Hello everybody, it's Sam from Financial Samurai and in this episode we're going to talk about the benefits of big city living and why we should focus on big city living once again. So I haven't been this excited in a very, very long time. For years now, I've been trying to figure out a way to escape San Francisco because it's been too congested, too expensive, just and too competitive.

You know, I've gone through the grind of living in New York City for a couple of years in San Francisco since 2001 and it hasn't been easy. You know, I thought that generating about $200,000 a year in passive income was good enough, and it took me 18 years to get there.

And then I saw these articles from realtors and all that saying, well, actually you need to make more to afford the median home price in San Francisco. And the math comes out to about $300,000 a year. And so as parents with now two kids, trying to generate $300,000 a year in passive income to afford a middle class lifestyle in San Francisco just felt like too much.

It was untenable. And I was very tired. So I was like, okay, let's try to re-strategize. We can try to make a little bit more money actively, but that takes away time from taking care of our kids. So the next best thing is to try to relocate to a lower cost area of the country.

And that place is Honolulu. Honolulu is not exactly a cheap place to live, but it's about 30% cheaper than San Francisco. And so if it takes $300,000 a year to raise a family of four and live a middle class lifestyle in San Francisco and Honolulu is 30% cheaper, well then it only takes about $200,000 a year.

And that's where we are right now. And I think we can make that work. What are your thoughts about big city living, Sydney? So we've lived here for a gosh, over a decade now, and I've come to love San Francisco, but it's changed a lot. And I would be thrilled if San Francisco wasn't as busy, you know, as it was before the pandemic started.

It's been nice having less traffic on the road and just feeling like it's a little, a little more easygoing. Yeah, I remember one time I went to pick up my parents at the Oakland airport. They had to arrive at, I don't know, 645 PM. So that's rush hour traffic.

So I had to go across the bridge, pick them up and it took an hour and a half and that was nuts. And then I had to go south sometimes to pick up some, you know, remodeling equipment for a bathroom and all that. And it always, it always scared me to leave during rush hour traffic.

And now I can drive anywhere at any time and I don't feel the stress of traffic at all. And it feels great. And it also feels great, frankly, that there's not a lot of Uber drivers and Lyft drivers congesting the streets of San Francisco, because a lot of them would double park in major arteries and just not care about anybody else.

Yeah, and the other interesting thing about these rideshare drivers is so many of them were driving in from at least an hour away. To make money for the whole day. So yeah, the irony is that they're supposed to relieve traffic. But in actuality, there was like 40,000 more cars that came into San Francisco because of Uber and Lyft.

And they denied saying, oh, we're not causing any traffic jams. But you could just see it as plain as day for anybody driving. So there seems to be a mass hysteria now, or big hype from the media and from other people saying that big city living is dead or it's on the demise because of working from home.

And I was thinking about that a lot because I know media, you know, financial samurai is a type of media. And I know how media likes to, you know, whip people up in a frenzy and create this kind of hysteria so more people can read. And for those who don't live in big cities, which is probably like half the population, I think there's like this, aha, it's our turn now where we're going to, you know, rule the world.

And I feel that there's, it's just gotten overboard again now about the demise of big cities. What do you think? There's no way big cities are going to go away. I think as you're saying, big media, the news you see on TV and online, they're trying to get people to read what they're saying.

But it's overblown. There's no way the cities are going to go away. So I'm really pumped because again, I've been trying for years to figure out a way to live a better lifestyle with the income and the wealth that we have. So one way is to go, you know, eventually go to Honolulu.

And that plan was to go to Honolulu in 2022 when our son is eligible for kindergarten, we'd apply to various schools there, or maybe go to a public school. And then we'll hopefully stick with those schools, which are actually cheaper than schools here in San Francisco. And they're from K to 12.

And it'll be a great lifestyle. I would love to be in Honolulu for 12 years. Oh, yeah, it's a fantastic place to go. We've been there so many times. And it's very family friendly. Yeah. And I also love the idea of getting into a school at kindergarten that you can stay at through 12th grade.

That's huge. Because San Francisco does not offer that. No, it's like public or private. You know, you got elementary and then you got middle school and then you got high schools like what a pain. It causes so much stress to parents in the city for public and private. Yeah.

And I understand the whole goal of social engineering and busing across town and stuff like that. However, there has to be a little bit better situation a system because it's clearly not working because the private schools have just gone the private school route and the public school it's total segregation.

So instead of trying to make more and moving the entire family to Honolulu, I figured, wow, with this pandemic and the media hype and all that, we might not have to do anything at all. Sometimes the best move is to do nothing. And if it is true that there's gonna be a mass exodus of people out of San Francisco, well it solves our biggest problems and our biggest issues of living in San Francisco, right?

Housing prices might soften. Okay, that's not great for our real estate portfolio, but it allows us to upgrade to a nicer home because we have a larger family and if we want to get help and so forth, it'll be much more affordable. That's great. There'll be less traffic and congestion.

There will be less competition for schools. And I think this is one of the examples that really hit home for us. We applied to, I think, seven preschools. Yeah. And we got rejected to six of them. I know. I didn't expect that to actually happen, but it did. And the reason why we're okay with it is because we got accepted to our neighborhood preschool five minutes away from us, which we would like a lot.

And we got accepted to that school quite early. So the rejections started rolling in six months, three to six months after we had already gotten accepted. Right. But it was just, we wanted to go through the process and we were curious to see whether, you know, two stay at home parents would be able to get accepted to these preschools.

And granted, these are some of the best preschools, probably the best preschools in San Francisco, but to get rejected systematically one after the other was very eye opening. It was kind of like a harbinger for what's to come because preschool, if it was that hard, well, it's probably going to be very hard to get into grade school and then middle school and then high school.

One of the reasons why I was a high school, private high school tennis coach was because I wanted to understand the system and see who are these people getting in. And it's quite a homogenous group, socioeconomic and race wise. So as two unemployed parents, stay at home parents, we're definitely at a disadvantage and we would need to use connections and money, you know, for donations and all that to try to get in.

And I don't like that system. It feels rigged and it is rigged. What are your thoughts? I agree with everything you've talked about and schools shouldn't be this hard or stressful to get into. That's one of San Francisco's weaknesses. And I think that's why historically families have moved out of the city when their kids are approaching school age.

And the pandemic is changing a lot. And as we talked about in a different podcast, which you can check out in the stream, we have decided to homeschool our son for this upcoming preschool year. Yeah, and we'll see how it goes. There's two of us. So it's not like one person has all the duty.

If we divide, you know, let's say it's two hours per parent. Oh, a lot can be taught in four hours. I don't know if kids can spend more than four hours learning anyway. You do four hours and then you play for a couple hours, go eat, go to the bathroom.

Yeah. And I mean, amongst that for a three year old, a lot of a lot of the teaching is involved with play. It's not rigorous. Yeah. So one of the benefits of all this hype of the death of big cities and, you know, people going to smaller cities is that competition to get into school for your children will be less fierce.

And it's not just your kids, but yeah, actually, it's your kids. Like after they graduate from high school, maybe they want to go to a school like Berkeley, Stanford, Harvard, MIT, Boston College, Columbia, NYU, UCSF, Johns Hopkins, USC, UCLA. All these schools are located in big cities. And so if more people flee big cities and if more people are scared of living in big cities, then there's just less competition.

And for example, our preschool is actually really hard to get into. So supposedly it's like 2% acceptance rate, whatever it is, it's not easy. And there are some spots available now, which there were never any spots before. So it's clearly great that there's less competition for the faithful who stay or the people who can stay.

Another benefit is really housing affordability for teachers, social workers, nonprofit workers, the very fabric of America and the middle class. I don't want to see the middle class get pushed away and have to commute 30 minutes to an hour just to find a job in the big city. That really bummed me out, which is why I tried to provide subsidized rent for our preschool teachers and too bad it didn't work out.

But if you have falling rents, I mean, that's great. It allows more people to afford to live in the city. And when there's more diversity and more support, I think that's a great thing. And another benefit is the opportunity to upgrade your housing. So we've always kept our housing expense very, very low.

It's a fundamental principle to achieving financial independence to keep your housing to below 10 percent of your gross income. And we've kind of gone to the extreme to that, frankly. We paid cash for our previous house. The cost of owning our home is less than I think it's like less than two or three percent of our gross income.

So we don't really even think about it. But on the flip side, we've been very conservative with the way we live, our housing situation. And with this pandemic, you know, there's not a lot of opportunity to buy homes for under two million dollars in San Francisco. It's still really competitive because mortgage rates are so low.

But once you get above like the two point five million dollar range, three million dollar range, there's more opportunity. And this could be an opportunity for us to expand our house now that we have two kids and if we hire help. And what are your thoughts about buying a nicer, larger property to live a better life?

It's really exciting to think about that, especially with the amount of time that we're spending at home nowadays, you know, and it's fun to see what's out there for sure. And I've really fallen in love with San Francisco. I loved it when we moved here and I still love it today.

Yeah, we do have friends. Actually, we have several friends who are all upgrading their homes to buy bigger homes, more space for work from home and for their kids, partly because mortgage rates are so low, but also because there's been so much wealth created in the stock market. The Nasdaq is up over 35 percent in 2020.

Can you imagine that? I don't know if the Nasdaq would be up so much if there wasn't a pandemic. How ironic is that? If there wasn't a pandemic, maybe the Nasdaq would have been up, I don't know, 10 percent, 15 percent. But we're not talking about up 35 percent.

So if you are just crushing it in your career, you're making a lot of money in your company stock or your portfolio, you're probably going to convert a lot of it or some of it into living a better life, especially since we're spending more time at home. So overall, I feel that there's less stress.

You know, there's less congestion. There's less competition with more professional and personal opportunities and with more schooling options for your children and higher affordability. All this leads to less stress, less anxiety and more livability. So I believe that big city living has become more livable. Just look in New York City.

There's now 67 miles of open streets where there are no cars. Families can just ride their bikes, do their scooters, walk without the stress of cars. It's just a much better pace of life. And I really like that. And it is my belief that there is going to be a V-shaped recovery in the desire and the demand for big city living over the next couple of years.

It's the same thing we've seen everywhere in terms of housing demand, retail sales, everything, all these economic indicators. If you take a look, you've seen a V-shaped recovery. And I think that's the same thing is going to happen with guarding big city living. I have friends who have gone, who've had the ability to go to a smaller city, smaller state.

They just flew with their family for three months. And you know what they told me? They said, I enjoyed it, but after three months, it's kind of like after a summer vacation, three months in high school, you kind of get bored and you want to get back to where your friends are and where your network is and just your old haunts.

And I think that's going to happen again. It's nice to go away for a while, but to establish roots and to build relationships with new people takes years, if not decades, if not generations. So when the inevitable rebound comes, if you have left the big city where your employment opportunity is, it may be very hard to get back in because the people who stayed will soak up the existing housing inventory and the existing job opportunities.

Here's one commenter who said, I'm definitely staying in a big city as well. This is my time to get ahead by showing my loyalty and commitment to the firm and to the area. The people who leave are carefully monitored and recorded by management. Their assumption is that those who leave do not have the grit to stick things out until the virus is under control.

As such, they were mainly here for the money. The opportunity for people who stay to grow is really tremendous. And what do you think about that in terms of management monitoring the employees who flee the area or their headquarters? I think management pays a lot of attention to their employees that employees probably don't realize or even think about.

So I think that commenter is very accurate. Right, because we all have a tendency to try to take care of the people who we like the best, who we see the most, who stick around the most and who just don't flee. You know, and look, people fleeing is probably a bad word.

People who leave. People have legitimate reasons to leave, whether it's family, affordability or whatnot. We shouldn't punish people for leaving. However, you know, if you're a boss, you're going to take care of the people who stayed behind. Right. I think that's just natural the way we do things. So just be careful in terms of your career opportunity.

If you are planning on leaving, you know, and living wherever you want to live. Great. Go for it. That's a win win. But just know that you might be putting yourself at a disadvantage when there is that rebound because the people who stay will be taken care of first.

And the other thing to note is that you might experience a income cut. Yeah. You know, I think Facebook said that they're going to cut incomes if you leave the Bay Area and go to a lower cost area. I know my former employer had a similar policy where we had offices in North Carolina, I think it was.

And so if you were to move from New York or San Francisco to the office down there, they would give you a salary cut. Do you know how much? I don't know the details. They never revealed the specifics, but they did say, you know, hey, we have job opportunities here if you want to relocate.

However, you will have to get an adjustment. They called it an adjustment to your salary due to the lower cost of living in that area. So you should ask your employer before you move if there is a salary cut at all. And if there's not, it could be a great arbitrage opportunity for you.

But again, the career advancement opportunities. Just be careful. You really need to put in more effort if you're going to go remote and you're going to be away from the company headquarters to put more face time in, unfortunately, to stay top of mind. In conclusion, I think the demise of big city living is overblown.

I think there's going to be a lot of opportunity, whether it's investing in real estate, rental properties, buying a larger home or career opportunities that are going to be had over the next one to two years, because I think inevitably there's going to be a V-shaped recovery. For so long, I've been planning on escaping San Francisco because it was too competitive, too crowded and too expensive.

With some people leaving and the media instilling fear of a mass exodus, I think I can now stay put for longer and be happy to stay put for longer. I mean, it's just it's kind of pain to move, even if you're moving. It's a lot. The more as your family grows, the more of a pain it becomes to move.

You just have more stuff. Yeah. And, you know, moving to a different condo or house within the city is one thing, but moving to a different state and to a different city with a family is another thing. Yeah, it's a lot. The logistics of moving is going to be really, really painful.

I think I'd probably just try to sell like our furniture, our electronics and everything and just keep the valuables and ship it. Right. Or bring the packable valuables on the airplane. Are you kidding me? Just two suitcases each is not enough. Well, not for a family with two kids, but I think people hire moving companies and they use insurance, you know, to protect their belongings.

People do it all the time. It could be done, but it's not maybe not an enjoyable process. It's definitely not enjoyable process. And then we'd have to find a new home and so forth. So I'm really happy that we're there. There's less of a need to move. You know, we already had a plan of moving in 2022, but now maybe it's not 2022.

Maybe it's 2025 or 2030 so that both our kids are old enough so that they can listen to direction and not, you know, kill themselves wandering off and they're just more independent. Yeah. So that is very interesting. This whole situation right now is up in the air. But I like big city living.

One thing you got to realize about big city living is that if you don't need to go to a day job while you're in a big city, it is an incredible, incredible place because you can roam around much more freely Monday through Friday with not a lot of crowds.

And there's just so much entertainment options, food options, cultural options, scenic options. I mean, there's a reason why there's millions of tourists who come to San Francisco every single year or they used to. It's because it's an amazing city. Yeah, for sure. It's scenic. There's just a lot to do and there's a lot of history and so forth.

So if you don't have to have a day job, big city living is even better because it is that grind of work, that constant pressure to perform and to compete with your peers and so forth that really just brings you down, beats you down. And it beat me down.

I admit I couldn't handle it after about 13 years. I want to do something new. So I do want everyone to just hold their horses and think strategically, whether it's opening up a business in a big city or buying real estate or starting your career. That's not dead, folks.

In fact, I think it's better than ever. Ironically, I would pay more to live in San Francisco, more to live in New York if it was less crowded. Now obviously, if enough people leave, there's going to be a depression in asset prices, for example, real estate. But it's funny because the people who stay and I know many people who stay are all looking to upgrade and are actually looking to buy clusters of real estate so that they can build a little community.

And in the past, it wasn't so easy, but now it is becoming easier. All right, folks, we're going to wrap it up because our little ones need our attention and love. Hopefully, you enjoyed this podcast. And if you think big city living is on the decline, let us know in the comments, in the post or just shoot us an email or a shout out on social media.

And we'll see you around. Thanks, everybody.