I describe myself as an unrepentant Californian. I grew up hiking along coastal foothills and spent my youth learning respect for the Pacific Ocean. I'm at my happiest sporting shorts and sandals. When I wanted to impress girls in high school, I'd wear my good flannel (that was really a thing). I love it here.
When you live in Eden, you have to pay the gardener's bill.
At the same time, living in a High Cost Of Living (HCOL) state like California is an enormous financial strain. The physical beauty of the environment (and, depending on your tastes, the people) are a draw for many, but paradise comes at a steep price.
How do those of us who live here pull it off?
Mostly by the skin of our teeth.
Also, by adhering to a few rules of thumb.
Golden Rules For Living In The Golden State
- Every day is bring your spouse to work day. Meaning your spouse will need to work in one capacity or another, either generating income or holding down the family fort to save on child care costs. Even trophy husbands and wives are expected to work in California.
- Know why you live here. Is your family in the area? Are you a tech or media person where a region of California offers you the best chance for career growth? Understand what brought you here, and periodically reassess if it's enough to keep you here. There are lots of wonderful places in the world more affordable than California.
- Save like a doctor. With great incomes come the need for great tax-deferred contributions. If you are not maxing out your 401k, backdoor Roth, and any other pre-tax vehicles available to you, both Uncle Sam and the State of California are consuming a bigger piece of your pie than they legally need to get. Given a ~10% state income tax rate at most physician income levels, you'll soon realize it's called the Golden State because it will conspire to take your gold. Give the minimum required by law, but don't leave a tip.
- Do It Yourself. Doctors in California snake toilets and spackle walls. They conduct small home repairs and even minor remodels. While I dabble in minor toolbelt machismo, I consider my greatest accomplishment having become a DIY investor who learned to manage my own portfolio. Mastering this big expense will save me hundreds of thousands of dollars over my investing lifetime.
- Eat what you kill. If given the choice or opportunity, be a business owner and not an employee. The only reason you are offered W-2 employment is because your employer is making a profit above the cost of paying you. Preserve that profit for yourself if at all possible by pursuing the unicorn job opportunities that will enable it.
- Leverage the public schools available to you. Sometimes this may mean buying a less nice, more expensive home in the right district. It will hurt to pull the trigger, but do it - the home might preserve its value, but money spent on private school will not. Of course there exist perfectly legitimate reasons for people to enroll their children in private school - the problem is that in California, it's hard to afford after all the other expenses are factored in.
- Don't buy an unreal estate. The size of your house will be inversely proportional to the size of your net worth. If you are a size matters kind of person, allow me to assure you that the latter measure is of far greater consequence than the former. I recently saw a dated 1600 square foot 3 bedroom/1 bath teardown bungalow with original 1950s decor on a postage stamp sized lot listed in excess of a million dollars in a coastal area with good public schools.
- Be selective with your pleasures out of proportion. Find activities you love to do that don't cost an arm and a leg, if possible. Expensive weekend warrior hobbies are for physicians who earn like you but live in affordable non-coastal states. Your buddy from residency who took the job in Texas gets to board his steed at the polo club - you focus on captaining the weekend ultimate frisbee team. California hobbies should include hiking, cycling, and ocean sports, which combine fitness with low financial barriers to entry. Surfing would be a yes. Sailing? Maybe in a couple of decades, Popeye.
- Don't assume you'll always love your job. Some physicians opt to buy the doctor house, pop the kids into private school, and skimp on the retirement savings. They put nose to grindstone and create a retirement plan that is based on working 70 hour weeks until age 70. "I love what I do," they sing, as if that will magically inoculate them against burnout, illness, and the other plagues that routinely force physicians to take a detour from the work force. By all means plan to work until age 70, but save for retirement as if you'll be forced to stop working by age 55. If you get lucky, you'll have the umbrella and it won't rain.
- Remember you can always course-correct. Sometimes wrong, never uncertain characterizes a lot of decisions we make in medicine where immediate action is essential. Problems arise when a wrong decision is compounded by an inability to recognize an error and appropriately alter your trajectory. Bought too much house? Sell and right-size your living situation. A physician salary can forgive many mistakes, but only if you take the initiative to stop and redirect.
Physicians living in California will endure significant trade-offs for the pleasure of residing here. The more of these ten rules you use to guide your spending decisions, the likelier those trade-offs will prove worthwhile.
What rules would you add that I left off the list?