From a financial perspective are high cost of living areas worth it?

[James_0011]

For those of you familiar with the northeast and the cost of living here I have a question.

I've been offered a job and have the option of working at the office in Rochester NY, or the office in Boston. The starting salary would be the same I am guessing (although I haven't fully looked into this). The main pros and cons of each I have come up with are:

Rochester:
pros:
-Low cost of living
cons:
-Might be hard to negotiate a higher salary in the future due to the low cost of living, and it may be hard to find other opportunities if this one falls through at some point down the road.
-Similar to the point above the general economy is not that great in Rochester (three major companies in Rochester have close their doors in recent years, the whole of upstate NY is pretty economically depressed in general).
-I would have to own a car as the public transportation isn't great, which would drive my costs up

Boston:
pros:
-Great public transportation means I wouldn't need to own a car, I could probably walk or bike to work + the store at least in the summer.
-More job opportunities and better overall economy for finding higher paying jobs in the future and negotiating a higher salary.
cons:
-Expensive compared to Rochester

My line of thinking is that I could "hack" a cheap living situation in Boston and cash in on the potential higher future salary. But, this may be incorrect I don't know. Im not that concerned with qualitative factors at this point, although my family is closer to Rochester I think I would like living in Boston more as I dislike driving and car ownership and enjoy being around a variety of people (Rochester has some diversity too I think, but not as much as Boston).

What do you think? Has anyone had experience with this sort of trade-off? What did you do?

[James_0011]

I read this article on: http://www.financialsamurai.com/living- ... d-happier/

Im not sure about the happier part, but he has a good argument in that although your living costs are higher in an expensive city, the absolute dollar amount you can save will be higher as well.

[Dragline]

If the salaries are the same, the short-term economics says Rochester. But you also have to consider the overall game plan for the next 5-10 years.

The Frugalwoods hacked Boston for a number of years before retiring to their homestead in Vermont. I would go read the early parts of their blog to see how they did it -- its fairly detailed.

[BRUTE]

at what point in his career is James_0011, and how long does he plan on continuing the career?
brute recommends moving to a HCOL area if in the first 1/3 of the (anticipated) career for sure, to a LCOL in the last 1/3, and in between it's a bit of a toss up.

[James_0011]

@Brute

I just graduated college, so I'll be working at least ten years. Can you explain the reasoning behind your suggestion?

[James_0011]

@scriptbunny

I've never owned one either, but this article: https://www.nerdwallet.com/blog/loans/t ... wning-car/

Claims its about $725/month to own a car. You have to consider gas, repairs, oil changes, washing it, insurance, parking, etc...

Do you live in Boston? I've been looking on craigslist and it looks like you can get a room in a decent place for like 500 a month. Is this true? I don't need a whole apartment to myself, just a studio/room in a shared house.

[BRUTE]

@Brute

I just graduated college, so I'll be working at least ten years. Can you explain the reasoning behind your suggestion?

in that case, brute definitely recommends Boston. the reasoning is as follows.

metro areas where a skill is in demand (assuming James_0011 didn't graduate in facility management) have more employers competing for James_0011's work, more capital to buy it. there is a higher density of other skilled practitioners to learn from. thus in terms of building career capital, this will happen faster, and likely go further, in a HCOL area. this doesn't matter if there are only a few years of work left, but at the beginning of the career, brute would definitely recommend the career boost vs. the savings.

absolute savings can also be higher a few years into the career. for example, a junior software developer in San Francisco might not save more, or might even save less, in absolute terms, than one in Podunk, Idaho, because COL is very high. But after 3-5 years, the developer in San Francisco will have increased his absolute pay by so much that, barring lifestyle inflation, his savings rate is now likely on par with the one in Podunk. but in absolute terms, savings are much higher. therefore the potential to save a high absolute amount, and move to a LCOL area after 5-10 years, is much higher.

[thrifty++]

I think the most relevant measure in the accumulation phase is not CoL but purchasing power. Matching salaries against CoL. Go for the highest purchasing power. Numbeo.com indexes this. And lucky for you being American quite a few of the US cities top the list.

Also something else to consider is real estate. I listened to a podcast about two school teachers living in Las Vegas which has peanuts property prices, and which were ridiculous cheap a few years back. They escalated to FI really quick by snapping up properties and renting them. Yield was massive and risk was low, as a result of the low property prices

[James_0011]

I think the most relevant measure in the accumulation phase is not CoL but purchasing power. Matching salaries against CoL. Go for the highest purchasing power. Numbeo.com indexes this. And lucky for you being American quite a few of the US cities top the list.

Cool, thanks for that site! It looks like there is actually more purchasing power in Boston than in Rochester.