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Big_City_Living


Whisper Transcript | Transcript Only Page

00:00:00.000 | Hello everybody, it's Sam from Financial Samurai and in this episode we're going to talk about
00:00:05.320 | the benefits of big city living and why we should focus on big city living once again.
00:00:12.040 | So I haven't been this excited in a very, very long time.
00:00:16.200 | For years now, I've been trying to figure out a way to escape San Francisco because
00:00:21.200 | it's been too congested, too expensive, just and too competitive.
00:00:26.520 | You know, I've gone through the grind of living in New York City for a couple of years in
00:00:30.160 | San Francisco since 2001 and it hasn't been easy.
00:00:34.840 | You know, I thought that generating about $200,000 a year in passive income was good
00:00:40.080 | enough, and it took me 18 years to get there.
00:00:44.240 | And then I saw these articles from realtors and all that saying, well, actually you need
00:00:49.760 | to make more to afford the median home price in San Francisco.
00:00:53.400 | And the math comes out to about $300,000 a year.
00:00:56.800 | And so as parents with now two kids, trying to generate $300,000 a year in passive income
00:01:04.800 | to afford a middle class lifestyle in San Francisco just felt like too much.
00:01:08.760 | It was untenable.
00:01:10.920 | And I was very tired.
00:01:12.680 | So I was like, okay, let's try to re-strategize.
00:01:14.880 | We can try to make a little bit more money actively, but that takes away time from taking
00:01:20.720 | care of our kids.
00:01:22.840 | So the next best thing is to try to relocate to a lower cost area of the country.
00:01:27.280 | And that place is Honolulu.
00:01:29.000 | Honolulu is not exactly a cheap place to live, but it's about 30% cheaper than San Francisco.
00:01:35.900 | And so if it takes $300,000 a year to raise a family of four and live a middle class lifestyle
00:01:40.560 | in San Francisco and Honolulu is 30% cheaper, well then it only takes about $200,000 a year.
00:01:48.800 | And that's where we are right now.
00:01:50.280 | And I think we can make that work.
00:01:52.720 | What are your thoughts about big city living, Sydney?
00:01:56.480 | So we've lived here for a gosh, over a decade now, and I've come to love San Francisco,
00:02:01.920 | but it's changed a lot.
00:02:04.400 | And I would be thrilled if San Francisco wasn't as busy, you know, as it was before the pandemic
00:02:11.760 | started.
00:02:12.760 | It's been nice having less traffic on the road and just feeling like it's a little,
00:02:19.200 | a little more easygoing.
00:02:21.600 | Yeah, I remember one time I went to pick up my parents at the Oakland airport.
00:02:27.520 | They had to arrive at, I don't know, 645 PM.
00:02:30.540 | So that's rush hour traffic.
00:02:32.240 | So I had to go across the bridge, pick them up and it took an hour and a half and that
00:02:36.560 | was nuts.
00:02:38.020 | And then I had to go south sometimes to pick up some, you know, remodeling equipment for
00:02:43.240 | a bathroom and all that.
00:02:44.520 | And it always, it always scared me to leave during rush hour traffic.
00:02:49.360 | And now I can drive anywhere at any time and I don't feel the stress of traffic at all.
00:02:55.480 | And it feels great.
00:02:56.480 | And it also feels great, frankly, that there's not a lot of Uber drivers and Lyft drivers
00:03:01.880 | congesting the streets of San Francisco, because a lot of them would double park in major arteries
00:03:08.080 | and just not care about anybody else.
00:03:10.080 | Yeah, and the other interesting thing about these rideshare drivers is so many of them
00:03:14.280 | were driving in from at least an hour away.
00:03:19.120 | To make money for the whole day.
00:03:20.960 | So yeah, the irony is that they're supposed to relieve traffic.
00:03:25.720 | But in actuality, there was like 40,000 more cars that came into San Francisco because
00:03:33.040 | of Uber and Lyft.
00:03:34.680 | And they denied saying, oh, we're not causing any traffic jams.
00:03:37.520 | But you could just see it as plain as day for anybody driving.
00:03:41.200 | So there seems to be a mass hysteria now, or big hype from the media and from other
00:03:47.960 | people saying that big city living is dead or it's on the demise because of working from
00:03:54.640 | home.
00:03:55.640 | And I was thinking about that a lot because I know media, you know, financial samurai
00:04:00.360 | is a type of media.
00:04:02.120 | And I know how media likes to, you know, whip people up in a frenzy and create this kind
00:04:07.000 | of hysteria so more people can read.
00:04:09.920 | And for those who don't live in big cities, which is probably like half the population,
00:04:16.280 | I think there's like this, aha, it's our turn now where we're going to, you know, rule the
00:04:22.320 | world.
00:04:23.400 | And I feel that there's, it's just gotten overboard again now about the demise of big
00:04:28.520 | cities.
00:04:29.520 | What do you think?
00:04:30.520 | There's no way big cities are going to go away.
00:04:32.440 | I think as you're saying, big media, the news you see on TV and online, they're trying to
00:04:40.640 | get people to read what they're saying.
00:04:44.120 | But it's overblown.
00:04:45.120 | There's no way the cities are going to go away.
00:04:48.760 | So I'm really pumped because again, I've been trying for years to figure out a way to live
00:04:53.480 | a better lifestyle with the income and the wealth that we have.
00:04:57.820 | So one way is to go, you know, eventually go to Honolulu.
00:05:00.760 | And that plan was to go to Honolulu in 2022 when our son is eligible for kindergarten,
00:05:05.920 | we'd apply to various schools there, or maybe go to a public school.
00:05:09.480 | And then we'll hopefully stick with those schools, which are actually cheaper than schools
00:05:14.200 | here in San Francisco.
00:05:15.520 | And they're from K to 12.
00:05:16.520 | And it'll be a great lifestyle.
00:05:18.400 | I would love to be in Honolulu for 12 years.
00:05:21.600 | Oh, yeah, it's a fantastic place to go.
00:05:24.960 | We've been there so many times.
00:05:28.160 | And it's very family friendly.
00:05:29.480 | Yeah.
00:05:30.480 | And I also love the idea of getting into a school at kindergarten that you can stay at
00:05:36.600 | through 12th grade.
00:05:37.880 | That's huge.
00:05:38.880 | Because San Francisco does not offer that.
00:05:41.120 | No, it's like public or private.
00:05:42.920 | You know, you got elementary and then you got middle school and then you got high schools
00:05:46.000 | like what a pain.
00:05:47.000 | It causes so much stress to parents in the city for public and private.
00:05:52.080 | Yeah.
00:05:53.080 | And I understand the whole goal of social engineering and busing across town and stuff
00:05:57.320 | like that.
00:05:58.320 | However, there has to be a little bit better situation a system because it's clearly not
00:06:03.280 | working because the private schools have just gone the private school route and the public
00:06:07.640 | school it's total segregation.
00:06:10.640 | So instead of trying to make more and moving the entire family to Honolulu, I figured,
00:06:18.400 | wow, with this pandemic and the media hype and all that, we might not have to do anything
00:06:23.680 | at all.
00:06:24.680 | Sometimes the best move is to do nothing.
00:06:28.200 | And if it is true that there's gonna be a mass exodus of people out of San Francisco,
00:06:34.160 | well it solves our biggest problems and our biggest issues of living in San Francisco,
00:06:39.840 | right?
00:06:40.840 | Housing prices might soften.
00:06:41.840 | Okay, that's not great for our real estate portfolio, but it allows us to upgrade to
00:06:46.680 | a nicer home because we have a larger family and if we want to get help and so forth, it'll
00:06:50.840 | be much more affordable.
00:06:53.280 | That's great.
00:06:54.280 | There'll be less traffic and congestion.
00:06:57.320 | There will be less competition for schools.
00:06:59.400 | And I think this is one of the examples that really hit home for us.
00:07:04.180 | We applied to, I think, seven preschools.
00:07:07.520 | Yeah.
00:07:08.520 | And we got rejected to six of them.
00:07:10.240 | I know.
00:07:11.240 | I didn't expect that to actually happen, but it did.
00:07:15.760 | And the reason why we're okay with it is because we got accepted to our neighborhood preschool
00:07:20.240 | five minutes away from us, which we would like a lot.
00:07:23.120 | And we got accepted to that school quite early.
00:07:25.280 | So the rejections started rolling in six months, three to six months after we had already gotten
00:07:31.680 | accepted.
00:07:32.680 | Right.
00:07:33.680 | But it was just, we wanted to go through the process and we were curious to see whether,
00:07:37.480 | you know, two stay at home parents would be able to get accepted to these preschools.
00:07:42.880 | And granted, these are some of the best preschools, probably the best preschools in San Francisco,
00:07:47.220 | but to get rejected systematically one after the other was very eye opening.
00:07:53.480 | It was kind of like a harbinger for what's to come because preschool, if it was that
00:07:58.600 | hard, well, it's probably going to be very hard to get into grade school and then middle
00:08:03.520 | school and then high school.
00:08:04.960 | One of the reasons why I was a high school, private high school tennis coach was because
00:08:09.320 | I wanted to understand the system and see who are these people getting in.
00:08:13.240 | And it's quite a homogenous group, socioeconomic and race wise.
00:08:18.380 | So as two unemployed parents, stay at home parents, we're definitely at a disadvantage
00:08:23.560 | and we would need to use connections and money, you know, for donations and all that to try
00:08:28.740 | to get in.
00:08:29.740 | And I don't like that system.
00:08:31.120 | It feels rigged and it is rigged.
00:08:33.520 | What are your thoughts?
00:08:35.400 | I agree with everything you've talked about and schools shouldn't be this hard or stressful
00:08:40.600 | to get into.
00:08:41.600 | That's one of San Francisco's weaknesses.
00:08:43.960 | And I think that's why historically families have moved out of the city when their kids
00:08:51.000 | are approaching school age.
00:08:53.960 | And the pandemic is changing a lot.
00:08:56.120 | And as we talked about in a different podcast, which you can check out in the stream, we
00:09:01.680 | have decided to homeschool our son for this upcoming preschool year.
00:09:06.040 | Yeah, and we'll see how it goes.
00:09:07.720 | There's two of us.
00:09:08.720 | So it's not like one person has all the duty.
00:09:11.340 | If we divide, you know, let's say it's two hours per parent.
00:09:14.080 | Oh, a lot can be taught in four hours.
00:09:16.520 | I don't know if kids can spend more than four hours learning anyway.
00:09:19.560 | You do four hours and then you play for a couple hours, go eat, go to the bathroom.
00:09:24.240 | Yeah.
00:09:25.240 | And I mean, amongst that for a three year old, a lot of a lot of the teaching is involved
00:09:30.440 | with play.
00:09:31.440 | It's not rigorous.
00:09:32.440 | Yeah.
00:09:33.440 | So one of the benefits of all this hype of the death of big cities and, you know, people
00:09:39.200 | going to smaller cities is that competition to get into school for your children will
00:09:44.080 | be less fierce.
00:09:45.080 | And it's not just your kids, but yeah, actually, it's your kids.
00:09:48.440 | Like after they graduate from high school, maybe they want to go to a school like Berkeley,
00:09:53.640 | Stanford, Harvard, MIT, Boston College, Columbia, NYU, UCSF, Johns Hopkins, USC, UCLA.
00:10:00.040 | All these schools are located in big cities.
00:10:02.760 | And so if more people flee big cities and if more people are scared of living in big
00:10:07.320 | cities, then there's just less competition.
00:10:11.520 | And for example, our preschool is actually really hard to get into.
00:10:15.200 | So supposedly it's like 2% acceptance rate, whatever it is, it's not easy.
00:10:20.880 | And there are some spots available now, which there were never any spots before.
00:10:25.640 | So it's clearly great that there's less competition for the faithful who stay or the people who
00:10:32.120 | can stay.
00:10:34.200 | Another benefit is really housing affordability for teachers, social workers, nonprofit workers,
00:10:41.720 | the very fabric of America and the middle class.
00:10:44.640 | I don't want to see the middle class get pushed away and have to commute 30 minutes to an
00:10:49.680 | hour just to find a job in the big city.
00:10:53.060 | That really bummed me out, which is why I tried to provide subsidized rent for our preschool
00:10:58.400 | teachers and too bad it didn't work out.
00:11:01.000 | But if you have falling rents, I mean, that's great.
00:11:03.960 | It allows more people to afford to live in the city.
00:11:06.940 | And when there's more diversity and more support, I think that's a great thing.
00:11:12.960 | And another benefit is the opportunity to upgrade your housing.
00:11:16.640 | So we've always kept our housing expense very, very low.
00:11:20.560 | It's a fundamental principle to achieving financial independence to keep your housing
00:11:24.680 | to below 10 percent of your gross income.
00:11:28.320 | And we've kind of gone to the extreme to that, frankly.
00:11:31.480 | We paid cash for our previous house.
00:11:33.520 | The cost of owning our home is less than I think it's like less than two or three percent
00:11:39.140 | of our gross income.
00:11:40.720 | So we don't really even think about it.
00:11:43.240 | But on the flip side, we've been very conservative with the way we live, our housing situation.
00:11:50.400 | And with this pandemic, you know, there's not a lot of opportunity to buy homes for
00:11:54.480 | under two million dollars in San Francisco.
00:11:56.120 | It's still really competitive because mortgage rates are so low.
00:11:59.680 | But once you get above like the two point five million dollar range, three million dollar
00:12:02.960 | range, there's more opportunity.
00:12:05.760 | And this could be an opportunity for us to expand our house now that we have two kids
00:12:11.040 | and if we hire help.
00:12:12.680 | And what are your thoughts about buying a nicer, larger property to live a better life?
00:12:18.360 | It's really exciting to think about that, especially with the amount of time that we're
00:12:22.400 | spending at home nowadays, you know, and it's fun to see what's out there for sure.
00:12:28.480 | And I've really fallen in love with San Francisco.
00:12:30.960 | I loved it when we moved here and I still love it today.
00:12:36.240 | Yeah, we do have friends.
00:12:38.040 | Actually, we have several friends who are all upgrading their homes to buy bigger homes,
00:12:43.960 | more space for work from home and for their kids, partly because mortgage rates are so
00:12:49.280 | low, but also because there's been so much wealth created in the stock market.
00:12:55.480 | The Nasdaq is up over 35 percent in 2020.
00:13:00.320 | Can you imagine that?
00:13:02.080 | I don't know if the Nasdaq would be up so much if there wasn't a pandemic.
00:13:05.200 | How ironic is that?
00:13:06.400 | If there wasn't a pandemic, maybe the Nasdaq would have been up, I don't know, 10 percent,
00:13:10.840 | 15 percent.
00:13:11.840 | But we're not talking about up 35 percent.
00:13:14.280 | So if you are just crushing it in your career, you're making a lot of money in your company
00:13:18.800 | stock or your portfolio, you're probably going to convert a lot of it or some of it into
00:13:24.100 | living a better life, especially since we're spending more time at home.
00:13:27.940 | So overall, I feel that there's less stress.
00:13:31.080 | You know, there's less congestion.
00:13:33.800 | There's less competition with more professional and personal opportunities and with more schooling
00:13:39.560 | options for your children and higher affordability.
00:13:42.600 | All this leads to less stress, less anxiety and more livability.
00:13:47.440 | So I believe that big city living has become more livable.
00:13:52.100 | Just look in New York City.
00:13:53.120 | There's now 67 miles of open streets where there are no cars.
00:13:58.360 | Families can just ride their bikes, do their scooters, walk without the stress of cars.
00:14:04.000 | It's just a much better pace of life.
00:14:07.480 | And I really like that.
00:14:08.960 | And it is my belief that there is going to be a V-shaped recovery in the desire and the
00:14:14.960 | demand for big city living over the next couple of years.
00:14:18.360 | It's the same thing we've seen everywhere in terms of housing demand, retail sales,
00:14:24.120 | everything, all these economic indicators.
00:14:26.160 | If you take a look, you've seen a V-shaped recovery.
00:14:29.420 | And I think that's the same thing is going to happen with guarding big city living.
00:14:33.800 | I have friends who have gone, who've had the ability to go to a smaller city, smaller state.
00:14:38.920 | They just flew with their family for three months.
00:14:42.240 | And you know what they told me?
00:14:43.240 | They said, I enjoyed it, but after three months, it's kind of like after a summer vacation,
00:14:47.780 | three months in high school, you kind of get bored and you want to get back to where your
00:14:51.320 | friends are and where your network is and just your old haunts.
00:14:56.120 | And I think that's going to happen again.
00:14:57.480 | It's nice to go away for a while, but to establish roots and to build relationships with new
00:15:02.680 | people takes years, if not decades, if not generations.
00:15:07.200 | So when the inevitable rebound comes, if you have left the big city where your employment
00:15:13.160 | opportunity is, it may be very hard to get back in because the people who stayed will
00:15:19.120 | soak up the existing housing inventory and the existing job opportunities.
00:15:25.240 | Here's one commenter who said, I'm definitely staying in a big city as well.
00:15:29.360 | This is my time to get ahead by showing my loyalty and commitment to the firm and to
00:15:33.120 | the area.
00:15:34.200 | The people who leave are carefully monitored and recorded by management.
00:15:39.000 | Their assumption is that those who leave do not have the grit to stick things out until
00:15:44.000 | the virus is under control.
00:15:46.280 | As such, they were mainly here for the money.
00:15:49.560 | The opportunity for people who stay to grow is really tremendous.
00:15:54.200 | And what do you think about that in terms of management monitoring the employees who
00:16:00.200 | flee the area or their headquarters?
00:16:05.200 | I think management pays a lot of attention to their employees that employees probably
00:16:10.800 | don't realize or even think about.
00:16:12.840 | So I think that commenter is very accurate.
00:16:15.680 | Right, because we all have a tendency to try to take care of the people who we like the
00:16:21.520 | best, who we see the most, who stick around the most and who just don't flee.
00:16:27.000 | You know, and look, people fleeing is probably a bad word.
00:16:31.960 | People who leave.
00:16:33.400 | People have legitimate reasons to leave, whether it's family, affordability or whatnot.
00:16:37.800 | We shouldn't punish people for leaving.
00:16:40.600 | However, you know, if you're a boss, you're going to take care of the people who stayed
00:16:45.720 | behind.
00:16:46.720 | Right.
00:16:47.720 | I think that's just natural the way we do things.
00:16:51.200 | So just be careful in terms of your career opportunity.
00:16:54.680 | If you are planning on leaving, you know, and living wherever you want to live.
00:16:58.440 | Great.
00:16:59.440 | Go for it.
00:17:00.440 | That's a win win.
00:17:01.440 | But just know that you might be putting yourself at a disadvantage when there is that rebound
00:17:07.160 | because the people who stay will be taken care of first.
00:17:09.760 | And the other thing to note is that you might experience a income cut.
00:17:14.400 | Yeah.
00:17:15.400 | You know, I think Facebook said that they're going to cut incomes if you leave the Bay
00:17:18.980 | Area and go to a lower cost area.
00:17:20.760 | I know my former employer had a similar policy where we had offices in North Carolina, I
00:17:27.880 | think it was.
00:17:28.880 | And so if you were to move from New York or San Francisco to the office down there, they
00:17:35.040 | would give you a salary cut.
00:17:36.640 | Do you know how much?
00:17:38.040 | I don't know the details.
00:17:40.020 | They never revealed the specifics, but they did say, you know, hey, we have job opportunities
00:17:44.560 | here if you want to relocate.
00:17:46.560 | However, you will have to get an adjustment.
00:17:50.480 | They called it an adjustment to your salary due to the lower cost of living in that area.
00:17:57.640 | So you should ask your employer before you move if there is a salary cut at all.
00:18:03.120 | And if there's not, it could be a great arbitrage opportunity for you.
00:18:08.200 | But again, the career advancement opportunities.
00:18:11.160 | Just be careful.
00:18:12.160 | You really need to put in more effort if you're going to go remote and you're going to be
00:18:16.720 | away from the company headquarters to put more face time in, unfortunately, to stay
00:18:22.360 | top of mind.
00:18:24.600 | In conclusion, I think the demise of big city living is overblown.
00:18:29.800 | I think there's going to be a lot of opportunity, whether it's investing in real estate, rental
00:18:34.800 | properties, buying a larger home or career opportunities that are going to be had over
00:18:40.080 | the next one to two years, because I think inevitably there's going to be a V-shaped
00:18:44.640 | recovery.
00:18:45.880 | For so long, I've been planning on escaping San Francisco because it was too competitive,
00:18:50.360 | too crowded and too expensive.
00:18:53.040 | With some people leaving and the media instilling fear of a mass exodus, I think I can now stay
00:18:59.140 | put for longer and be happy to stay put for longer.
00:19:02.480 | I mean, it's just it's kind of pain to move, even if you're moving.
00:19:07.440 | It's a lot.
00:19:08.440 | The more as your family grows, the more of a pain it becomes to move.
00:19:12.520 | You just have more stuff.
00:19:13.920 | Yeah.
00:19:14.920 | And, you know, moving to a different condo or house within the city is one thing, but
00:19:19.440 | moving to a different state and to a different city with a family is another thing.
00:19:23.840 | Yeah, it's a lot.
00:19:25.720 | The logistics of moving is going to be really, really painful.
00:19:28.880 | I think I'd probably just try to sell like our furniture, our electronics and everything
00:19:33.740 | and just keep the valuables and ship it.
00:19:37.120 | Right.
00:19:38.280 | Or bring the packable valuables on the airplane.
00:19:42.440 | Are you kidding me?
00:19:44.440 | Just two suitcases each is not enough.
00:19:46.520 | Well, not for a family with two kids, but I think people hire moving companies and they
00:19:53.280 | use insurance, you know, to protect their belongings.
00:19:59.800 | People do it all the time.
00:20:00.800 | It could be done, but it's not maybe not an enjoyable process.
00:20:06.720 | It's definitely not enjoyable process.
00:20:08.960 | And then we'd have to find a new home and so forth.
00:20:11.160 | So I'm really happy that we're there.
00:20:15.840 | There's less of a need to move.
00:20:17.200 | You know, we already had a plan of moving in 2022, but now maybe it's not 2022.
00:20:23.160 | Maybe it's 2025 or 2030 so that both our kids are old enough so that they can listen to
00:20:30.320 | direction and not, you know, kill themselves wandering off and they're just more independent.
00:20:36.800 | Yeah.
00:20:37.800 | So that is very interesting.
00:20:40.080 | This whole situation right now is up in the air.
00:20:43.320 | But I like big city living.
00:20:45.480 | One thing you got to realize about big city living is that if you don't need to go to
00:20:49.080 | a day job while you're in a big city, it is an incredible, incredible place because you
00:20:55.040 | can roam around much more freely Monday through Friday with not a lot of crowds.
00:20:59.800 | And there's just so much entertainment options, food options, cultural options, scenic options.
00:21:04.560 | I mean, there's a reason why there's millions of tourists who come to San Francisco every
00:21:09.400 | single year or they used to.
00:21:12.040 | It's because it's an amazing city.
00:21:14.280 | Yeah, for sure.
00:21:15.280 | It's scenic.
00:21:16.280 | There's just a lot to do and there's a lot of history and so forth.
00:21:19.120 | So if you don't have to have a day job, big city living is even better because it is that
00:21:24.600 | grind of work, that constant pressure to perform and to compete with your peers and so forth
00:21:31.960 | that really just brings you down, beats you down.
00:21:35.520 | And it beat me down.
00:21:37.520 | I admit I couldn't handle it after about 13 years.
00:21:40.000 | I want to do something new.
00:21:42.000 | So I do want everyone to just hold their horses and think strategically, whether it's opening
00:21:49.680 | up a business in a big city or buying real estate or starting your career.
00:21:54.480 | That's not dead, folks.
00:21:55.720 | In fact, I think it's better than ever.
00:21:58.120 | Ironically, I would pay more to live in San Francisco, more to live in New York if it
00:22:02.800 | was less crowded.
00:22:04.480 | Now obviously, if enough people leave, there's going to be a depression in asset prices,
00:22:10.880 | for example, real estate.
00:22:12.920 | But it's funny because the people who stay and I know many people who stay are all looking
00:22:17.960 | to upgrade and are actually looking to buy clusters of real estate so that they can build
00:22:24.080 | a little community.
00:22:25.080 | And in the past, it wasn't so easy, but now it is becoming easier.
00:22:29.480 | All right, folks, we're going to wrap it up because our little ones need our attention
00:22:34.640 | and love.
00:22:35.640 | Hopefully, you enjoyed this podcast.
00:22:38.120 | And if you think big city living is on the decline, let us know in the comments, in the
00:22:44.120 | post or just shoot us an email or a shout out on social media.
00:22:49.200 | And we'll see you around.
00:22:50.200 | Thanks, everybody.