How a Millennial Family Chose to Expedite their Financial Progress

Sometimes moving from a low- to high-cost of living area makes sense. Review this couple's reasonings to see if they match with your situation and choose to follow suit.

It doesn’t take much Google searching to find out living in a high cost of living coastal city hurts the bank account.  Whether from higher costs at the pump, pricier food, or out-of-reach housing, living in high cost-of-living areas has not stopped becoming increasingly expensive in the past decade.  

Many in the FIRE (financial independence, retire early) movement favor leaving these high cost areas and geoarbitraging to a more affordable location afterwards.  In effect, this leverages a high cost-of-living area’s high incomes for accumulating significant savings and then relocating to a low cost-of-living area to have your money go further.

If this is the case, then why did we risk moving to a more expensive area after having lived in a modestly-expensive location?  Are we doing it wrong and did we wait too long to make this choice? Finally, how exactly do we see this as a path for getting ahead?

Well, one reason has to do with support as we begin to grow our own family and have a need to be closer to family. The second, and primary, rationale involves an attractive job market for two young professionals with ambition.

We came to the San Francisco Bay Area from New Orleans in the hopes of finding more career mobility and upside.  We also sought out a better environment for growing a family, not to mention an enjoyable climate for being more physically active and exploring the outdoors.  But we never lost sight of how expensive San Francisco is for living.

Homeowners Once, Let’s Do it Again

There’s no sense denying we had a nice set up in New Orleans.  Not to mention having my parents nearby, I owned a condo from before my wife and I got married.  

We have had it rented at a good price in a prospering area of the city.  After 5 years of owning the place, I’ve managed to realize significant capital appreciation and attractive tax-advantaged passive income thanks to the benefits of MACRS depreciation expense and other beneficial tax deductions available to landlords.  

These rent payments have helped to cover the monthly costs of home ownership in another property I co-own with my family and managed on our behalf.  My wife and I lived in this multi-unit house my family purchased with money inherited from my grandmother’s modest estate.  

We called this multi-family house our home for the past 3 years and have nothing but gratitude for the opportunity to start our financial journey on a solid foundation.  In exchange for the free rent, we encountered a fair amount of due diligence, effort, and time commitment to make the property suitable to renters.

In addition to the added time spent on upkeep, marketing, and maintenance, we took extra precaution and called our insurance company to update our insurance declaration page with adequate coverage to protect ourselves against potential liability.  Doing so would protect us against any unanticipated events and allow us to continue building our lives together and not get off to inauspicious start.

While house-hacking, or the practice of living in one unit of a multi-family home and having the other units provide rental income to offset your cost of living, we occupied one unit while renting another to long-term tenants and listing the other as a short-term rental on AirBnB.  

Between these three sources of income, we never paid a dime in living expenses.  We did, however, invest a reasonable amount of money to get the house in its current shape.This house-hacking adventure helped us take concrete steps toward financial independence, pay off some of my wife’s student loans, and also build a down payment fund on the first place we we own and will call home together.  We didn’t want to continue deciding between a condo vs. apartment and ultimately wanted a single-family home of our own.

Leaving is Never Easy

Where it gets less clear is why we wanted to leave this situation and move to the most expensive housing market in the U.S.  After the money we saved on rent, holding down respectable jobs and living frugally, we’d managed to set aside enough money to buy a respectable home in New Orleans.  

Unfortunately for us, there’s an added wrinkle to why we needed to move.  Simply put, my wife could not have found a job in line with her career ambitions in New Orleans after she finished her medical residency.  

This resulted from attending residency in a smaller city and two residency programs in her specialty leading to a saturated market. In other words, there would not have been enough patients for her to consider practicing in her field or possibly facing the business startup costs of having her own practice.  

Another major factor came from the need to be closer to her family in time for our first born child to come into the fray.

Not including the decision made on selecting our educational choices and resulting career paths, the decision-making on where to live may prove to be the biggest choice to impact our money.

While house hacking allowed to learn how to save money and live within our means well enough to afford a home of our own in New Orleans, we wanted more for our money and happiness.  As a result, the best return we can make will come from owning our own home in a high-cost of living area.  Aside from the barrier to entry posed by a higher down payment, we will quickly turn our focus to ways to pay off our mortgage faster.

Home price appreciation has a higher upside in San Francisco, even after recent gains. We feel this way despite current Justice Department interest in major tech companies in the area.  We’ve assessed the risks and don’t see these inquiries as a material drag on growth in the long-term. We will both admit that while some tech companies may slow their growth as a result, or in some cases, face stricter regulatory scrutiny, in our opinion, the highly-skilled labor force would just migrate from one company to another and continue fueling the economic growth.

It is not hard to see how this added economic growth (and associated tax revenue) spills over into essential services for the greater Bay Area.  This will continue to make the area both increasingly attractive and expensive. That’s why moving now when we’re at inflection points in our careers makes more sense than staying put.

New Orleans, and many other low-cost of living areas around the country, present solid career opportunities, educational options, and qualities of life.  However, with such a well-developed, diverse and vibrant job market, coupled with great K-12 and public university systems, it appeared worth the risk. 

For now, we’re back to being renters with a continued drive to save enough for buying a house in the Bay Area. We’re sticking to our frugal roots, continuing to explore some credit card churning opportunities for travel, and doubling down on our penchant for saving. This combination will let us enjoy our lives (and feed our travel bug) and still fuel our down payment fund.

Why Moving Made Sense for Us

It could easily have been the case where we decided to stay in New Orleans.  My wife might not have had the opportunities for higher career upside in an extremely competitive market, but we would have had a solid foundation for raising our family.  However, despite my wife’s career limitations, I also would have felt those similar restrictions in the long-term. In the end, the calculus worked out more in favor of moving from a low- to high-cost of living area for the many reasons enumerated above.

Leaving New Orleans was a difficult decision for me personally because my family called it home for the last 3 decades.  Fortunately, as my parents near retirement, they have demonstrated their mobility and flexibility.

This leaves the door open to them relocating to somewhere on the West Coast to be nearer to us and also to my brother in Seattle.  Perhaps we’ll discover the best of both worlds: a growing economy well-suited to our career ambitions and a supportive family network nearby.

Moving to a high-cost of living area isn’t the right move for everybody, but for us, it’s definitely the smartest thing we could have done.

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