Cost of living in Silicon Valley

Associate 2 in ER

I understand that we currently have bigger issues in this country than assessing COL for a finance professional but I would like some help here. I currently work in a relatively low COL city (think similar to Charlotte, NC) and take advantage of the finance salary/bonus to save and invest. I lived relatively comfortably on ~$100k last year ($80k base/$20k bonus).

With that said, I have received an opportunity to leave ER and get into corp fin. at one of the FAANG companies. For me, this is a no brainer given the current economic situation and overall state of ER. Further, my total compensation would increase by ~$60k, maybe more.

My only issue is...

  1. It's still a cost of living pay cut.
  2. My girlfriend is a teacher that won't be getting such a pay raise ($10-$15k) if we move. All-in, I estimate we would be cutting our purchasing power by ~50%.

For those who made the move to northern California, how do you guys think about such steep increase in cost of living (SF cost of living is ~104% higher than Charlotte per nerdwallet)? How did you go about reducing costs to manage the difference (other than downsizing apartment)? Anything else I should know (outside of the canned political commentary, this doesn't factor into my predicament at all)? Some help on this would be appreciated, thank you WSO.

Comments (34)

Mar 31, 2020

The biggest difference will be housing and taxes. Take a look at what your net take home is and subtract your housing costs in NC. Do the same for San Fran. You may find that while you spend a higher percentage of your income on housing in San Fran you will still have more money left over. You might be able to ditch a car as well.

  • Associate 2 in ER
Mar 31, 2020

Considering I live in a 3 bedroom, 2000 sq ft, house with a backyard for less than $2k a month there is no way these are going to net out right? I imagine to even keep my housing costs equal I'd have to move to a 1,000 sq ft (if that) 1 bedroom?

Mar 31, 2020

Pretty sure you would be looking at more like 3k for a studio. and $3500-4,000 for a one bed.

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Mar 31, 2020

Its going to be a different style and pace of life.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Apr 2, 2020

I agree with your thinking. Definitely can't ditch the car though - Silicon Valley is not the same as SF

Mar 31, 2020

House Hacking

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  • Associate 2 in ER
Mar 31, 2020

What exactly does this mean?

Mar 31, 2020

Can check it out on biggerpockets website

Most Helpful
Mar 31, 2020

I have several clients that moved from a low cost SE city (Nashville/ATL/CLT) to the valley, let me share some of the highlights.

the ones who've spoken about it positively are in the following camps: temporary stay (<5y), at a company that went parabolic growth wise, from CA originally so wanted to get back home.

if you're there less than 5y you don't need to worry tremendously about accumulating wealth while you're there, so just suck it up, pad the resume, and get the fuck out as soon as it's practical.

if you're at a company that goes parabolic, money won't matter to you pretty soon. however, most of that upside is gone for the FAANG companies, you need to go with something sub $10bn market cap and that still gives stock options.

most were family people, married to a lower income spouse and with kids in the home, they don't look at it favorably by and large. and for those wondering, these aren't your sterotypical gun toting stars and bars southerners, these are people you wouldn't think of as from the south. the reason is wealth accumulation. when you're in a corporate setting, even at the VP level, it's difficult to accumulate wealth at well-established, lower growth companies.

sure you make $1mm, but that $600k house just became $2.5mm with higher taxes and everything else associated with it. don't buy a house in atherton or los gatos? fine, take your savings and plow that into the nearest private school, because that's what you'll have to do. the math works short term, but in my experience (which I'll admit is narrow), it's difficult to justify longer term.

now, I'm not saying some of those companies can't grow at double digit rates, what I'm saying is that your participation in that growth is gonna be limited. so in your role, you may get $50-100k in equity awards, even if the stock does 20% a year, you're looking at $2-300k net after tax after 5y. that's great, don't get me wrong, but that's not life changing enough to warrant staying there long term unless you can rapidly ascend the ranks.

all of that said, if I were you, I'd do it. you're young, SF is a great city, and getting out of ER is smart. you can parlay this job into many other jobs in many industries that wouldn't be open to you with just your ER background.

  • Associate 2 in ER
Apr 1, 2020

Thanks for the advice @thebrofessor". I am relatively young and the intention would be to gtfo as fast as possible, I have no intention of staying in northern California. That is unless I have the opportunity to join a parabolic growth company as mentioned. Your advice seems spot on and aligns with my thinking.

Any thoughts on how to manage housing costs?

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Apr 1, 2020

if there was a "hack" to do this, it would've been discovered, so just suck it up. I know a young couple living in <700sqft 1 bedroom in the city whose rent payment is 2.5x my mortgage payment, but I'm worlds apart from SF.. I know people who live in south SF and just bum around San Mateo more often than going into the city, others who prefer east bay and that area, and others who suck it up in a 500sqft studio in a good location and just spend as much time outside as possible.

it depends on where you're working. if you're going to the valley proper (like Facebook), I'd probably live in south SF/san mateo area, get a lease for 6mos, figure out the area, and aggressively begin looking for roommates if you can cope with that, just depends if you value money or privacy more. for me, it's privacy, but just one man's opinion.

Apr 1, 2020

OP - @thebrofessor" nailed it. Completely agree with the entire approach

Originally from the area, I've considered moving back and have a lot of friends in a similar situation.

Housing is going to really depend on where you'll be specifically. You may be able to ditch the car, but if your gf finds a school in a different city/across town.. maybe not. At the end of the day, you're budget is going to be wildly different but it'll be a good experience and could be really great for your career if you decide to make the move

If you want any recommendations on specific cities or neighborhoods send me a PM

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Apr 2, 2020

To add to @thebrofessor" 's comment, you can easily transition from MAFANG to a high growth tech company for the most part - vice versa, not so much. Most high growth companies would definitely be looking for people with the right kind of fit and background - MAFANG background has much more weight than even NYC finance unless you're from GS/MS/JPM [1].

[1]From personal experience

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

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Apr 1, 2020

Have family there and have traveled to visit the bay area many times (like 50) in the past 25 yrs. Housing market is ridiculous but everyone knows that. Taxes are crazy, but again, everyone knows that. What catches some off guard is the actual cost of everyday items. Very expensive relative to the SE. Gas (pre Covid 19 and Oil tanking) 3.50 per gallon (surpassed 4 previously when it was 2.80 in FL). Basic things like meal cost at a restaurant, movie tix, is definitely higher. More like NYC than SE (maybe not as high ).

OTOH, cool place to be if you can stand the uber liberal politics (so open minded they're actually among the most closed minded folks I've ever met - God forbid you disagree with anyone...)

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Apr 1, 2020

I recently interviewed at Google and went through a similar COL thought process so I'll share how I approached it. One angle that hasn't been mentioned is the future career/income growth of your experience if you work for a FAANG company and decide to return to your city - this was actually the most important part of my equation since I didn't intend to stay out there for long (and was a great conversation with my partner about potential opportunities, more on that at the bottom). YMMV.

I estimated at least 1 promotion by coming back to a large tier company, two if a medium/small company. So really two years at a FAANG can be a gigantic title/pay accelerator the moment you return, not to mention long term reputation/career boost you get to be the "FAANG guy" instead of the generic companies available in your city. You mentioned Charlotte so you'll likely return to Lowe's, Duke Energy, WF, Truist or BofA, etc. Those companies are incestuous. Literally everyone in Charlotte already has those generic big corp. experiences. Ever wonder why people put "Ex-Facebook" or "Ex-Googler" on their LinkedIn? It's signal, those companies are exclusive AF and hard to get into. FAANG differentiation has real value. You've noticed that nobody has a LinkedIn that says "Ex-Wells Fargo" or "Ex-BofA" in Charlotte, right? There's a reason.

So really this comes down to a few things:
-How long are you planning on staying?
-Taking purchasing power into consideration, what is the Real compensation +/- per year
-Is the number above negligible when considering the long term growth?
-Is your partner understanding of this equation and willing to do it too?

Despite eventually getting rejected from Google (because most do), this discussion with my partner opened both of our eyes and got us on the same page for priorities and opportunities. While my partner isn't a teacher it made her realize there were infinitely more high paying opportunities available elsewhere that could significantly accelerate our financial position upon returning to our city. Really, people only consider the options that they are aware of. Hopefully the details above gave a new option to consider :)

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  • Prospect in IB-M&A
Apr 1, 2020

From the Bay and as you've seen $100k in Charlotte gets you a lot more than $160-180k in the South Bay, honestly a gigantic gulf. Renting prices have continually skyrocketed and 1 bedroom apartments in areas where you'll be relatively close to the tech companies in the peninsula easily go for $3,000-$3,500. You'll be able to pay less but you'll have to split a 2 bedroom with someone else. The South Bay is also very spread out with tons of suburban sprawl so you'll need a car.

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Apr 2, 2020

Here's what you do:
1. Take the job and just know your housing and fcf are going to take a hit.
2. Work your ass off and try to earn a few promotions.
3. Enjoy living in SF and experience everything you can (while being semi-frugal).
4. In 3-5 years either:
a. Move back to the south on a MUCH higher comp and career trajectory
b. Decide that you love SF and you want to figure out a way to stay

Other than some short term pain their really should be no downside to a new/better experience and more $. If you end up loving SF and wanting to stay then some sacrifices will have to be made, but that will be your choice down the road.

EDIT: As someone who moved from the Chicago area to a lower COL area, it really is awesome. I dont make millions by any means, but raising a family in a lower COL area on a pretty nice comp package is really the sweet spot of american life imo (obviously if you want to have a wife and kids).

twitter: @CorpFin_Guy

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Apr 2, 2020

If you work at a FAANG, you aren't going to want to live in SF most likely. That's assuming you like a reasonable commute. Corporate finance is going to be done in an office in the South Bay rather than a satellite office in SF (that's for engineers).

Apr 2, 2020

OP, I want to tell you that nerdwallet and other COL calculators overestimate the difference. According to them, a 130k salary in NYC is the same as a 60k salary in a low COL. That is not true.

In reality, people try to cut costs and think of other ways to save on housing when moving to a high COL city. I assume you will also. These calculators assume you will be splurging like a bitch. Just keep that in mind.

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  • Associate 2 in ER
Apr 2, 2020
Bun101:

OP, I want to tell you that nerdwallet and other COL calculators overestimate the difference. According to them, a 130k salary in NYC is the same as a 60k salary in a low COL. That is not true.

In reality, people try to cut costs and think of other ways to save on housing when moving to a high COL city. I assume you will also.

To be fair these calculators compare salaries at similar lifestyles. There would be no point if they adjusted for cost-cutting.

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Apr 26, 2020

Agree. Survival and maintaining the exact same lifestyle are completely different. Have lived in both types of places and the COL calculator was pretty accurate on a like for like basis.

  • Associate 2 in ER
Apr 2, 2020

Thanks for the responses all. Of note: My GF will be coming so no roommates, we have a kid.

  • Analyst 2 in IB - Gen
Apr 2, 2020

Deleted

  • Analyst 2 in IB - Gen
Apr 4, 2020

Was your girlfriend able to find a teaching job in the Bay Area? I recently turned down a dream job near SV because my significant other is a teacher and essentially had no prospects of finding teaching job in such a competitive market. All of our research indicated it would be nearly impossible to find a FT teaching job (even in non COVID circumstances) over the next several months before the next school year

Apr 2, 2020

Hey OP, was in a quite similar situation as you. Worked corp fin. in Houston and took an internal transfer to SF last year. I received a 50% raise to do so and have kept spending flat. How did I keep it flat? First, I clearly overspent in Houston. Wow, I must have overspent. Next, I got roommates. I understand this isn't possible for you but I think having dual income is pretty similar. Neither of my roommates hit it out of the park in compensation and we live in a modest 3 bedroom house in the city. We found an "affordable" neighborhood, I sold a pickup to buy a used hybrid, and I cook alot. Overall it's a great place to play cheaply outdoors, use public transportation, and generally keep variable costs low. Bring lunch (or if at FAANG use cafeteria), street parking instead of garage, avoid luxury apartments, and you should enjoy the move.

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  • Associate 2 in IB-M&A
Apr 2, 2020
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Apr 2, 2020