High vs. low cost of living calculations (why things are not as bad as they seem)

High vs. low cost of living calculations fail to take into account the overlooked benefits of ‘high cost of living’ areas:

1. For a person living alone modestly, $200k even in the Bay Area is more than enough to put away a decent chunk of money for retirement. Just run the numbers, as I have done below.

2. Pundits also vastly overestimate taxes, which are low in the US. The top tax rate is for anything above $400k, so the amount you pay is way lower than commonly assumed even if you cross into the highest bracket.

3. High cost of living areas have more amenities overall which may not be factored into calculations. Things like walkability, so you don’t have to pay for car, car insurance, gas, etc.

4. More public services, another amenity. Like better schools, better public transportation, nicer neighborhoods (this may be subjective).

5. An expensive mortgage is not like pissing the money away–you are building home equity.

Regarding high cost of living, I think there is a systemic bias among pundits that overestimates expenses and underestimates salaries. You hear about how living expenses are so high in Silicon Valley that even FAMNG workers are poor/struggling, but when you run the numbers, unless you have a large family or are really reckless with money, it’s not that bad.

Pundits, especially on the right (not just to pick on the left), also overestimate income taxes. I think ‘the left’ does have a point that Americans pay really low taxes, even if I am opposed to tax increases. Most pundits overlook or ignore that tax rates are progressive, which means if your earnings cross into the highest bracket, you only pay the highest percentage for anything above that threshold, not the entire amount. (I told the story earlier about getting a huge refund because of this mistake.)

The consequences of this can be quite counterintuitive. For example, someone who earns at least $231,251/year, which is a solid upper-middle class income, would drop three brackets, all the way to only a 22 percent effective income tax rate:

That is a lot lower than other developed countries.

If you make $230k/year at a tech job in California (I am assuming $230k in income and excluding other compensation, which is not that unreasonable), after factoring state and federal taxes, you still are left with a lot of money.

Running some numbers on a tax calculator for single-filer in California with an income of $230,000/year, including state taxes and sales taxes, shows a take-home pay of almost $150k:

Assuming $3,000/month for rent for a one-bedroom apartment and $2,000/month for other expenses, such as car, students loans (pay $444/month on a 10-year $40,000 federal student loan at six percent), food, internet/phone, utilities, etc.. still leaves $89,000 left over as discretionary income. Not exactly broke. [Large tech companies tend to have good benefits, such as healthcare, so no need for health insurance, which is a major personal expense.] So even after taxes and expenses, you still have a lot of money left over, and this is in a high cost of living area.


  1. Are you high?
    First those places as have about a 10% state and local tax including on capital gains for a combined rate of 25-30% on top of that they are all close to a 10% sales tax. On top of that is the hidden taxes like $65 parking tickets and $160 littering tickets for the mess the homeless and sanitation workers make daily. Oh the property taxes and the cost of things like insurance usually more than a car payment. Parks are filthy unsafe all city services are black work programs pure torture to do anything from pull a building permit you hire a former employee to shake you down and bribe his pals. Similar death tax probate is where a bunch of Jews rob your heirs.
    The public services ? Have you ever even been to a city. I grew up and lived in NYC since 60s and NYC was the best managed large city till recently. The services are unusable you can’t send your white kids to an urban public school unless you want them raped and beaten regularly. There’s no and I mean zero education going on. The public transportation is equally unsafe
    Private school is like 40k for wealthy w connections. People didn’t volunteer for a two hour commute and 20k year property taxes in a suburb for nothing

  2. Can’t comment on Cali, but grew up in NYC.
    Linked below is a Catholic private school in Park Slope, 10k for TWO students.
    If you bought a 2bedroom 600k condo in Brooklyn preCovid at 2.5%, you are golden. Parks are fine, be selective. Botanical gardens, etc. Agree with public transport, stay off the trains.


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