<p>Like many people on this board I am currently considering a career in finance. And while not the sole reason, the prospect of making big bucks is often at the top of the list of why people get into brutal professions like investment banking, sales and trading, corporate law,etc.</p>
<p>The problem I've come across, however, is that because I hail from a relatively unpopulated area with a low cost of living I'm often shocked at the sticker price of the major finance hubs. When one has to plunk down seven digits to get merely a "decent" house in San Francisco or New York it really makes the amount of money one earns in finance seem a lot less. Then take into account things like being in a higher tax bracket and higher rates in general for being in SF or NY, everyday expenses associated with professionals (getting suits cleaned and pressed adds up!) and I'm left with a somewhat unsavory taste in my mouth -- especially when $60,000 where I'm from buys a heck of a lot more than three times that much in NY.</p>
<p>What is it that you guys find exciting/drawing to work in places like NY or SF? The excitement of the big city may be nice while you're young, but what do you see yourself doing once you marry and/or have kids?</p>
<p>I lived in the SF bar area for 5 years, right out of college. I went to UC Davic and then moved to the area to work for big pharma. There was no way I was going to be able to afford the high cost of living. However, the culture, nightlife, and all that was awesome. I grew up in rural central California and had visited SF a lot growing up, but nothing compared to living there. </p>
<p>Eventually I got married, we stretched to buy a house, and then we got pregnant. We realized that we wouldn't be able to afford day care or for my wife to not work. We ended moving to Cincinnati, OH where I got a job with a smaller pharmaceutical company. We lost about 30k on the sell of our house due to the slumping housing market, but consider ourselves lucky.</p>
<p>Those big cities are for young kids and big money, the rest should stay out. Go there to get the experience and even to make some money. However, if you think that you are going to make it big there, think again. </p>
<p>I've heard of some people working outside of NY/LA/SF/CHI and getting roughly the same pay. I know of two people who accepted law positions in Texas and are paid as much as they would be if they worked in NY. One graduated with his JD from Chicago and the other from Columbia with his JD. They work in Dallas and Houston, respectively. </p>
<p>My friend in Dallas got a 25% raise in Houston from his Manhattan job and the cost of living is much lower, as you'd imagine. He's married with two kids and was able to buy his family their first home as well as finally get himself a car, etc. </p>
<p>NY, SF, etc. are definitely bastions for the prestigious jobs, but there are similar if not equal jobs else where around the country. I've heard that they're sometimes less competitive as well.</p>
<p>Totally agree with the previous post. Costs of living aside, it took me just one tax season to realize how much MORE taxes I have to pay in NY. </p>
<p>A few transported Texans whom I met in recent months all said the same things. </p>
<p>I will be heading back to Texas and my still reasonably-priced McMansion soon ... :)</p>
<p>OP -- When you have children, you move to the suburbs and become Burb Parent!</p>
<p>If you want to work in finance, living in NYC puts you in the center of the action. You can be exposed to new ideas, trends, different ways of thinking, etc. in your field. You have the opportunity to rub elbows with the movers and shakers. If you realize that becoming a mover & shaker is not what you want, then a move to a less expensive area is a good idea. Hopefully, you will be an attractive job applicant because of the exposure you had while in the city.</p>
<p>If you aspire to move up within a corporation, you are probably better off if you live in a less expensive city, with a large corporate headquarter in that city. To the best of my knowledge, large corporations have to offer the same pay range for the same position regardless where you live. As a result, people who live in a lower cost area have a distinct advantage over people in a high-rent area. However, if it is a large corporation, be prepared to be asked to move. But that is another story...</p>
<p>The economics of working and living in a big city work out pretty well if you're young and smart about managing your money. I'm 24, I live in manhattan, I don't work on wall street but i'm in a comparable industry, and it makes a whole lot of sense. I can certainly imagine living somewhere else, but when you're young and single, it's hard to beat. If you live with roommates you can pay $800-1000/month in rent, and you just have so much more opportunity to go out and meet people your age. Especially in NYC, there are just so many young single people out looking to meet new friends that you can feel the difference from the suburbs. You're paying for that atmosphere, you're also paying for the convenience of having everything right at your fingertips. And frankly, these days, you're also paying for safety, at least as far as manhattan is concerned.</p>
<p>A $60k salary is sort of the bare minimum in ibanking, and at the end of year 1 you get a bonus big enough to put you into six figures, on average. And it only goes up - significantly - from there. And on a 60k salary, you take-home about 42, which means about $3500/month in take-home pay. You can buy a lot on $3500/mo, even in NYC. That'll pay your rent+bills, transportation, clothes, going-out costs, food, gym membership, and you'll still have a lot left over unless you're living in a really expensive apt. You can go on that trip, pay for that cab, get the better bottle of liquor, order in instead of cook. And still put money away into your brokerage account. $60k goes pretty far if you don't have kids.</p>
<p>Chicago should not be the list of expensive cities. It is the home of the skyscraper but is still cheaper than San Jose, Bay area, LA, NYC, Boston, etc</p>
<p>I think the main issue for me is simply the cost of housing. I want to be a property owner as quickly as possible. One can be a property owner your first year out of school in a city like Houston/Dallas - this is very hard to do in coastal CA or the NYC-Boston metroplex. It's not like Houston or Dallas lack young or single people or interesting things to do.</p>
A $60k salary is sort of the bare minimum in ibanking, and at the end of year 1 you get a bonus big enough to put you into six figures, on average. And it only goes up - significantly - from there. And on a 60k salary, you take-home about 42, which means about $3500/month in take-home pay. You can buy a lot on $3500/mo, even in NYC. That'll pay your rent+bills, transportation, clothes, going-out costs, food, gym membership, and you'll still have a lot left over unless you're living in a really expensive apt. You can go on that trip, pay for that cab, get the better bottle of liquor, order in instead of cook. And still put money away into your brokerage account. $60k goes pretty far if you don't have kids.
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<p>Tell that to my D!! Aside from her 401K she hasn't saved a cent and has even dipped into her savings.......and she makes more than $60k !!</p>
<p>tell her she doesn't need that 2000sf loft in Tribeca then =P</p>
<p>I imagine if she makes more than $60k, is single without kids, and doesn't live in a place way too expensive for her, then she's either saving money, or having the time of her life enjoying everything the city has to offer. Or has no idea how to manage money and is up to her ears in high-interest debt (like credit cards). One of the three must be true. Your biggest expense living in a city like this is housing - manage that and everything becomes much easier.</p>
<p>I'm saving roughly 35-40% of my income, net of taxes. I may be a little smarter than average about things like knowing rent and neighborhoods, but it's not like i'm doing anything outrageous or miserly. Saving 10-20% (again, without dependents - kids ruin everything) is totally within basically everyone's bounds, if you're college-educated and have a professional job in NYC.</p>
<p>re: Mr Payne:</p>
<p>If you're going to own property, on the understanding that your monthly costs for a mortgage property will be greater than the rent on an equivalent property, then you should be looking for the best investment, not just a feeling of emotional security. Where are property values rising the best? NYC, Chicago, and Phoenix, last I checked.</p>
<p>The way you get to own property in a place like this is saving up enough for a down payment - or, if you're doing well enough financially, you can get 100% financing. When I've got sufficient cashflow to support a $500-600k apartment in the city, i'm getting it, because (especially in my neighborhood) property values are already rising and are about to start going up very fast. Basically, I would rather own property in New York than own slightly cheaper property in Houston or Dallas a little earlier in life. The cashflow implications are about the same, and the value I get out of it is much better =)</p>
<p>Property values may be going up fast, but there is a good chance that they will fall as well, general consensus dictated by 24 yrs worth of data for large cities states that for every dollar gain over 5 years, you will loose 32 cents in the subsequent years. And it is truly hard to believe the bulls, there is to much uncertainty. Consumer spending will decrease, the wealth effect from wall street will dry up and eventually effect the rest of the burrows, similar to 1987, but at a slower rate. And then you have the fact that on top off all this uncertainty, you are paying a 7-10k premium on top of the actual cost of housing just to stay in nyc. </p>
<p>The potential upside/downside is much greater in NYC than elsewhere. In dallas/houston, you hardly need to worry about cycles/problems such as are present now. The upside may be less, but you also have to realize that a home is not considered an investment by everyone</p>
<p>Denzera, the reason people wish to buy a house in someplace other than the highly volatile markets of NY, SF, etc. is not necessarily related to any perceived financial gains they can reap in the future. Many buy it for reasons of security, be they personal or financial.</p>
<p>Also, I wasn't necessarily suggesting that one live in the suburbs instead of a city area. I go to school in LA and its nothing but a giant suburb (and I have yet to see why anyone would WANT to live here. San Diego is smaller, cleaner, prettier, has less crime, less traffic, etc.). Can't one just live in a less expensive city (Seattle, Portland, Atlanta, Houston, etc.)?</p>
<p>Denzera, I'm curious to know specifically what kind of activities in NY mitigate the COL. What makes living in NY better than, say, Minneapolis? I realize that NY has a wider variety of activities to chose from, but what do you actually end up doing? Go see a Broadway play? Go to a world-class museum? Professional sports? Those are all great reasons to visit a NY, SF-type city, but are they good reasons to live there?</p>
<p>Denzera, I can live in much better accomodations in TX than I can in NYC. This is realized in rent prices or in home prices. And prices in TX aren't "slightly" cheaper than in NYC (or surrounding metro area). They are much cheaper. The first link I clicked on craigslist:</p>
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<li>southpasadena, what you say may be true for most of the country and world, but I submit that economic driving factors continue to imply that high-demand areas such as Manhattan and SF are growing and if you spend enough time gaining local knowledge about neighborhoods, your investment will have substantially positive expected value.</li>
<li>Lotus, I acknowledged the feelings of security in my post, but made the point that at this time in our lives (our 20s), financial value should probably be considered more important than a false sense of security in owning a home. You may sell the house, or find the bank calls the note, and either way have an expected lifetime at that house that's not that much greater than your expected lifetime at an apartment. Things are different once you have a family, but for us, the important decision is financial prudence.</li>
<li>Mr Payne, I acknowledge those cities are much cheaper. But as you know, price follows demand. I wouldn't be able to get a $135k house for $120k in a place worth living, because then there would be demand to move there and corresponding price pressure. The fact that NYC is more expensive indicates that many more people find it an attractive place to live. I'm normally skeptical of claims in favor of the wisdom of crowds, but I think that in generalities, here it at least holds some value.</li>
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<p>To answer Lotus's question about NYC vs Minneapolis, remember I'm talking from the perspective of young professionals here. Here</a> is Forbes' survey of cities for young professionals, and NYC</a> comes out on top for a bunch of reasons you can read about. I've spent plenty of time in Minneapolis, to take your example, and while the downtown center is pretty nice, there's about 10 square blocks of it. A few restaurants (Solera is awesome) and theaters and entertainment areas, a few nightclubs, a few bars, and office towers - your standard city, just writ much smaller. Surrounded by many, many miles of suburbs (and now a collapsed bridge). Plus it's really really cold in the winter. And I'm from Boston originally, so I know from cold - and NYC is balmy by comparison. Minneapolis is a cute town, better than many new yorkers would think it is, but the scale and atmosphere just don't add up.</p>
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Mr Payne, I acknowledge those cities are much cheaper. But as you know, price follows demand. I wouldn't be able to get a $135k house for $120k in a place worth living, because then there would be demand to move there and corresponding price pressure. The fact that NYC is more expensive indicates that many more people find it an attractive place to live. I'm normally skeptical of claims in favor of the wisdom of crowds, but I think that in generalities, here it at least holds some value.
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Ummm, price follows the difference between supply and demand, not demand alone. The point is, TX has much more flexible supply. The supply of housing NYC is heavily restricted. I have no problem admitting that NYC might have more overall demand - but the restriction on supply certainly exacerbates the prices.</p>
<p>Exacerbating the price means nothing. There is plenty of money still outside of the city, and even the country, that still want in. The weakening dollar is not helping. But there will have to be a time when the prices in Manhattan and the surrounding Burroughs reach a breaking point. Many will notice the fast dropping prices in the suburbs and there will be at least some exodus. It is complicated to say since every article you read about the issue is heavily biased towards one scenario or the other and the economics for this local economy seems to break the typical rules</p>