Coastal California is paradise for everything but your wallet. You can hit the waves and hike the mountains in the same day. World cuisines collide in novel deliciousness (LA's Kogi Taco Truck craze started when a Filipino-American chef who grew up devouring local Mexican food married into a Korean family). 13 years ago this month I had to dig my car out of snow to make it to my first date with my wife. We spent yesterday’s first date anniversary in shorts and sandals on the beach ten minutes from our home. It’s no surprise that folks want to live here.
Unfortunately, housing is costly, commutes can be soul-sucking, and many jobs offer lower salaries than other regions of the U.S. because employers feel the privilege of living here is a big part of your remuneration.
Given these realities, what unfair advantages can assist you in achieving Financial Independence (FI) in a High Cost Of Living (HCOL) area?
1. Choose a high income career / medical specialty. As Tevye from Fiddler on the Roof put it, “Would it spoil some vast eternal plan if I were a wealthy man?” If you are a competitive applicant who could envision a happy future in pediatrics or plastic surgery, would it hurt to choose plastics?
2. Be a business owner, not an employee. If someone’s going to profit from your hard work, it might as well be you. Once you’ve chosen a specialty, consider hanging up your own shingle or finding a group where you have the option to share equity in the business. It’s more work to take on the headaches of running a business, but the reward will offset the costs of life in paradise.
3. Halve your costs with a working better half. If being seated at the singles table at your niece’s Bat Mitzvah wasn't lousy enough, flying solo means paying more for housing (a roommate can lighten the rent). Pros: high-earning singles can live simple lifestyles and avoid exorbitant lifestyles without compromise. Cons: a working partner or spouse with similarly frugal values can mean half the fixed expenses and twice the pay. This only contributes if your partner remains in the workforce, so make every day "Keep Your Spouse At Work Day."
4. Reduce your parasite load. Have few kids, if any. Get a nice house plant instead.
5. If you breed, use educational arbitrage to choose housing. In LA, if the neighborhood is affordable, the public schools are undesirable, so you must factor in private school tuition costs. An expensive house with public school education may be cheaper in the long run than an affordable house with private school. Better still, rent a reasonable place in a great public school district and save the difference. For those committed to a parochial education, find an affordable school and an affordable house.
6. Live humbly. Maintaining a resident’s spending for 5-7 years after graduation is a huge win, allowing a newbie with a typical loan burden to kill educational debt and save a decent down payment for a home. The longer you wait to buy big ticket items, the slower you increase your spending, the wealthier you become. Cultivate cheap, active hobbies for your days off - hike instead of golfing! Rich older you will thank scrappy younger you for the foresight.
7. Don’t bring a U-Haul to your second date. Few of us would commit to move in with someone after one promising date. Strangely, few of us maintain this sane perspective when it comes to our first jobs out of residency, where first impressions are often misleading. Don’t buy a home until you’ve been in a new job for at 2-3 years. That’s about when you get to know the dysfunction of a place and understand if it’s tolerable, if leadership is fair, and if the ship you boarded is sinking or cruising. You don’t want to take out a jumbo mortgage only to discover you’ll be taking all night and weekend calls for the coming decade.
8. Drive a beater. Cars are classic depreciating assets, and nothing screams “watch my net worth plummet” like driving the latest make and model. If you can develop a sense of identity around projecting a contrarian image, you’ll excel in saving.
9. Manage your own portfolio. The minimal setup time and basic education is free courtesy of your local library, and the couple of hours a year you spend maintaining it will eventually amount to a ten to twenty thousand dollar hourly rate. It's never been easier or cheaper to avoid being a schmuck.
10. Invest, don’t speculate. Done correctly, investing is like watching paint dry. Look for excitement in the bedroom (with the caveat to beware of #4 above), not the market.
Take heart young newbie - this is a wish list. The more unfair advantages you possess now (and cultivate later), the better you’ll fare in your HCOL area. Despite the crapload of mistakes I’ve made along the way, the wife and I have still course-corrected our way to FI.
What other unfair advantages are helping you achieve Hi-FI?
Financial Literacy for The Newly Minted Physician