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I think that people should look to own property and focus on either 401ks or investing in some way off the bat.
I don't think waiting to invest is a good idea. Also if one can't afford property in L.A off the bat, the chance they will ever afford it is pretty slim.
Realistically most people aren't going to end up making that much more in their jobs and if they do get a raise or higher salary, the price of property usually goes up more than the amount of that raise.
I bought a place in 2010..but if I had waited a little while longer I wouldn't have been able to because prices went up a lot.
Weath is created by having your money work for you...and when all your money is going to rent and other expenses you are making others wealthy rather than yourself.
I might agree with you if it was someone established in their 30's. But the majority of people posting in this community to gather advice for a move to LA are in their early 20's, some not even out of college. In other words, all of the 20 - 25 year olds who are moving to LA should consider 401K's and owning property shortly after their move? No 21 year old is doing that in any state, let alone one of the most expensive ones. Not to mention, not everyone has the same priorities in this day and age. Time's are changing and so is the cookie cutter "traditional" way of living a lot of older people subscribe themselves to.
Edit: That's not to say that I don't want to own property in Cali (I own elsewhere) cause at some point I do. But at the moment, I'm young and content.
I might agree with you if it was someone established in their 30's. But the majority of people posting in this community to gather advice for a move to LA are in their early 20's, some not even out of college. In other words, all of the 20 - 25 year olds who are moving to LA should consider 401K's and owning property shortly after their move? No 21 year old is doing that in any state, let alone one of the most expensive ones. Not to mention, not everyone has the same priorities in this day and age. Time's are changing and so is the cookie cutter "traditional" way of living a lot of older people subscribe themselves to.
Edit: That's not to say that I don't want to own property in Cali (I own elsewhere) cause at some point I do. But at the moment, I'm young and content.
Perhaps, but just because most people aren't doing it doesn't mean people shouldn't do it.
As Dave Ramsey says , "Normal is broke, most people are broke. It's better to be weird" (paraphasing but something like that) .
The way I see it if people don't at least start saving/investing or building equity in property early, when are they realistically going to do it?
I also don't think it's necessarily true that no 21 year old is putting money in a 401k even in other states.
With reports of people having to work until their 70s out of necessity because they haven't saved up enough money I think that should be enough of a wake up call to young people these days.
"Nearly a third of Americans over the age of 18 have no retirement savings. Twenty-three percent of those between the ages of 45 and 59 have no savings or pension. But the Fed report overlooked an key part of this problem: Minorities are in far worse financial shape than white Americans."
"The Urban Institute report reveals just how little African-American and Hispanic families have in liquid retirement savings, particularly compared to white families. In 2013, the average white family had more than $130,000 in liquid retirement savings, compared to $19,000 for the average African-American family and $12,000 for the average Hispanic family."
Regarding OP question, Pay in L.A isn't commensurate with COL. This is because there are tons of people in L.A that live here either full time or part time that don't pay their expenses with a paycheck from an L.A employer.
Places like L.A ,NYC ,SF ,Miami are magnets for people with money from all over the world.
You are competing with all of these rich people that don't need a job to pay their bills because they make their money off their investments. Those investments could be in China, Europe or any other place, not necessarily in L.A
Perhaps, but just because most people aren't doing it doesn't mean people shouldn't do it.
As Dave Ramsey says , "Normal is broke, most people are broke. It's better to be weird" (paraphasing but something like that) .
The way I see it if people don't at least start saving/investing or building equity in property early, when are they realistically going to do it?
I also don't think it's necessarily true that no 21 year old is putting money in a 401k even in other states.
With reports of people having to work until their 70s out of necessity because they haven't saved up enough money I think that should be enough of a wake up call to young people these days.
"Nearly a third of Americans over the age of 18 have no retirement savings. Twenty-three percent of those between the ages of 45 and 59 have no savings or pension. But the Fed report overlooked an key part of this problem: Minorities are in far worse financial shape than white Americans."
"The Urban Institute report reveals just how little African-American and Hispanic families have in liquid retirement savings, particularly compared to white families. In 2013, the average white family had more than $130,000 in liquid retirement savings, compared to $19,000 for the average African-American family and $12,000 for the average Hispanic family."
Really can't argue against this, pretty interesting stuff. If only they taught this in school instead of pre-calc. I agree, saving is fundamental, though I don't necessarily think you need to start or that it's even feasible in your early 20's. When it came to normative traditional matters, I was speaking more towards owning a home.
I think we're entering an age where people are more content on making themselves happy instead of working dead end jobs where they are locking away a 401K or paying off their mortgage. This is one of the big reasons people uproot themselves from stability and move halfway across the nation to something brand new. The focus tends to be more on the now rather than now and the future. For me personally, there's no career for me back in the midwest where I could be saving a lot more, but at a different expense.
And then there are those that simply have no want to own real estate equity. Many people in my complex have been living there for years and are showing no signs of relocation. I can see the rental rates they're locked into being a factor. But I don't think owning is a necessity or priority for everyone.
There's definitely a balance and it is unique to each person.
Really can't argue against this, pretty interesting stuff. If only they taught this in school instead of pre-calc. I agree, saving is fundamental, though I don't necessarily think you need to start or that it's even feasible in your early 20's. When it came to normative traditional matters, I was speaking more towards owning a home.
I think we're entering an age where people are more content on making themselves happy instead of working dead end jobs where they are locking away a 401K or paying off their mortgage. This is one of the big reasons people uproot themselves from stability and move halfway across the nation to something brand new. The focus tends to be more on the now rather than now and the future. For me personally, there's no career for me back in the midwest where I could be saving a lot more, but at a different expense.
And then there are those that simply have no want to own real estate equity. Many people in my complex have been living there for years and are showing no signs of relocation. I can see the rental rates they're locked into being a factor. But I don't think owning is a necessity or priority for everyone.
There's definitely a balance and it is unique to each person.
I second all of these comments.
We are firmly established where we currently live, with real estate that is about halfway serviced thru a mortgage. But the winters and the droll of just never having a life to enjoy just kills me. It takes years off of people's lives.
So, I understand that I'll be spending a ton more on my mortgage, and won't necessarily have a nice expensive car, or trips to your vacation destination of choosing. to me, SoCal is a pretty nice place to spend my weekends. And spend my weeks off for vacay. But I won't justify why rents are so high there, except to say it's a place people actually WANT TO LIVE. Can't really say that about Birmingham, or Meridian, or Murphreesboro, or Franklin, KY, or Peoria, IL, or so on and so forth.
Thanks to all who have replied, some pretty thought-provoking stuff here. I appreciate (maybe not as much as I should) the need to save for retirement and all that, though after living through the last recession and housing bubble-burst, I'd agree with bpeeps about "times are changing and so is the cookie cutter 'traditional' way of living a lot of older people subscribe themselves to." I really don't trust the notion of the American Dream anymore. I thought about moving to Phoenix or several other cheaply-priced cities with a reasonably healthy job market. And the thought of living in a big tract house with my own little postage-stamp sized yard to mow just depresses the hell out of me. I don't particularly want to work til I'm 75, but neither do I relish the thought of a "comfortable" life growing dusty at a desk job while counting the days til retirement. I bought into the whole college degree mythology, and wish I never had... nothing but loans I'll never see the end of. Makes me suspicious about home ownership, which seems to have not worked out so well for a lot of the middle class. I'm not so young anymore, and everything being what it is, I think I'd rather live someplace vivid and alive, with beautiful weather, than some affordable armpit like Arizona or Cincinnati. I love live music, and every band I love plays in (or lives in) L.A. There's a million things going on.
I've always been pretty broke, so it doesn't bother me to live on the cheap or in a borderline neighborhood. I think if I can land a job there paying at least 50K net, I'm doing it.
The hyperbole and over exaggeration by the members here is astounding.
No car, no kids? Then I'm confused as to what you are spending your money on and how subjective you consider living decently to be. New mid-size Toyotas, Nissans, Hondas, etc are all extremely affordable to purchase on (let's assume you make 60K) that salary. These days you don't need a new Benz to have all the amenities and luxuries they afford. Most people moving to LA are interested in warmer weather, a new start, a job transfer/opportunity, or a career in the entertainment industry. I highly doubt they are looking to own property or focus on 401K's off the bat. 6 years ago, I didn't care about any of that stuff. Now I do, but I'm a lot more established residentially and professionally than some newbie from Iowa.
Fact: You can live in LA for 50K after taxes. Everyone starts somewhere.
Totally agree with this. Also, you have to get an idea for what less desirable areas means. For some that means areas that aren't as "safe" which can be subjective. Take Inglewood for an example. It get's a bad rap (no pun intended) from hiphop lyrics and things that have happened in the 90's but generally it's pretty nice (there are some shady areas of course). Also, you could live in the Valley or Koreatown, which to me is just fine but some people aren't keen on that as they are looking to live in areas that look and feel like Westwood or Santa Monica. $50k is totally doable if you're looking to live intelligently with your finances.
Really can't argue against this, pretty interesting stuff. If only they taught this in school instead of pre-calc. I agree, saving is fundamental, though I don't necessarily think you need to start or that it's even feasible in your early 20's. When it came to normative traditional matters, I was speaking more towards owning a home.
I think we're entering an age where people are more content on making themselves happy instead of working dead end jobs where they are locking away a 401K or paying off their mortgage. This is one of the big reasons people uproot themselves from stability and move halfway across the nation to something brand new. The focus tends to be more on the now rather than now and the future. For me personally, there's no career for me back in the midwest where I could be saving a lot more, but at a different expense.
And then there are those that simply have no want to own real estate equity. Many people in my complex have been living there for years and are showing no signs of relocation. I can see the rental rates they're locked into being a factor. But I don't think owning is a necessity or priority for everyone.
There's definitely a balance and it is unique to each person.
Ding! It's all about balance and preference. Some people have enough in their accounts to pay for emergencies and etc., but maybe they won't buy a home--ever--and they don't care. I always get a kick out of what people tell others they should be doing with their money. Only a few things really apply, not having debt is a major one but owning a home, not necessarily. I do plan on buying one within next couple years but I'm not judging anyone that doesn't. Some people consider "living" being able to do what you want whenever you want when it comes to money. Others just want to work a job they like, pay rent and enjoy people. They pay their debts and sure they have to tell themselves no or wait but that doesn't mean they aren't living. Capitalism is a monster that is never fully fed. Be content and adjust accordingly, yes LA is getting expensive but it's still doable. I live in Palms and I have neighbors who don't even speak english that are doing it. If they can, then you can. It is all about mindset, this isn't SF or NYC where you need to make $200k at some tech or wall st. job to be "comfortable."
You're just getting by at that. Like I posted, you aren't owning any property, you ain't stuffing the 401k too well for retirement and you're driving an old used car and aren't taking too many vacations.
I do much better than 50k a year, and I ain't living high on the hog here. I don't even have a car payment or kids and again... living decently, but not as well as you'd think you would be doing.
I get your point, but I think you exaggerate.
It really depends on if you're a frugal person or not. Most Americans think they are frugal but truthfully have no clue.
I live in the SF Bay Area and grossed about 47K last year...yet I put just over 13K into my retirement (plus a bit more in my IRAs, but I'll ignore that just to be conservative).
Granted, someone just moving here would be paying higher rent than I would. But if you are making 50K after tax, you should have no problem stuffing that retirement account, etc.
But yes, I do live without some things that other people consider necessities such as:
--No cable TV
--No smart phone, just a basic cell phone and a cheap $25 plan.
--Old car. (Ok, you were right about that). Fortunately, my job is a block away from my apt.
--Studio apartment (not a 1BR).
Vacations: On 50K, you should be able to do a decent vacation once a year, but you will have to shop for good air fares, etc. I went to Istanbul, Florida, and Palm Springs last year...but I did have friends/relatives who provided a free place to stay. But you could consolidate that down to 1 trip per year if you were totally paying your own way 100%.
But to answer the OP's question, I have to agree with you and most others...the higher pay in coastal CA metro areas simply does not make up for the higher cost of living for the vast majority of jobs . Not even close. You have to know that if you come here.
Last edited by mysticaltyger; 02-18-2015 at 11:24 PM..
Thanks to all who have replied, some pretty thought-provoking stuff here. I appreciate (maybe not as much as I should) the need to save for retirement and all that, though after living through the last recession and housing bubble-burst, I'd agree with bpeeps about "times are changing and so is the cookie cutter 'traditional' way of living a lot of older people subscribe themselves to." I really don't trust the notion of the American Dream anymore. I thought about moving to Phoenix or several other cheaply-priced cities with a reasonably healthy job market. And the thought of living in a big tract house with my own little postage-stamp sized yard to mow just depresses the hell out of me. I don't particularly want to work til I'm 75, but neither do I relish the thought of a "comfortable" life growing dusty at a desk job while counting the days til retirement. I bought into the whole college degree mythology, and wish I never had... nothing but loans I'll never see the end of. Makes me suspicious about home ownership, which seems to have not worked out so well for a lot of the middle class. I'm not so young anymore, and everything being what it is, I think I'd rather live someplace vivid and alive, with beautiful weather, than some affordable armpit like Arizona or Cincinnati. I love live music, and every band I love plays in (or lives in) L.A. There's a million things going on.
I've always been pretty broke, so it doesn't bother me to live on the cheap or in a borderline neighborhood. I think if I can land a job there paying at least 50K net, I'm doing it.
You'll do just fine. People are doing it here. My wife is a accountant/cfp and she agrees with me, it's all about what you want. It won't be easy and yes, you'll have to make sacrifices but you can do it. We take trips out of the country but we have to save for them. We plan on buying by 2018 but we understand we'll have to wait and if it's 2020 or 2021, I'm not going to let the Jones's make me keep up. I love this city and it has great areas and nearby cities to staycation (Vegas, Diego, Pasadena, Palm Springs, Malibu). Love you're mentality. Just do it!
And then there are those that simply have no want to own real estate equity. Many people in my complex have been living there for years and are showing no signs of relocation. I can see the rental rates they're locked into being a factor. But I don't think owning is a necessity or priority for everyone.
I agree with this. I never cared about owning even before it become quasi trendy to be a renter. I also don't fit the profile of a broke renter, either.
In the coastal CA metro areas, median income earners pretty much have to choose between having a decent 401K or owning a place but having little to nothing in retirement. I chose to rent in a small space and to be retirement rich and I'm good with that.
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