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Comments (30)

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Nov 21, 2021 - 11:47am

I'm going to do this just for fun.

If you make $230k in NYC, you will pay $85,317 in income taxes ($144,683 net income) assuming you live in Manhattan. For the same comp in chicago, $74,367 in income taxes ($155,633 net income). So before you have even factored in rent, transportation, cost of a beer at a bar, etc. You would need to be paid over $20k more in NYC just to get the same after tax-income ($250k in comp in NYC nets you $155,068).

I'll say Rent is $800 cheaper in Chicago (this is pretty conservative IMO, it's probably a wider gap). $3200 for a mediocre one bedroom in Manhattan vs $2600 in Chicago. Obviously, you would get a lot more for that $2600 in Chicago, but that's not really a fair ask. No one is going to live in a shitty, NYC quality apartment in Chicago if they're making $200k+. $800 * 12 = $9600. Apply a 35% tax rate to that (also conservative), and you're looking at ~$15k in additional compensation to make up for the rent differences.

While there may be other COL adjustments, Taxes and Rent are the biggest.

Use the below website to input your own numbers and figure it out. Big jumps in comp are worth the move in my opinion. LCOL cities underpay in my experience.


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Nov 24, 2021 - 10:14am

I don't live in Chicago but live in a LCOL city and have a lot of friends who live in Chicago. Chicago benefits from being considered a "major market", and so salaries are comp'd out to NYC/LA/SF/etc. but the COL is significantly less. I'm not saying you make the same in Chicago as NYC, but the relative gap there is a lot less than say, Chicago and Denver. I know people that were making $250K in Chicago were being asked to take a $100K salary cut to move to a similar role in Denver, and the COL between the two are marginal. Chicago is a cheap ass city if you are okay not living in a brand new high rise downtown. I would say if your goal is to save as much money as possible and still live very comfortably, there might not be a better city in the country. 

I'll make an argument for LCOL. I used to live in a HCOL city when I was younger and moved to a LCOL market as I approached 30. The big markets are great when you younger, but at this stage in my life I consistently find myself in a better financial situation than my friends who stayed in the bigger markets. I will never make the same salary as them, but I pay a lot less in taxes, I can afford a home, I have the ability to save a ton without feeling stretched (and importantly, invest those savings to make up for or exceed the salary I would've made in a bigger market), my wife and I don't have to think about money too often, we'll be able to buy a second home in the next 5-10 years, my kids will go to really great public schools, and there isn't really any pressure to keep up with the Joneses. I will make less money over my career, but I wouldn't be surprised if my net worth ends up being more and my quality of life is much much higher. Just food for thought. 

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  • Associate 1 in RE - Comm
Nov 24, 2021 - 11:36am

1) OP is probably a decade away from buying a home. He's in his early to mid 20s. Home prices are irrelevant at this stage.

2) If OP can make $225k in Chicago, then based on my analysis above, it's probably not worth it for him to move to NYC. My experience looking at RE roles in Chicago was nothing like what you're describing - they tend to pay less than Tier 1 cities. But if OP can prove me wrong then this discussion is not needed

Nothing you said in your post was wrong, but it's not entirely applicable to this situation. The math is totally different when you're a 33 year old VP or Director

  • Associate 3 in IB-M&A
Nov 22, 2021 - 6:45pm

What do you pay in rent in Chicago?

A "decent" one bedroom (no washer dryer or dishwasher, terrible view, walkup) is $3.5k. One in a decent area with W/D in unit, dishwasher, basically comparable to your average 1 bedroom rental in any other city, is around $5k. NYC may pay more but I bet your savings post taxes, rent, etc will still be higher in Chicago.

  • Associate 1 in RE - Comm
Nov 22, 2021 - 6:59pm

You should read my comment above. It's about a $35k pre-tax difference between the two cities ($230k in Chicago = $265k in NYC)

IMO, not nearly as big of a difference as you'd think.

It would be bigger if you rented a Chicago quality apartment in NYC, but no one does that (at least no one in their 20s)

Nov 22, 2021 - 11:15pm

It's a huge difference, not a small one, as the difference in purchasing power *gets disproportionately worse over time*. Put another way, the difference will never matter less than it does as soon as you start the new job in a one bedroom apartment. 

Each future dollar earned is taxed at a higher marginal rate and the spread between the two would be salaried *increases*, it doesn't remain constant. State taxes don't matter when you're earning less money, they hurt more when you're earning more. 

Renting a 1 bed with a difference of $800 becomes renting a 2 bed at $1500 difference which becomes buying a 3 or 4 bed at a monthly payment difference if $3-5k with a higher down payment as well. Again the spread is expanding all the time. 

This is all compounding each year as you save less and spend more. 

This is why it's extremely common to start in NYC and move to less expensive cities, not the other way around. It never matters less than it does when you're earning the lowest salary you'll ever make and renting the cheapest house you'll ever live in. 

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  • Investment Analyst in PE - Other
Nov 22, 2021 - 8:04pm

To rent the apartment I currently live in in Chicago would probably be 3-4K monthly in NYC I'm at 1.6k.

  • Associate 1 in RE - Comm
Nov 22, 2021 - 8:21pm

When you're doing a cost of living comparison, you can't compare the same exact living situation to NYC.

Thats like saying "well I live in a 2000 SF house in Newnan, GA and make $100k. The same house in NYC would cost me $7 million, therefore I would need a $1.1 million raise to justify moving to NYC"

You have to adjust housing expectations city by city.

  • Associate 1 in RE - Comm
Nov 22, 2021 - 8:29pm

Chicago simps be like "$150k in Chicago or $250k in NYC? Easy decision - take the Chicago job. You'll save so much money on rent that your Net Savings will be higher in Chicago. Plus you'll live in an ultra luxury building with a concierge. And our summers are sick!!!1"

Nov 23, 2021 - 10:15am

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