, claims adjuster on site in body shop instead of visiting you, etc.
Not that I know of... the closest might be the Broken Window Fallacy (http://www.investopedia.com/ask/answers/08/broken-window-fal...), where only the effect of "seen" outcomes are front of mind and considered, but "unseen" outcomes are ignored even if they are more impactful to reality.
While I agree with the others calling this a type of sampling bias, I've seen this type of error frequently enough that I think it deserves a more specific name.
Perhaps developers in the Bay Area learn very quickly how much demand there is for their skills and that confidence translates directly to leverage during negotiations, regardless of where they look for a job. There's too many confounding factors to clearly pick out which are significant without much more precise data.
On a side note: Calling them hackers when you clearly mean run of the mill corporate programmers seems like something straight out of an HBO show.
Oh, I default to using the hacker label as a compliment to programmers here on news.yc. I tend to assume (based on reading bits of code from various news.yc contributors) that many devs (carefully not bucketing myself in this group) here exhibit a level of mastery above a run of the mill corporate programmer.
A lot of employers look at previous salary to determine a base point for a new job. Coming from somewhere with a high salary makes it much easier to "justify" asking for more.
I can offer only anecdotal evidence; take it for what it's worth (not much, I know).
I lived and worked in the Bay Area for a little over fifteen years, almost two thirds of it at Apple, and almost a third of it at a successful startup called Reactivity.
I left in 2006 because of some catastrophic health events, and have lived and worked in Arkansas since recovering my ability to work.
When I'm working, I find it pretty easy to command higher-than-average pay for this area. Of course, I fairly often work remotely for people still in the Bay Area, or in Boston or Denver, and naturally they're going to tend to offer me more than Arkansas companies would. But I can also command a pretty good premium in Arkansas.
I don't know how much you can take from my example. I'm an old-fart developer now, with a long resume that has a bunch of famous names on it. People who are impressed by those things will naturally tend to offer more money to get them. I've seen some employers in this area become visibly more enthusiastic because of some of the people I've known and worked with, or that I can offer as references. My assessment is that some of that enthusiasm has been respect by association.
On the other hand, there may be some real quality differences in engineering culture, and some fraction of the premium may reflect that. Some of the markets I've worked in outside Silicon Valley have significantly different standards and practices, and the differences are not often for the better. In some cases they've verged on infuriating or clown-car laughable. Maybe some fraction of the premium is employers paying for people they expect to know better, and maybe they're not entirely wrong.
It's not a big mystery. They ask for higher salaries, because that's what they are used to and end up getting paid more. It's not because their skills are more valued.
This doesn't factor in stock compensation AFAIK. For instance, I started at Amazon at around $90k in salary plus signing bonus of $20k so like $110,000 my first year out of college back in 2013. I made about the same in 2014. In 2015 I got promoted to SDE2 and my salary is closer to $118,000. But additionally I also got like $60k in 2015 in stock and this year my stock compensation is just about $100,000.
I'd imagine this is the case for a lot of tech companies so comparing salary alone probably isn't going to make a good argument one way or another.
Also taxes. WA has no state income tax so add an additional 10% income buying power
But there has also been an incredible growth in amazon stock value during that time. This isn't going to be typical of someone starting to work for Amazon today (or another tech company) as your stock grant was most likely calculated at a much lower stock price then it is now while theirs would be calculated on today prices and we don't know how the future will go. Experience definitively varies.
Not underestimating, worked there and believe in the company. But speaking from experience, the stock can take dives from time to time based on market whims as it happened when I left and t my RSU vested below their estimated price. Which sucked as I needed cash at the time to move. The thing is you can be lucky or unlucky with RSUs during short or long term periods.
Keep in mind stock vests after some time and then you're back to base salary. I've found the practice of yearly "evergreen" grants to be rare even in the Valley.
One thing the article is missing and not factoring in is home ownership. It can be a tremendous form of "compensation" as well provided you can weather out any downturns (10 years will probably be sufficient).
With high salaries you have high tax brackets. Probably 40-50% total marginal tax rate with state, federal, and all the misc taxes. Being able to subtract your mortgage interest and the fact that your "rent" is going to pay down equity, on paper at least, your living costs are actually lower. Even more so if you have roommates.
Factor in 4-10% appreciation with leverage (10% down = 1000% leverage) so that becomes a 40-100% annual ROI.
Work in the bay area for about 10 years when you are young and then sell your house. You can buy another house somewhere cheaper for cash and then retire.
Might also be possible to just rent out the house in the bay area. The rent should cover rent some place cheaper and have plenty of additional cash flow to live on each month.
Well, they mentioned home purchase prices, but they also think the Seattle Metro area has average $400k houses which anyone living there would laugh at. Somehow I think "metro area" in Seattle has longer commute times than "metro area" in SJ or SF. There's just no way the average in Seattle metro (with equivalent commute) is half.
Counterpoint: Globalization is real. Top tier accelerators accept companies from outside of the Bay Area and tech hubs these days. You can work for a tier 1 early to mid stage startup in a tier 3–4 startup ecosystem if you look hard enough (I do).
(The Triplebyte recruiter didn't seem super enthused with that being my response to why I didn't do their process.)
This whole dialogue shows a very laborer-centric view of the world. What is missing from this entire conversation is the concept of being an employer/founder or independent consultant. If you want to bootstrap a startup, the Bay Area cost basis is going to destroy your nest egg until you can raise capital. Also, this conversation implies that you are employed 100% of the time, ignoring any cases where you quit, are fired, or the "rocketship" startup you joined doesn't work out.
To add a personal case: I lived in Boston working full-time (and all the time) for about seven years before getting sick and having to take a year off of work.
When you game out salary vs cost of living for a region, you tend to make an assumption that you'll be employed 100% of the time. But once you break that assumption, it can change the dynamics considerably. The $2000/mo you spent comfortably on rent while working full-time quickly becomes an uncontrollable drain on savings when you stop.
For me, I decided to move to a place (CO, an hour north of Denver) with a lower cost of living (and for me, a better quality of living, too), a place where I could live comfortably even if I didn't (or wasn't able to) work full time all the time. And if I do work full time, I could potentially "retire" in my 40s if I wanted, where "retire" probably means "work on whatever I want without needing to get funding," and/or "be a parent," etc.
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[ 5.3 ms ] story [ 424 ms ] threadThe cost of living comparisons I've seen are comparing the "local economy". They compare the cost of: housing, food, transportation, health care.
More of our salary went to the local economy than I expected. We have a bunch of kids, which amplified the effect, but I am astonished at how much money it took to not feel like we were struggling to stay above water. Babysitting, gas, food, clothing, activities were all extremely expensive. Even insurance was high.
The things that didn't go to the local economy still cost more — because taxes. We bought a car from Minnesota and paid a huge amount of excise tax to the state of California. Almost everything we ordered from out of state was subject to high local sales taxes. Income tax didn't help either — our higher salary put us in a higher tax bracket. The top $50k of salary only netted us $25k in buying power, which was eaten up by rent.
They can be your highest spending categories and still leave plenty of room left over to save.
As a young person living in NYC (high taxes, high housing, high food costs) I can still save a huge percentage of my income due to the high salaries.
You're not wrong about NYC, but the bay area is really broken.
However, the caveat is that housing is so expensive here that it's difficult to save up for a down payment on any kind of housing on a single engineer's salary. A 20% down payment on pretty much anything is more than $100k, and even a highly paid engineer will need a long time to save up that kind of money while also paying high rent. An 80/10/10 mortgage or some kind of mortgage with PMI is easier to achieve, but those have significant drawbacks.
So, if you have significant cash savings, or a home somewhere else you can sell, you can achieve home ownership in the Bay Area (but it will probably be a smaller home than the one you have now). If you don't aspire to home ownership, you'll be fine too -- a software engineer with an average salary can afford to pay rent here, and people who say otherwise are simply incorrect. But if you are just starting your career and move to the Bay Area planning to buy a home anytime soon, you're going to be disappointed.
Given that many people predicate their quality of life on home ownership, that's a pretty big caveat.
The problem is that $100K is a very low estimate for a down payment in the Bay Area these days. Most people I know are getting parental help to put down $500K down, because with housing prices running around $1.2M, that's what's necessary to get under the $700K jumbo mortgage threshold.
Read: Don't have a family and don't do anything special, like take vacations.
Also, average rent is $3600/month. That's over $43k a year. That leaves $17k for everything else, following your plan.
Families that need 2+ bedrooms and a good/safe neighbourhood are screwed though.
I'm not sure what you think an average salary is. If you think an average engineer can save $50k cash per year out of his/her net income, you're way above the average I had in mind.
Let's assume an average salary of $120k per year gross. That's about $6k per month net for a single person who takes the standard deduction, assuming no 401k contributions. That's a net income of $72k per year. If that engineer saves $50k, that leaves only $12k for everything else. Saving $100k in two years on that salary, which I think is pretty close to the average, is just not doable.
EDIT: Should have been $22k left over, not $12k. Still not enough to live on considering the cost of rent.
Why? Fully contributing to a 401k (assuming no company match) would put your "take home" at ~$79,200 instead of $72k following your tax rate (which I assume is roughly correct).
> That's a net income of $72k per year. If that engineer saves $50k, that leaves only $12k for everything else
$72k - $50k = $22k, not $12k.
So with no 401k, you'd have to live on $22k to save $50k/year. When contributing to a 401k, you'd have $29k to live on, which sounds pretty do-able. Add in the fact that you would probably invest these savings, and you can hit $100k after 2 years by saving a bit under $50k each year.
Saving $100k in 2 years is not as outlandish as you make it seem.
I guess it depends what you mean by "take-home". The original premise was "saving 100k in 2 years". I hope we can agree that saving money in a 401k is saving money, regardless of whether we agree it's "take-home".
Most 401k loans become due in full if you leave your job. That traps you in your job until you pay it back, because if you had enough cash to pay the loan outright, you would not have needed the loan in the first place. Unless you have an unusually good severance agreement with your employer that would enable you to pay back the loan if you leave your job or get fired, taking out a 401k loan is a bad idea.
Oops.
But that's still less than most people's annual rent, so it's still not enough to live on. It doesn't change my argument.
Whether or not the established places will toss so much money around if the hiring competition from startups dries up if there's a crunch there, well, that's probably a legitimate question, but I'm not sure that job losses of that size would only hit the Bay Area.
Yes it's expensive, but also yes there really are quite a lot of jobs that pay more than well enough to make up for it.
My rent+util is about $2000/month. I live in a very /cheap/ 1-bedroom with creaky carpet floors, no insulation, and near train tracks that's far outside SF. (Belmont)
Altogether I spend close to $4000/month if I don't do anything special. /Everything/ is more expensive in this region. Food is expensive for no apparent reason other than to gouge customers. ($6 for a few sticks of butter? When I was in Seattle, it was $2-3.) I eat less fruits here because the prices are high year round. My job doesn't provide lunches, so I have to eat out everyday I'm at work. I mean, even cars cost more here just on Craigslist. In the same way there's an Apple tax, there's definitely a Bay Area tax.
I cannot possibly save $50k/yr for a house. Oh and $150k/yr is not $110k/yr after taxes. It's more like $94k.
I'm saving maybe $20k/yr right now. Ain't even contributing to retirement. Just trying to save for who knows what until I can get a job that pays 50% more.
Granted, the house was a good deal, but should be able to swing a 2/1 for 2500 or so.
You don't have to spend $6/lb of butter, but if you buy it at Whole Foods (or similar), you do.
You're not the only one paying extra rent to rentiers. So are retailers and restaurants.
$4,000 * 12 is $48,000. Plus your $20k in purported savings is only $68k.
That's only $100k in gross pay, which is the bare minimum for a developer in SV. Most new grads make more than that.
1: http://www.payscale.com/research/US/Job=Software_Engineer/Sa...
2: https://www.glassdoor.com/Salaries/san-francisco-software-en...
EDIT: And to add more to the conversation than that curt response:
When I compare take-home pay among various jobs I tend to ignore bonuses (because they're subject to your employer's whim--you don't necessarily get them) and I tend to ignore equity (because it's typically temporary--once you vest it no longer adds to your yearly take-home). To compare apples with apples you can only really compare base salary.
A company offering $100k in salary + $20k in bonuses and $80k in RSUs is paying significantly more than one offering $120k in salary with no bonus or RSUs.
Also, Glassdoor tends to skew low. Here's a more reasonable database of new grad offers which average $109k base for public tech companies. [0]
[0] http://newgradsalaries.com/
Most new grads here make $90k-110k from what I've seen. Yes, you can make more. Yes, there are companies that pay stock on top of that. Those people are not me.
I make ~$110k. Minimal benefits. No stock. I happen to work for a big company too. Not every company here pays well and many low ball as hard as they can. (And succeed at low balling)
Before this job, I made $65k. Companies low ball hard and if you can't interview well, you take what you can get.
If you're not a new grad and you're only making $110k, then yes you are making under-market. I'm not disputing what you make (that'd be ridiculous), but your assertion that you're making a standard salary.
That's including rent right? If so that's not too bad.
> Food is expensive for no apparent reason other than to gouge customers.
Stop shopping at overpriced pseudoscience stores (eg Whole Foods). Regular grocery stores are not that expensive. Or buy in bulk at Costco.
> My job doesn't provide lunches, so I have to eat out everyday I'm at work.
Bring food from home and stop wasting money on buying lunch.
Also, I don't know anybody who got that kind of parental help or put $500k down.
September 2016: http://www.bankrate.com/financing/mortgages/jumbo-home-rates...
From TFA "the jumbo loan is supposed to come with a slightly higher rate". IMO the rate should be a LOT higher; otherwise PMI is always a losing proposition. Bizarre market forces indeed.
It was certainly surprising/counterintuitive that jumbo rates would be lower than conforming, but even when they're not, it sounds like they're incredibly close.
That said, if someone wanted to throw $500k at me to buy a house, I wouldn't turn it down :)
Regardless, whether it's 2 years or 3 years, to do the lifestyle you're suggesting takes and incredible amount of willpower to be willing to sacrifice and prioritize. It's passing up that cell phone upgrade. It's cutting discretionary spending to zero. It's passing on happy hour and bringing lunch every day.
While feasible, it's hard.. but suffering for two years to benefit for a decade. Quite possibly worth it.
It is easy to end up spending double rent on a comparable place. The difference is for now at least the home you buy can grow nicely so you need to do the math on rate of return for that vs other uses of that cash.
When I bought my first home my loan (P+I) payment was $1300 per month on average (paid every 2 weeks), which was not only affordable but cheaper than what I was renting at once you accounted for interest deductions! But the taxes were somewhere around $500 a month after the township raised local property tax by the maximum year after year. Due to average daily balance laws and escrow regulations, we often had a substantial amount of money "invested" in to our escrow account.
There was no amount of deductions to make this home an asset. It pushed a good quality home at a great price to something that now remains completely unoccupied.
My situation is 100% atypical - but I more meant to illustrate how big of an impact property taxes can be.
Have you actually done this? Know anyone who has? This seems completely implausible, outside of some extreme frugal lifestyle cases (I'm talking "eating garbage dumped by grocery stores" level frugal)...
[1] Googling "average software engineer salary california" shows figures ranging from 107k to 135k, 120k seems to be more or less the median of Google's figures.
Edit: added footnote
You must admit that $40k bonus after tax is a huge, atypical amount of money. It makes your effective yearly income to be about $156k.
It reminds me of the mrmoneymustache.com guy, saying "anyone can retire early! Just look at me, all I had to do was get $1M in stock from Cisco!"
No disrespect intended for you; I'm sure compared to some of your friends you lived frugally. The point I'm making is that to duplicate your living standard today, very few comparable developers would be able approach your level of savings.
Not sure what typical bonuses are these days, but I don't think that's out of line for a big tech company. Certainly stock grants can be much more than that, but it usually takes more than 18 months for them to amount to anything.
Check paysa.com for user-reported total compensation in recent offers. If you don't believe them, check http://h1bdata.info for lawyer-reported salaries of h1b employees (base salary only and probably biased downward by h1b abuse).
The h1b data is mind blowing in the huge disparities within the same company. Let me tell you: the people getting paid 50% more with the same title are not 50% better. I increased offers by 50% by telling the recruiters that's what I would need to accept an offer.
[1: I am an engineering manager at Google]
The whole point of the original statement was "I made $X and saved $Y, it's not that hard." But when you examine the X and the Y, they are not representative at all!
It has similar merit to a lottery winner saying, "why can't you win the lottery too? All I did was buy a lottery ticket."
Like the article mentions, saving a lot is easy if you're fine with a roommate and living in a non-luxury apartment, but if your housing standards are higher than that then it's tougher.
This is, of course, at the compensation levels talked about in the article. Some companies (early stage start-ups, banks) pay much less.
Not being very frugal:
That's $2700/mo. Let's round it up to $3000/mo because you're a well paid software engineer and can spend $300/mo on top of what I listed whenever you feel like it.So far, $36k expenses + $50k savings and you still have $8k left to go on ski trips to Tahoe, Outside Lands and other non-frugal lifestyle expenses.
"A decent 1BR" - It all depends on the definition of decent. I pay $2k for a 1BR walking distance to Redwood City downtown/Caltrain.
But forget about renting an apartment, if you want to save and you're single, having roommates allows you to rent in the Peninsula for much less than $2k/mo.
Also, I added $300 discretionary spending which lets you to cover some of the things you described, and you're left with $8k at the end of the year.
Can you easily save $50k while spending $3k on rent+utilities to live in a fancy apartment in the Peninsula ? Maybe not, but you certainly don't need to be "eating garbage dumped by grocery stores".
Nice strawman :) I was specifically talking about the situation conditional on saving the 100k in 18 months, my comment was a response to the comment above it.
Separate point: your figures seem very low. I thought SF is roughly equivalent to NYC in terms of cost of living. In which case 300/mo is a zero off as an estimate for all food expenses.
edit I don't know what a 401k is good for (I already have two retirement saving schemes in other countries), mostly did staycations since SF is such a tourist destination.
NYC, not SF, but the difference isn't huge.
Most people are atrocious with their money by either overspending or under-optimizing.
Also, the average apartment in Manhattan (if you do rent without roommates) is pretty close to your cited figure for total monthly expenses. Which means you either lucked out, or seriously compromised on your living arrangements.
I was making $150k/yr, which is pretty standard for a developer in NYC.
> Also, the average apartment in Manhattan (if you do rent without roommates) is pretty close to your cited figure for total monthly expenses.
I take it you don't live in NYC. The average is a useless metric because it's distorted by millionaires and billionaires. Just go on Craiglist and you'll find plenty of suitable apartments in the $2-3k range.
Nobody I know pays more than $3k/m for their apartment. Heck, my friend just rented a beautiful luxury single-bedroom for $2.8k.
In my case, I chose to go for a non-luxury apartment for $1.8k/m. This was definitely a deal, but even though it wasn't luxury there was plenty of space and I even had a back yard.
I do.
> Nobody I know pays more than $3k/m for their apartment.
Few people I know pay under. We live in parallel dimensions I guess.
> In my case, I chose to go for a non-luxury apartment for $1.8k/m.
I don't know what NYC you live in, but this is non-existent AFAIK. I know someone who went all the way to Rego Park (this is really far from Manhattan) to rent a 1BR for $2.5k.
I make about that much, at a company without free food perks that doesn't give me amazing stock bonuses (my social skills are too bad to negotiate them…) and I live frugally but could never save that much after $2k/mo rent! And there's no huge parental loans for me.
But if you do and are, you have $100K. Congratulations. That does you no good when homes are $1M+. Keep saving.
I don't know any software engineer at Google (in the Bay Area) with such a low annual compensation: https://www.paysa.com/salaries/google--software-engineer--mo...
The other big thing to help with home ownership is to get married. With double the income it is a lot easier to save for a downpayment.
With a frugal lifestyle, 10% should be doable in a couple years, especially if you're okay with living in the East Bay (so the house price is somewhat reasonable).
On an engineer's salary, it is very doable to pay rent and still save up enough to buy an entire house in cash elsewhere in the country.
[1] https://medium.com/migration-issues/millennials-have-less-de...
My big break was finding a job in San Francisco. I charmed my way into an entry level sales gig with a base salary of about 35K USD (in 2004), and was soon making at a 70K-ish "annual run rate" (stealing that from startup PR lingo). And that job did all of the lead generation for me. I wasn't able to find a job like that outside of a big city.
Even when I was homeless for a bit a few years later, I chose to stay in San Francisco over moving in with my suburban LA parents because there I saw more opportunity in San Francisco. For me, it was riskier to play it safe in the burbs than hustling in San Francisco. It's better to burn out than fade away.
The way I see it, if you wanna make it as a professional, and you don't have a reasonably understood career path to follow, it makes sense to go where the money is. You can live financially cheaply in most places, and you'll have to decide how much you're willing to work for it. For me, living in San Francisco is, and has been, worth it.
Our next blog post is going to be about this (how engineers decide between offers, and how they can perhaps do it better)
Also, a lot of the time when I'm working at these startups as an employee (rather than a founder), the ongoing success and cashflow of the business are made utterly opaque to me and every other employee. Which means, if a potential hire came and asked me whether the company I'm working for has good growth/revenue... I wouldn't be able to tell them. I'd have an impression, but it'd be just that: an image created by the salesmanship of the business side of the company. Which means that asking others when I'm looking is just as useless.
It is definitively possible to diversify: Just do an agreement with other programmers to put all (or, say, 50%) your incomes into a common pot and distribute the content of the pot among all peers. Just set up terms and conditions and let everybody who is part of this agreement sign them.
Just because you can't diversify doesn't mean its not still a good idea to pick your employer in the same way an investor would.
An investor in startups is going for high risk, high reward investments. For every individual investment they make, the chance of any sort of return is quite low; they make up for this because the rare startups that succeed make enough to compensate for this low success rate. Since they are making a lot of these high risk/high reward 'bets', they can be fairly assured they will receive the expected value in return.
As an individual, you only get to place one bet on your employer. For most startup employees, that means they are very unlikely to get any sort of payout because of company success. It doesn't matter that the 'expected value' of working for a more-likely-to-hit-it-big startup is higher than for another company, since the probability is that you will not hit it big.
As an individual, you are more concerned with things like salary, working conditions, and personal enjoyment of the work. Those are the things you are CERTAINLY going to experience; the tiny chance of huge success is most likely not going to affect you.
I think there is a good analogy to poker here; in Texas Hold'em, two aces are the best starting hand. There is almost no situation where it is best to fold them before the opening flop; your expected value is always positive against ANY other combination of opponent hands.
However, there are a few cases where even though you have the highest expected value for your hand, it is in your best interest to fold. One such case is if you are playing in a tournament, you are in the money, and two people with much larger stacks have already gone all-in. In that case, your best bet is likely to fold; even though you have the highest odds of winning the hand out of everyone, if you LOSE, you are out and can't keep playing. Even if you win, you will still have the smallest stack and are unlikely to move up any spots and win more money; if you fold, though, someone else is likely to be knocked out and you can move up.
It seems counter intuitive, but this holds because expected value only works as your primary decision making point when you can make many bets; if you only get one bet, lower risk with lower reward is often better for you even if the expected value is lower.
Think about it this way; lets say you only have $1,000, and you need it to pay your monthly rent (if you don't pay, you will be kicked out and be homeless). Someone comes up and offers you a bet; you bet $1000, and you get a 1% chance of winning $200,000. In terms of expected value, this is a great deal! If you made the bet many times, you will expect to win $1000 for each bet made! However, 99% of the time you are going to be homeless. For most people, the choice is to go against the expected value and play it safe.
I call this the startups::"active investment" versus slow-and-steady::"index investment" comparison. For the majority of software engineers who are not rock stars with commensurate 400K+ total annual compensation plans, it's not clear to me participating in the startups/SF-Bay ecosystem is statistically worth the financial instability risks, just as for the majority of retail investors, index investing is currently the most statistically consistent path to wealth accumulation.
If you are a "retail" engineer (perhaps there is a signaling indicator like if you aren't negotiating a compensation package directly with VC's or founders and not their representatives, then you're "retail"), then like most retail products, the vast majority of your value, half and more, is reserved for capital holders. It is your call whether or not if there is any statistically increased long-term job precariousness involved with accessing that startup/SF-Bay ecosystem, and if the tradeoff is worth it to your personal situation.
Investors on the other hand get thousands of at-bats. They're only limited by the amount of money they want to invest, so they can diversify all they want.
This is the bit I take issue with. I've done the whole startup thing, worked for 4 different companies in under 2 years, and it worked out great for me, but I did it in the Tennessee Valley, not Silicon Valley.
The Bay Area is not the only place with startup jobs. It's just the place with the biggest multi-national corporations still pretending to be startups.
This wasn't the only reason but it was one of the biggest. Another reason being that I wanted to work in tech as it relates to media and content, and there were many more options to choose from here.
Monterey Park is basically my ideal location, though I'm plenty willing to live in some of the other nearby suburbs. For example, I saw a really great house in Temple City listed on Zillow, and I came really close to asking for a transfer to my company's LA office because of it (and the only reason I didn't is because our LA office is at LAX, and I'm not looking forward to that commute... I'll have to change jobs or go remote if I want to live in the SGV).
Can confirm. This has been my experience as a programmer in Los Angeles who has been approached and interviewed by a few Bay Area companies.
i'm not joking. if you move to LA, plan ahead.
That's a valid assessment.
Paragraph 2 -- if you pick a winning startup (uber, etc) then the bay area is great! Well, yes. The problem is picking that winning startup, and really, if you're good at that, stop wasting your life as an engineer and go invest money for a living. We shouldn't expect eng to be able to pick better than vcs, and their hit rate isn't great.
It also uses pre-tax salaries, not after tax salaries, where Seattle has a large advantage; even at $120k, you get $5k more in cash in Washington state. Which may not sound like much, but you should view it not as 5/120 but as 5/80 (roughly your take-home pay).
The discussion of housing (where exactly is that sub $800k housing in sfbay) ignores commute times and costs. Sure, if you want to live in outer sunset or east bay and deal with horrid commutes, there's cheap housing. If you want to live within 30 minutes of work, housing will likely be much more expensive.
The author also pays no attention to the effects of having to reset your social network / family to exploit moving to sfbay, banking the higher salary, then moving away. That's a large price to pay if your plan is to get to your mid 30s then move elsewhere. And hard to achieve buy-in from significant others who may similarly not be stoked about losing all his/her friends.
And finally, it finishes with a discussion of the two most generous employers, google and fb. Who, yes, are generous but also not representative.
If you're an investor, you need a company to succeed in a long-term sense: to pay out at the other end of the bet that started it. That's hard to predict: it's like looking at the fitness of animals in an ecosystem and trying to predict which one will end up with the most great-great-grandchildren.
But if you're an employee, you just need a company to be growing, and to be throwing money around in the process of doing that. You aren't looking for a fit animal, you're looking for a fat animal. Animals might get fat before they get fit, as before puberty in mammals—and investors try to encourage startups to "bulk up" to kickstart their metaphorical puberty. But unhealthy animals also get fat, and to a predator, they're just as edible.
If your goal is to "eat a lot of salary", you just need a company who's known to be throwing their fat around, not a company who will dominate their niche and sire a thousand children.
I, myself, moved from the Midwest to a very high COL East Coast city 7 or 8 years ago. My salary has pretty much doubled, though I imagine at this point it is about $40K more than I could get back home.
But I live very frugally, and I have saved a lot of money. The plan is to soon get out of here and buy a nice place somewhere cheaper (South or Midwest) with cash and not worry about making the same salary.
OTOH, I think many people end up losing out financially in places like NYC and SF. If your salary is only $40K more than it would be in Omaha, after taxes, you're probably looking at only $30K. If you rent a typical corporate apartment, you're probably now underwater.
I think we're going to start seeing more and more people refusing to move to SF, NYC, and DC if salaries don't allow similar lifestyles as $20K less in middle America.
That leaves plenty of places to live, but not very many that are well known for having a lot of good software jobs.
I don't really want to live in a broom closet with 3 other people that already get on my nerves in the space we're in now. It doesn't matter if you are willing to pay me more if I can't maintain the same standard of living on that.
Cashing out in Arkansas means you can move to ... a cheaper part of Arkansas. Cashing out in Silicon Valley means you can go about anywhere.
My friends back in Oklahoma are on their third or fourth houses (we're all around 35) at this point.
In the Bay Area, you probably don't buy a house until you're 35. In fact, you have to get a bit lucky to be able to do it then.
Houses aren't retirement plans in most places. And I think that's good.
So you have the 1/1 homes for young singles, 2/1 homes for young couples, 3/2 and larger homes for families, and then maybe a step-down option for empty-nesters.
My chain broke in 2007, when I got canned in a buyout, had to move to find work, and couldn't sell either the 3/2 or the previous 2/1 (rented out) at a decent price, and all my accumulated equity vanished. I would probably also be on my 3rd or 4th house by now if I hadn't been busted back down to tenant.
I definitely can't afford SV home prices, even with a higher salary. I need at least a 3/2, and don't have enough millions in the bank to get one anywhere near SF Bay.
Homes aren't the retirement plan around here, but the retirement plans definitely factor in not paying rents or mortgages after about age 55.
> Houses aren't retirement plans in most places. And I think that's good.
Absolutely; the fact that they've worked that way in some places is completely poisonous. For one thing, it's obviously not sustainable; you can only have the inflation-adjusted average value of a home double so many times before it's literally impossible for anyone but the actually wealthy to afford. Secondly, it creates a strong incentive to oppose building more housing, which causes all kinds of problems.
I admit that I stopped reading at this point. Maybe I read that wrong and they meant "in addition to other areas", but from the way it's written it sounds like a conflict of interest. It's going to be difficult to make an objective assessment of the pros and cons of living in the Bay Area if your business depends on people wanting to live in the Bay Area.
> Examples of topics we would like to cover include the salary differences between the SF Bay Area and other locations (does it make sense for engineers to move to SF?), the prevalence of remote work (is it harder or easier to get a remote job?), gender/age bias in hiring (How common is it?), and how credentials impact hiring decisions. We have insightful data on all these topics.
Here's example for Seattle and SF: https://www.numbeo.com/cost-of-living/compare_cities.jsp?cou...
I'm wondering if anyone could comment if those numbers look accurate for those cities.
* https://www.expatistan.com/cost-of-living/san-francisco
* https://teleport.org/cities/san-francisco-bay-area/
* https://nomadlist.com/san-francisco-ca-united-states/scores
Personally I just moved from Seattle to Boston. I'm conflicted on the two places. I really liked the outdoors areas in Seattle, commute was shorter and rent was also cheaper. But Boston has a lot of cool things too, food better, more interesting activities todo (other than outdoors but you can find it NH) and cycling infrastructure is poor compared to Seattle.
I'm not native of either place (from Montreal) so my experience is based on a few years of living in both.
Boston isn't exactly better in terms of winter sunlight that's for sure. Both are grayish in winters but summers are great (less humid in Seattle).
What did it for me is proximity to family. Being in the same timezone is huge.
Cool fact I learned recently, Boston-Cambridge-Nashua, MA-NH area has one lowest unemployment rate for any metro area at 2.6%.
There's a lot going on just under the radar in the smaller college towns. Amherst/Northampton MA, Burlington in VT, Hanover/Lebanon in NH. A lot of what's going on is in fairly small shops that don't have job postings, but would create a position for the right candidate, which makes it hard to find them if you're not in the area, unfortunately, but there are definitely some medium-size firms, too. These have a very different feel from Boston, though, so maybe not what you're looking for.
I also know a few folks who live near me (Hanover/Lebanon) and commute to Boston or NYC (2-3 days a week, WFH the other days). This is a pretty sweet deal if you can make it happen.
But, I left Seattle because of the dreary weather I suffered from my whole life, so I understand.
I'll get you started: "Cascadia megathrust".
If you have to have people in the office to make sure they're working, you already have a fundamental hiring problem.
For many types of problems, collaborating in person works far better than collaborating online. Lower friction, easier to have a conversation, easier to sit around a computer and experiment, and generally easier to handle things in a few minutes that would take longer otherwise.
I do decentralized development regularly, and for some kinds of work it works fine. For other kinds of work, it makes simple tasks take an order of magnitude longer.
On the other hand, the development of any one individual patch series to implement one feature typically occurs either by one developer, or by a set of co-located developers in one organization, not by geographically distributed developers. And some other kinds of work, such as backporting or rebasing a series of patches, doesn't work well when geographically distributed.
I worked at a 100% telecommute shop local to Chicago for 10 years. We also used offshore development firms on some projects, and I can tell you, if anyone ever seriously had the idea of replacing us with them, they were quickly dissuaded by the experience of working with these firms.
Plus, it's really hard to eat healthy at a tech company.
People think if they can keep jobs in the office then they can keep themselves in a job.
Maybe there's a future where seamless video conferencing, Beam robots, and better text communication could replace in-person conversation, coffee and lunch chats, and other office-place experiences. I've tried, and I don't think we're there yet.
Obviously for small startups this doesn't make sense. But mid to late stage, opening a satellite office for development somewhere else seems like a no brainer. I assume I'm missing something though.
Our secret sauce is one thing. Exactly one thing. What do you mean "tangentially related" we'd outsource anything unrelated.
The exit strategy is to be bought by a multinational megacorporation not to have two offices, or even ten. There's sort of a financial fund raising dead zone between having one office and being purchasable and having 500 offices and buying little companies. Very few companies jump that gap and its safer to try and get bought that to try and become Google2.0
Google Hangouts is decent for every type of sharing except "let another user control my computer directly".
I can press a button and usually within a few seconds I can see the chat recipient's screen on my end. Now I can watch his screen and we can pair with voice chat. I have my own screen to do occasional Googling and pasting info to chat if needed.
Basically I would find that far more efficient than unplugging my laptop, walking up to someone's office, plopping down, having to Google something while we pair, and now show him my laptop because there's no way to get it on his screen without duplicating the search work on his machine.
But yeah, your everyday, run-of-the-mill corporate coding job can easily be done at home. The problem is a trust factor with these companies: they don't trust the tools that enable remote working as much as they don't trust their ability to manage their remote people.
> If you have to have people in the office to make sure they're working, you already have a fundamental hiring problem.
It is possible to be remote and have your screen recorded to make sure you are typing for 8 hours, vs. being local and just being trusted to get on with it.
What troubles me is the use of median rent to compare housing costs. As rent increases, renters are likely to downsize offsetting some of the rent increase. I'd be willing to bet Seattle renters are able to get more space for the area's median rental. Accordingly, the salary increase probably doesn't cover the rent increase for a similar sized home.
I incorrectly multiplied the tax rate to the salary difference, and said that this was a 5$ difference. This is totally wrong (as multiple people point out below). I'll leave my original embarrassing comment as a cation to not write stupid things :)
==
I just added in a mention of the tax difference. But the numbers are 13.3% in CA vs 0% in WA. That's significant, for sure. But 13% tax on $33k is about $5k. I don't think that changes the conclusion that the salary difference does (in many cases) cover the housing costs.
You're likely correct about the price for a similarly sized home. People who want large homes should probably not move to the Bay Area.
If the salary difference of $33k is the difference between gross salary, that $33k is going to be taxed at the marginal tax rate. My guess at a marginal tax rate would be ~40%. Accordingly, that $33k becomes closer to $20k after tax.
Edit: to clarify, consider a Seattle salary of $100k and a Bay Area salary of $133k. The take-home salary for each location would be:
Leaving $19.8k in additional income to cover the median rent increase of $18k annually.Sounds high for Seattle.
Works out to $9k according to this for a single filer: https://smartasset.com/taxes/california-tax-calculator#8TRRj... -- so your additional income is more like $11k, or just under $1k / mo. In my experience, the difference in housing is far more than $1k/mo, so you come out ahead in Seattle.
EDIT: Looks like I forgot about California's other taxes on payroll, so it's actually even more in Seattle's favor.
https://en.wikipedia.org/wiki/Alternative_minimum_tax
https://www.tax-brackets.org/californiataxtable
See https://smartasset.com/taxes/california-tax-calculator
On a $150K income you are going to be paying an effective rate for CA around 7%.
Not sure what MediCal is. You mean Medicare? That's federal.
CA OASDI/EE is 0.9% but you only pay it on the first $100K or so.
[0] http://blog.harterrt.com/is-moving-to-the-bay-area-worth-it....
Median would be relevant if you were talking about moving to CA to sell car insurance to tech people.
A paid parking space will run you the price of a 1-bedroom in a sane region.
Mountain View's Walmart does not, according to this: http://www.walmartlocator.com/no-park-walmarts-in-california...
That said, RV parks are pricy and many have waiting lists.
I have known guys who try to find cheap/free parking; and it's a constant battle. "You can'park here". Cops that are beyond vigilant. I could go on forever.
If anyone is considering living in a vechicle; I honestly think a converted commercial van is the way to go.
I've lived in the Bay Area my entire life, and housing is just cruel.
The problem is so bad I would like to see state/federal/local county land opened up immediately for campers. Plus--companies should provide low rent/free areas to camp. Why is Walmart the only business that saw this a need for overnight parking?
All your bosses want to live in the nice parts of the Bay Area, and they can.
For everyone else housing is just a nightmare. If I was an employer; I would have a hard time looking my employees in the face.
(I know I not going to solve anything, but I'm right now sitting in my truck on Bush street; and there a lot of building--luxury condos. Since as long as I can remember it's been just expensive condos. Something most of us will never be able to afford.)
The idea is to normalize salaries by cost of living. If you have more specific information for each area (you have actual offers), then you can use that. However, using a lower rent for the Bay Area, for example, because you'll have roommate, may set you up to take an equivalently lower salary.
For example, if you're going from $100k/$2000 location to $100k/$3000 (salary / rent), but you set it back to $2000 because that's your rent with roommates, you've foolishly/ignorantly accepted a lower equivalent salary.
1. Bay area is extremely tolerant of immigrants and of different people. 2. Bay area is an excellent place for raising kids. The opportunities for your kids to learn are simply endless. There are excellent colleges near by and some of USA's best high schools. 3. Your experience as a programmer in bay area will always be valued more than your experience in Denver other things being same. 4. Job hopping is easier, finding another job when fired is even easier. 5. Skewed gender ratio means women might get more attention. 6. Networking opportunities are unparalleled in the world.
Disadvantages: 1. If you don't like racial, ethnic diversity then you might be uncomfortable in bay area. 2. If you are a single male finding a girl would be harder in bay area. 3. Competition is cut throat and sometimes it is stressful. 4. Job security is less as there are more people out there who can replace you. 5. California's tax policies and other government policies are very tyrannical and sometimes pure nonsensical. The Liberal state is far too liberal with your money. 6. Housing is bad. 7. Everything is expensive.
As for energy costs, in MN homes are very well insulated, you frequently have a fair amount of trees providing shade, and you have a basement that's 30-40% of your sqft, so heating and cooling costs aren't quite as dramatic, even when it's -20F like it will be this weekend.
Who does the cleaning, you or your partner? I never got used to cleaning a larger space. It is definitely a huge waste of time, vacuum bots only help marginally. Also annoying is walking or especially moving something from one end of the dwelling to the other.
Went to an open house once in a huge ranch. When we decided to leave, I noted how long it took us to walk from the bedroom to the front door. Man I'd hate to dash back in the house "really quick" for something I forgot. I guess that's a first world problem though!
Honestly, the two biggest rooms in this house just store stuff. I can absolutely live without that space. I do enjoy having an extra bedroom to use for... fill in the blank. I bought my house as a foreclosure for 125k and now Zillow lists it for 235k (a bit inflated). The value of my house is about the down payment on a house in San Jose and what I paid is half that.
I have a 2900sq ft home in Texas and we spend next to nothing on heating and AC. Our electric bill per month averages around $160 and peaks around $200 in the summer when we run the AC a bit harder. More than half the expense there is all the electronics in the house, primarily: kitchen utilities, computers, and large screens.
But as already said by others, you fill the space and get used to it. There are times it's really nice to have so much space (holidays with family, birthday parties), and other times it's not (cleaning, a/c). Having a dedicated movie theater room is nice too.
I lived in a 600 sq ft. mobile home in the bay area with my wife and son. It was a bit cramped but not too bad. Now we're in Munich in a place that's...maybe 900 sq ft.? And it feels like a pretty good size, just wish we had a garage. 4200 just blows my mind. To me, I think having that much space would feel like a burden.
But, you are right, this much space does feel like a burden frequently, which is why we are moving and I plan on downsizing. A little.
Of course, it wouldn't take 4x the space we have now to get all that, but I definitely get it a little bit.
tools & supplies for a variety of hobbies that involve the physical world. guest bedroom(s) for visitors. a decent kitchen so two can do real cooking at the same time. book cases. a laundry room that doesn't involve limboing under ducting.
I'm somewhat pondering an Evil Scheme where I start a one-to-one "subcontracting" firm, where a plain-bad programmer who would never otherwise make it in a startup environment can hire someone [me] to do all their work for them—and maybe even guide them through their interviews with a concealed earpiece. Basically, the company would have "actually" hired me, and the person in the startup's office would just be serving as a human proxy for my skills.
Of course, that's effectively just a hack to get around the idiotic policies companies have against hiring remote workers for local salaries; and one that would cost quite a bit of salary (the proxy would still have to get paid, after all.) But I bet it would still turn out better than a non-Bay-Area wage.
Moving to a high cost area to gamble for a position that might help your career in the future, given any unemployment for more than a month makes the living arrangement untenable, is a high-risk gamble. The idea that working for a big company changes your employment chances is about the same as what school you graduated from. It gets you an interview, you were probably going to get anyway in another geo-location. In a lower cost area (even relatively lower like Los Angeles) you end up with lower chances for a startup (with a brand that might eventually become household) but the experience isn't much different and landing your interviews are a cakewalk…talent pools are smaller everywhere else in the world. The positions you might qualify from, are about the same from some no-name sports gambling company as "I worked at uber for a year". Your experience at your role is what matters, you're a worker not a business consultant. The answer is a definitive no, and the headline is baiting a false equivalence, hence Betteridge.
FTA:
[found slide at http://get.hired.com/rs/348-IPO-044/images/Hired-State-of-Sa...]Bay Area hackers are more valued in different markets than local hackers. I would love to see the raw data for the "relocating" hackers and local hackers. Is it a question of applied experience opportunities in the Bay Area hackers? Is just startup afterglow? Are relocating hackers better than average pre-Bay Area experience to begin with and this shows up when they migrate away from the Bay Area?
Honestly I don't think experience in Bay Area is necessarily better, there are great teams in Europe/rest of US and shitty teams in SV, but for some reason there is this Bay Area "halo".
Source: I've relocated to Europe after 3 years in Silicon Valley.
My company has software developers in Los Angeles, Boston, Dallas, and Sunnyvale. From what I've seen it's a lot easier to bullshit your way into a senior software role in the Bay Area than it is elsewhere, so the rest of us tend to be a bit wary of the ones we don't yet know well.
Geico advertises that "People who switch to Geico save 15% or more". Notice that people who would lose money by switching to Geico should rarely switch. Accordingly, this metric will usually be positive.
Consider that people moving to a new city for a job may need more incentive to move.
Same basic problem as an employee who has worked at the same company for 10 years, and gotten their 3% raise every year - the market may have changed radically, but looking is a burden (emotionally, and otherwise) so they are unaware of that.
Enter a tremendous flood of car insurance advertising... to get people to actually evaluate if they are paying too much.
For what it's worth, when I had to make claims with Geico it was fine. But I was clearly not at fault in either case so it was not a difficult process.
I also think part of their ability to offer lower premiums is generally having lower human involvement -- no independent agents, claims routed through Web site or call centers, claims adjuster on site in body shop instead of visiting you, etc.
https://en.wikipedia.org/wiki/Selection_bias#Attrition
While I agree with the others calling this a type of sampling bias, I've seen this type of error frequently enough that I think it deserves a more specific name.
"Fifteen minutes could save you 15 percent or more on car insurance."
https://web.archive.org/web/20111201164345/http://www.the-dm...
On a side note: Calling them hackers when you clearly mean run of the mill corporate programmers seems like something straight out of an HBO show.
I lived and worked in the Bay Area for a little over fifteen years, almost two thirds of it at Apple, and almost a third of it at a successful startup called Reactivity.
I left in 2006 because of some catastrophic health events, and have lived and worked in Arkansas since recovering my ability to work.
When I'm working, I find it pretty easy to command higher-than-average pay for this area. Of course, I fairly often work remotely for people still in the Bay Area, or in Boston or Denver, and naturally they're going to tend to offer me more than Arkansas companies would. But I can also command a pretty good premium in Arkansas.
I don't know how much you can take from my example. I'm an old-fart developer now, with a long resume that has a bunch of famous names on it. People who are impressed by those things will naturally tend to offer more money to get them. I've seen some employers in this area become visibly more enthusiastic because of some of the people I've known and worked with, or that I can offer as references. My assessment is that some of that enthusiasm has been respect by association.
On the other hand, there may be some real quality differences in engineering culture, and some fraction of the premium may reflect that. Some of the markets I've worked in outside Silicon Valley have significantly different standards and practices, and the differences are not often for the better. In some cases they've verged on infuriating or clown-car laughable. Maybe some fraction of the premium is employers paying for people they expect to know better, and maybe they're not entirely wrong.
I'd imagine this is the case for a lot of tech companies so comparing salary alone probably isn't going to make a good argument one way or another.
Also taxes. WA has no state income tax so add an additional 10% income buying power
Stock is hit or miss. The big 4 had tremendous growth in the past few years and that made some people lucky. Don't count on that again in the future.
With high salaries you have high tax brackets. Probably 40-50% total marginal tax rate with state, federal, and all the misc taxes. Being able to subtract your mortgage interest and the fact that your "rent" is going to pay down equity, on paper at least, your living costs are actually lower. Even more so if you have roommates.
Factor in 4-10% appreciation with leverage (10% down = 1000% leverage) so that becomes a 40-100% annual ROI.
Work in the bay area for about 10 years when you are young and then sell your house. You can buy another house somewhere cheaper for cash and then retire.
Might also be possible to just rent out the house in the bay area. The rent should cover rent some place cheaper and have plenty of additional cash flow to live on each month.
(The Triplebyte recruiter didn't seem super enthused with that being my response to why I didn't do their process.)
When you game out salary vs cost of living for a region, you tend to make an assumption that you'll be employed 100% of the time. But once you break that assumption, it can change the dynamics considerably. The $2000/mo you spent comfortably on rent while working full-time quickly becomes an uncontrollable drain on savings when you stop.
For me, I decided to move to a place (CO, an hour north of Denver) with a lower cost of living (and for me, a better quality of living, too), a place where I could live comfortably even if I didn't (or wasn't able to) work full time all the time. And if I do work full time, I could potentially "retire" in my 40s if I wanted, where "retire" probably means "work on whatever I want without needing to get funding," and/or "be a parent," etc.