Income vs cost of living

[paulney]

Thread about an offer for an MBA grad got me thinking:

All states are extremely separated by cost of living and income. Yet, while certain prices are adjusted for the median income, others aren't. For example, an average income in Silicon Valley would be around $70k (maybe not an exact figure, but whatever). Real estate prices are insane, and so is gas, food, and electricity.

While, living in Montana, you could get a huge farm for a fraction of what a small house costs here, and (probably?) all the other expenses listed above would be cheaper as well. But the median income is way lower.

However, imported car prices are fixed across US. Or, let's say, a fastfood chain meal. Does that mean, that people in poorer states would never be able to afford certain things in life, while having a huge real estate. And on the opposite, people in wealthier/inflated states could possess nice cars, could afford to travel a lot more, spend more on other nice-to-haves, but slave away all their life to pay off a mortgage on some shack.

I have a feeling my logic is somehow flawed, but I don't have a lot of experience with income and cost of living in other states.

 

[nageov3t]

fast food prices differ from region to region... McDonald's in Times Square NYC is pretty crazy compared to a McDonalds in middle-of-nowhere town.

 

[PrinceofWands]

Originally posted by: paulney
Thread about an offer for an MBA grad got me thinking:

All states are extremely separated by cost of living and income. Yet, while certain prices are adjusted for the median income, others aren't. For example, an average income in Silicon Valley would be around $70k (maybe not an exact figure, but whatever). Real estate prices are insane, and so is gas, food, and electricity.

While, living in Montana, you could get a huge farm for a fraction of what a small house costs here, and (probably?) all the other expenses listed above would be cheaper as well. But the median income is way lower.

However, imported car prices are fixed across US. Or, let's say, a fastfood chain meal. Does that mean, that people in poorer states would never be able to afford certain things in life, while having a huge real estate. And on the opposite, people in wealthier/inflated states could possess nice cars, could afford to travel a lot more, spend more on other nice-to-haves, but slave away all their life to pay off a mortgage on some shack.

I have a feeling my logic is somehow flawed, but I don't have a lot of experience with income and cost of living in other states.

You're not just looking at state to state, but area to area. In Seattle you're screwed under 36k a year, in rural counties you're fine with 20k.

 

[SCSIfreek]

with the dot bombs, I would think the average income in Silicon Valley would have dropped a little but a year ago the average median income for the bay area was around 60K. the average median price for a single family home is around 500K+ . Sad but its true.


--Scsi

 

[SuperPickle]

I think your logic is flawed only in that you're focusing on the price of real estate in Silicon Valley. Wages in a job market adjust to the cost of living in that market, or perhaps vice-versa. Where incomes are inflated, so is the cost of living. In the end, the person with an income compared to the cost of living is the victor, but the person that makes more money has more purchasing options. Yes, it's true as you stated that some things are generally going to be out of financial reach of others, though they seem to have the same or higher standard of living (poor dude on a ranch instead of a rich dude in a CA shack).

For example, I make $1/hour above dick where I work. My cost of living is extremely low so my ratio of money in:money out is high. My SO lives in a large city and makes far more money than I but her costs are higher as well. Our standards of living are pretty much the same. However, because she makes more money than I, she'll might be able to afford a big ticket item (such as a fancy car or boat or whatever) just because she makes more dough.

In a nutshell - making more cash is not necessarily better, but may leave you more purchasing and lifestyle options.

 

[iamwiz82]

Originally posted by: loki8481
fast food prices differ from region to region... McDonald's in Times Square NYC is pretty crazy compared to a McDonalds in middle-of-nowhere town.

McDonalds 5 miles from each other could be different. I know there is approximately 75 cents different between Metro Detroit and Flint.

 

[vi edit]

There's more to it than just real estate -

Higher costs of living typically have higher insurance rates, higher crime/violence rates, higher state income tax rates, higher sales tax rates, overcrowded schools, ect.

Then there's also intangibles like lot sizes, commute times, air quality, ect that you typically have worse of in higher cost of living areas.

Obviously a guy making $150,000 in CA is going to have more purchasing power than a guy making $50,000 in IA. That's just a fact. Question is, are the higher paychecks worth fighting over the negatives?

 

[paulney]

I've been thinking that if we decide to have more than one kid (one is under way right now), we'll have to move to some less expensive state. Unless my company goes gangbusters on an IPO, I don't see how I could support two or three kids and pya out mortgage on a house that would house all of us... *sigh*