If he's supporting a family solely on his $120k salary, I might believe him. I don't have much experience on this, so I shall refrain from commenting.
But if he isn't supporting anyone else on his $120k salary, he's full of shit.
I used to intern in the Bay-Area, making ~$60k/year.
Then I graduated, and started earning $90k/year.
As recently as 1 year ago, I was living in San Francisco, which is much much more expensive than Sunnyvale, and earning $125k/year.
During all 3 phases above, I had more money than I knew what to do with.
Let's break it down here.
- 120k/year == 10k/month.
- 3k goes to taxes.
- 1.5k goes to rent (yes, sharing a 2 bedroom with 1 other person isn't the end of the world)
- 1k goes to food and groceries
- 0.5k goes to car payments, insurance, etc.
That leaves you with a whopping 4k left over every month.
Even if you blow half of it on gambling and drinking, and save the other half, that's enough money to make you in millionaire in ~25 years.
The large majority of people living in Silicon Valley get by just fine with much less than 120k. Are you going to be conspicuously rich on 120k? No. Is your life going to be shitty? Absolutely not.
[deleted] because the context I assumed, that wasn't present, was that he was complaining about ability to afford things. "Assumes facts not in evidence".
This is a response to someone who says they can't afford life and they must have a nice car.
But, you responded to a guy who was outlining a budget that he said works very well for him. He wasn't asking for your advice or complaining of a problem...
It's expensive to live in the Bay Area. Expect > 2.5k/rent + utilities + car payment in most situations.
However at that salary it is completely manageable if you keep your other expenses down. If you're not coming out of the gate with $80k+ student loans, you don't buy an overly expensive car (as people tend to do when they get a salary spike..), and you don't empty your savings on overpriced clothes and an outlandish night life, you should be able to save a decent amount of money every month.
Then over the next decade or so you continually build your savings, move your career forward, then you can actually afford a nice home in a nice area.
For the majority it's basic financial management. It will not work for everyone, but $130,000 is a lot of money.
There's no way that's adequate to, ten years from now, have enough to afford a nice home anywhere in the Bay Area, unless there's some unprecedented adjustment in affordibility vs compensation. My opinion is based on having a high ranking job at (usually) the most valuable company in the world, and having been in California over a decade.
Well by afford I mean can afford a 30-year mortgage on a $1.2m home. Assuming this imaginary person spends his decade or so in the $130-200k range (solid career advancement, probably overly optimistic) and shells between $10-$30k a year into savings, that would be maybe 15% down.
My opinion is based on having absolutely no experience in home buying while making the greatest attempt possible to be optimistic about my future in the Bay Area.
Yeah, that math is not going to work, even closely.
$200K a year works out at around $11K/month after tax.
15% on a $1.2M home is $180K - even by your estimations that's 6-18 years savings.
So a $1.02M loan over 30 years... 1.1% property tax, 0.5% PMI, 4% interest...
You're looking at a $6,000 mortgage payment (www.mortgagecalculator.org).
Yes, frugal living says you could manage that at 200K.
Your mortgage originator is not even remotely, no matter how convincing you are, going to underwrite a loan with a mortgage payment of 55% of your after tax income.
At 130K, no. That's 85% of your paycheck going to mortgage.
> Your mortgage originator is not even remotely, no matter how convincing you are, going to underwrite a loan with a mortgage payment of 55% of your after tax income.
Sorry, but a $1.2m house, including mortgage, taxes, insurance and the general cost of owning a home is not affordable to someone making 200k/yr, much less the $180,000 down payment you are suggesting. That isn't to say it is impossible, but the house would own you.
I earn about $30k per year and I still manage to fund my Roth IRA each year just fine.
I understand that perception of wealth is relative, and that earning six figures is no panacea, but it bothers me when rich engineers in the Bay Area think they are struggling, when so many families here earn less and still make do. 100K household income is significantly above the median income here. I recall once reading a sincere comment on HN that lamented how 250K is just not enough, once you cover the necessities like private school and vacations and cars.
Edit: I looked for that old comment, but couldn't find it. However, I did find someone who claimed that 150K was usually not enough for a family to get by on in SF: "The reality, however, is that 150K is the minimum living wage for a family with two kids in a place like SF, and usually not enough."[1]
Edit2: Ah here it is: "The biggest problem is that 250k a year is is barely middle class in a large city." [2]
Especially housing just adapts to what people can pay. If people can pay more, housing will just cost more. Of course, this is also very much assisted by government regulations that prevent building new houses. Supply cannot adjust and therefore prices just go through the roof.
Income tax is also very inflationary. If everybody makes 20% more and the prices go up 20%, you would think that nothing has changed. Not true. The taxes will have gone up by substantially more than 20%. So, taxes drag money out of the equation, and everybody will in fact be poorer.
If salaries increase for one subgroup, inflation will push up the salaries for other subgroups too. So, waitresses and cooks will also need and end up getting higher salaries, and that pushes up the cost of restaurant bills and everything else you can think of. Everything will just cost lots more.
That is how $130k in Sunnyvale will eventually push people below the poverty line.
Lowly wage-earners actually think they can buy their own house. Reminds me of the last depression, where a quarter of the food in America was destroyed, and people kept buying food no matter how much it cost. It was terrible for economic indicators, really stopped the important lines from going up and to the right.
But if he isn't supporting anyone else on his $120k salary, he's full of shit.
I used to intern in the Bay-Area, making ~$60k/year.
Then I graduated, and started earning $90k/year.
As recently as 1 year ago, I was living in San Francisco, which is much much more expensive than Sunnyvale, and earning $125k/year.
During all 3 phases above, I had more money than I knew what to do with.
Let's break it down here.
- 120k/year == 10k/month.
- 3k goes to taxes.
- 1.5k goes to rent (yes, sharing a 2 bedroom with 1 other person isn't the end of the world)
- 1k goes to food and groceries
- 0.5k goes to car payments, insurance, etc.
That leaves you with a whopping 4k left over every month.
Even if you blow half of it on gambling and drinking, and save the other half, that's enough money to make you in millionaire in ~25 years.
The large majority of people living in Silicon Valley get by just fine with much less than 120k. Are you going to be conspicuously rich on 120k? No. Is your life going to be shitty? Absolutely not.