Young Professional Moving from San Diego

[mark311]

Originally Posted by OpenD

Again, use the items that are applicable in the tables, ignore the rest. They EACH have a relative index, and it varies by category. Use the ones that apply.

I guess I'm an outlier because I don't trust a sampling of data gathered by random people meant to give a one-size-fits-all report. I'm also an outlier because I believe that people in San Diego and Austin are capable of analyzing their own finances using free technology. You're stating that I should use items in their tables and ignore the rest, but the problem is that their data isn't accurate for a smart consumer in 2012. We're dealing with educated people here making the huge life decision to move to another state. I don't think that I'm over-estimating the op of this thread who is in his mid 20's making $100K.

Anyway, here is a good guide to look over at the bottom of this link called the cost of living index manual. I definitely laughed out loud at some of the items being compared. Aren't all smart consumers outliers then? Wait, you shop at Costco? You're an outlier.

ACCRA Cost of Living index Data Interpretation:

[Aquitaine]

I guess I'm an outlier because I don't trust a sampling of data gathered by random people

The people are not random. The data points are random.

I can't figure out whether you're just so wealthy that you can't possibly appreciate why the cost of gas and bread matter more than the cost of a BMW or if you're so confident in your own ability to spot-check prices and make a determination that is superior to the agreed-upon method that you're unaware of what the term "statistically insignificant" even means.

The fact that we're dealing with educated people is all the more reason to use statistics and not a seat-of-the-pants analysis. I don't care what my grocery bill would be today in one town versus another. I want to know, over time, on average, how it would compare between two places.
People still had to buy the same things in the 1960s: gas, milk, bread. Now they can (and do) buy a heck of a lot more luxury items, and it's certainly possible to spend so much on these that you're eclipsing what you spend on staples to such a degree that the COL becomes irrelevant. If you spend $200/mo on premium cable, $100/mo on tanning booths, $600/mo going out to bars, and $200/mo playing golf, then yes, both places may cost you about the same because the luxury market is more insulated than commodities are.

But for the rest of us, if I want to come in under the COL average, I will shop at Costco. If I don't care about saving as much money, I'll shop at Whole Foods. My choice is not relevant to the index. Doing one or the other will put you a slightly higher or lower point compared to the average, but not to the extent that a BMW will - Costco might nudge you toward one end of the spectrum but not enough to make you an outlier.

Finally, even if you dismiss COL entirely, take your $100k in CA and your $100k in Austin:

Federal taxes: $19,939 (single, no deductions, $100k wages)
California state tax: $6,946 (for 2011 -- will go up another $1-$2k if the rate hike passes)
CA take-home pay: $73,115

TX take-home pay: $80,061

That's a lot of milk.

In trying to wrap this up, I think you are purposefully rejecting the notion of a general index because you feel it's "one-size-fits-all" when that isn't the case. It is not telling you what your expenses will be or how much you must spend. It is merely telling you that, on the whole, if you buy the same things at the same places in both cities, you will spend an average of $x more in San Diego. If your "staple" expenses are wildly different than what is indexed, then as you pointed out it will become less accurate, but "single guy with a big pay check" isn't inherently weird enough to do that.

The only way I can imagine that a single guy making $100k is at all an exception is that he's so far past paying for his staples that COL isn't relevant to him. You could double the price of milk or bread and it wouldn't significantly impact his budget because he's one person and if he's spending and not saving most of what he makes, then the biggest chunk of it is going to disposable luxuries anyway. This still does not make Austin "cost the same."

It makes living the high life cost pretty much the same no matter where you go. But when I was in my mid-20s (not very long ago) making decent money, I knew that in 5 years I'd want to have some money for a house, so I spent less on hookers and blow such that the cost of milk and bread did matter to me.

[mark311]

Originally Posted by Aquitaine

I don't care what my grocery bill would be today in one town versus another. I want to know, over time, on average, how it would compare between two places.

OK, this will be my last point and then we'll agree to disagree again so you can have the last word.

In regards to you wanting to know " over time, on average, how it would compare between two places.", you shouldn't be using the cost of living index for that. The ACCRA specifically states the quote below in their data interpretation area of their website.

"The Index does not measure inflation (price change over time). Because each quarterly report is a separate comparison of prices at a single point in time, and because both the number and the mix of participants may change from one quarter to the next, index data from different quarters cannot be compared. For inflation data contact the nearest regional office of the U.S. Bureau of Labor Statistics."

"Because the number of items priced is limited, it is not valid to treat percentage differences between areas as exact measures. Since judgement sampling is used in this survey, no confidence interval can be determined. Small differences should not be construed as significant, or even as indicating correctly which area is the more expensive place to live."
http://www.coli.org/Interpretation.asp

Originally Posted by Aquitaine

Finally, even if you dismiss COL entirely, take your $100k in CA and your $100k in Austin:

I do and thank you, this is a valid point. This should definitely be considered and it isn't calculated in the COL Index! Salary levels (whether they are equal or if one place comes with a pay cut) and taxes should be considered for your specific job.

[OpenD]

Originally Posted by mark311

OK, this will be my last point and then we'll agree to disagree again so you can have the last word.

OK, folks, you're a witness... we have it in writing!

Originally Posted by mark311

In regards to you wanting to know " over time, on average, how it would compare between two places.", you shouldn't be using the cost of living index for that. The ACCRA specifically states the quote below in their data interpretation area of their website.

"The Index does not measure inflation (price change over time). Because each quarterly report is a separate comparison of prices at a single point in time, and because both the number and the mix of participants may change from one quarter to the next, index data from different quarters cannot be compared. For inflation data contact the nearest regional office of the U.S. Bureau of Labor Statistics."

(Emphasis change mine) That doesn't mean what you think it means. What it really means is that you can't derive the inflation rate by comparing indexes from different periods. But if the COL difference between two cities shows that one city is cheaper than another by 12% in one reporting period, by 11% in another reporting period, and by 14% in another reporting period, then you can easily tell that the first city is cheaper than the second over time, on average, and even get an idea what that difference generally is.

Originally Posted by mark311

"Because the number of items priced is limited, it is not valid to treat percentage differences between areas as exact measures. Since judgement sampling is used in this survey, no confidence interval can be determined. Small differences should not be construed as significant, or even as indicating correctly which area is the more expensive place to live."

Right, so if the COL index in one city was 2% higher than the COL index in another city, you should not assume that the first is more expensive OVER TIME, ON AVERAGE. It's not a big enough difference to be significant.

Re: State income tax:

Originally Posted by mark311

I do and thank you, this is a valid point. This should definitely be considered and it isn't calculated in the COL Index

Of course not. It's part of take-home pay calculations, not cost calculations.

Originally Posted by mark311

Salary levels (whether they are equal or if one place comes with a pay cut) and taxes should be considered for your specific job.

Of course, and total tax burden is the key, and there are calculators for that. Some places have income taxes, but low property taxes and low sales tax; while others have no income taxes and high property taxes and high sales tax, while others have every combination in between. You have to look at the whole package.

Sorry, but I have to laugh, there's a young know-it-all on another forum I read who moved to another state which has a higher tax burden due to income tax, as well as having unexpected union dues, who knew better than the warnings from the voices of experience, and now he's jammed because he has a much lower than expected disposable income. Been whining about it for over a year. Wishes he was back in Texas. Ah wellll...

[Aquitaine]

I can't figure out if we agree on what COL is and are just quibbling over the extent to which it's accurate. You're certainly right that it isn't especially accurate, but by definition (lots of people checking lots of prices over time) it's more accurate than one person checking their own expenses one time, or even multiple times.

If we were talking about a city with a COL of, say, 100 versus 110 or even 115, I'd concede that the difference is appreciable but probably not so much so that it ought to be a primary consideration. But we're talking about 94.8 and 131.4. I suspect that Austin's has increased since then and San Diego's may have even decreased.

As a point of comparison, I moved from NYC to Allentown (where my wife is in grad school) which was a change from 161.8 (NYC) to 101.5 (Allentown). A huge part of the difference is housing. If you cut that out, it's not 60% or anywhere near 60%. COL also doesn't account for the fact that if you had a tiny studio in NYC you are probably going to get a much larger place rather than spending less on the equivalent. So yeah, it's not a bible, and that's why so many posts on c-d come down to "well, what part of town are you looking to live in" and "what do you like to do" because those things matter when looking at an individual case.

COL is still the best overall indicator we have. It's a starting point. I checked it early on in our moving process and never again, and I don't worship it. But you'll have to do better than a couple anecdotes if you want to suggest that San Diego is comparable in price by any proper metric.