It was almost exactly seven and a half years ago. Jess and I were sitting in our realtor’s office signing the paperwork to submit a formal offer to buy our first home.
This day is crystal clear in my mind not only because we ended up buying the home, but also because of the amount of fear and second-guessing that I experienced at that moment.
I remember looking over at Jess before I signed the document, as if I was expecting her to say, “Wait, don’t do it.”
Those words never came.
Instead, I hesitated for a second, pretending to re-read the document so as to not reveal my inner fears. I hesitated not because it was a bad decision, but because it was a lot of money.
We were about to commit to paying over $400,000 for our first home. Once I signed this document, there would be no backing out (or at least not without losing a lot of money) if the seller accepted our offer.
At that moment, the amount of money became real.
$400,000+ is a lot of money regardless of where you are from, but it can feel like a lot more (or less) depending on where you live. In the place where I grew up, $400,000 was a lot of money.
To give you a sense of the cost of living where I grew up, the sprawling 3,000-square-foot childhood home that I described in the 1,000 square feet mansion post was purchased for under $100,000. Even after factoring in inflation for 25 years, that only amounts to approximately $172,000 in today’s dollars.
You can imagine why I had a sudden feeling of fear and doubt when I was committing to a single purchase of almost half a million dollars at the age of 27.
After hesitation came action. I signed the document.
This moment in my life gave me so much clarity on the variability in the cost of living. It’s one thing to read about the varying degrees of living expenses, and it’s another to experience the vast difference between a low cost of living area and a high cost of living area.
Why We Moved to Boston
Jess and I knew that living in Boston would be expensive, but we moved regardless of the fact that it is often listed 10 most expensive cities in the U.S.
There were a number of factors that played into our decision to move, including most notably a positive experience when Jess lived in Boston during college. She was doing an internship in Boston the summer before our senior year in college.
We were dating at the time, and I would travel up to Boston to spend our weekends together. We got to experience a little bit of everything that Boston has to offer: hiking, panoramic views of the harbor, crowds of over a million people to celebrate the 4th of July, and so much more.
We capped off the summer by getting engaged on our last weekend together in Boston.
Those positive experiences were just the beginning of why we chose to live in Boston.
We also chose to move to Boston because:
- There are a lot of activities
- The city is also not too large to feel overwhelming. We like to describe it as aligned with our pace.
- There is also plenty of green space and proximity to great outdoor adventures.
- It has four distinct seasons, which we both appreciate (although some winters are a bit harsh)
- It’s fairly diverse. We strive to be more welcoming and inclusive of all people, and we enjoy life when we are near others who prioritize this.
- Great sports teams
- An excellent job market
To this day, I am still glad that we decided to move to Boston.
But noticeably absent from our list above was thinking about how Boston would enable us to achieve financial independence in a relatively short time frame.
While I was aware of financial independence as a concept, it was not in our plans when we moved to Boston.
While unintentional, we’re well on our way to achieving financial independence, and living in a HCOL area has actually played a big part in that. In fact, we believe that living in a high cost of living area has actually allowed us to fast-track our journey to FI.
Why High Cost of Living Areas and Financial Independence are NOT mutually exclusive
The idea that a high cost of living area could fast track a journey to financial independence is counterintuitive.
Most people that we meet buy into the common myths regarding high cost of living areas, most notably:
Myth #1 – Living in an HCOL area automatically means that you will spend more money
In conversations, I often hear people refer to a cost of living index that allows people to compare the typical expenses within different cities to one another.
Most often these indices display the costs relative to New York City. In other words, if a Boston is listed at 87 and New York City is listed at 100, it means that Boston is 13% less expensive than NYC.
In this index, Boston is listed 16th highest cost of living out of the 203 cities represented. Boston is more expensive on average than most on the list.
What this index does not say is that moving to an area that is higher on the index will automatically mean that you will spend more money on everything. Moving to a more expensive area does not strip you of your free will.
You still have the choice of what you buy, how much of it you buy, and when you buy it. All of these decisions contribute to your total expenses.
Not only that, but there are often trade-offs or areas of the budget that decrease in more expensive areas, as I detail later.
Myth # 2 – I could not afford to live in a HCOL area
The second myth that people buy into is the assumption that they cannot afford to live in a HCOL area.
Over the years we’ve had several conversations with friends and family, talking about the difference in cost of living. There have even been attempts where we have tried to convince those we care about most to move near us.
We love Boston, so I guess we figured others would too.
Unfortunately, all too often the conversation turns on “affordability.”
“I could NEVER afford to live there,” they often claim.
I understand this concern all too well. This is a similar belief that I had when I almost allowed fear to overcome me when we were buying our first home.
But a lot of people live in HCOL areas and make it work. The fact is that many individuals could afford to live in a high cost of living area. They just choose not to. It’s an important distinction.
Myth #3 – I would not save as much money
People also buy into the myth that they would not be able to save as much money while living in a high cost of living area.
Our experience has been the complete opposite. While living in Boston, we achieved a savings rate of 57% while working for nonprofit organizations.
In addition to this, the Bureau of Labor Statistics (BLS) shows that households in the northeast actually have a slightly higher savings rate and amount than the south and midwest, both traditionally considered low cost of living areas.
The table below is a summary of what you will find on the BLS website if you navigate to the bottom of the page and review the data by region.
| Item | Average | Northeast | Midwest | South | West |
|---|---|---|---|---|---|
| Income before taxes | $74,664 | $78,679 | $69,426 | $67,731 | $88,606 |
| Total expenses | $57,311 | $60,784 | $54,907 | $52,674 | $64,833 |
| Savings | $17,353 | $17,895 | $14,519 | $15,057 | $23,773 |
| Savings rate (ignoring taxes) | 23% | 23% | 21% | 22% | 27% |
I’ve added a few extra rows to show savings (in dollars) and savings rate for your convenience. For the sake of simplicity, and as indicated above, the savings rate ignores the amount individuals would pay in taxes, especially since taxes can and do vary by state. Frankly, the differences are minimal, but areas of the country with higher cost tend to save slightly more.
Reasons to Consider Living in a HCOL Area
We clearly love living in a high cost of living area, so I may be a bit biased. But there are a number of reasons why someone might consider living in in a HCOL area:
1. To Prioritize Lifestyle Design
As is our motto at the Fioneers, the journey should be as remarkable as the destination. This means that you should place value on your day-to-day life, not just save for your future. While you should not ignore the financial aspect, don’t de-prioritize living the life that you want simply because of the numbers.
HCOL areas don’t become expensive by random luck. Many people flock to parts of the country or urban areas for a variety of reasons (i.e. weather, job opportunities, proximity to natural resources, etc.) and as a result, the demand for limited resources (e.g. land) goes up, driving up the price.
The point is simple and basic: more expensive areas are arguably better places to live (for many people).
If you disagree, consider this scenario: if the cost of living did not adjust and everything was the same price regardless of location, do you think more people would live in San Francisco, California or Wichita, Kansas?
2. Better Income Potential
When Jess and I moved to the Boston area, we knew that the job prospects as nonprofit professionals would be much stronger than where we previously lived.
But I had no idea how strong of a job market it would be. Moving to Boston has allowed us to significantly increase our income. I’m convinced that we would not have had the same income growth if we lived in a low cost of living area.
Living in a HCOL area has (at least) three inherent benefits for your earnings potential:
1 – Higher Salaries. Employers in high cost of living areas know that in order to attract top talent, they have to pay their employees competitive wages. As is evidenced by the Bureau of Labor Statistics data above, salaries are much higher in HCOL areas.
2 – Less Likely for Prolonged Unemployment. Jess’ parents live in a low cost of living area. Out of curiosity, I occasionally look up nonprofit positions in their area. The last time that I looked, there was ONE job listed. Period. Not one job listing that day, but one listing total.
In high cost of living areas, there are more jobs available. And with more jobs available, you have a lot more options if your employer goes out of business or downsizes. With more competing companies, living in a HCOL area decreases both the likelihood of unemployment AND the length of any unavoidable unemployment period.
When Jess left her job in 2018, the strong job market here in Boston allowed her to get multiple interviews in a short period of time, allowing her to accept her part-time job shortly after she started her search. I’m not certain that would happen in a low cost of living area.
3 – Higher Income Jumps. According to a recent survey, employees received a larger pay increase by job-hopping than sticking with the same company.
In addition to higher salaries in general, with more potential employers in a HCOL area, you have greater potential for large increases in salaries. This is a great way to significantly increase your salary in a short period of time.
3 – Lower Transportation Costs
While not always the case, living in a large urban area has allowed us to keep our transportation costs low. When we needed to commute to offices downtown, we both used public transportation, leaving our one car in the driveway most days. Now we both work from home most of the time, and I often ride my electric scooter to work on a bike path that goes almost the full way between our home and my office.
We can also walk to the grocery store, the dentist, library, post office, several restaurants, and so much more. It’s such a luxury to be able to walk to so many places.
While it would be possible to not own a car at all, we like the flexibility of having reliable transportation for a variety of needs. Even with one car, we pay very little for transportation.
In a low cost of living area, households are often required to have two cars. This means having twice the expenses of gas, maintenance, insurance, etc. It also means two times the depreciation.
A nice hidden benefit of HCOL areas is that it minimizes your depreciating assets. Most people are quick to point to the high housing costs in HCOL areas, but I would rather have more money in an appreciating asset than a depreciating one (or two).
4 – You have the flexibility to move to a LCOL area
Last, but certainly not least, living in a HCOL area also gives you a nice safety net. If you needed to significantly reduce your costs for any reason, especially in retirement or after reaching financial independence, you would be able to easily move to a lower cost of living area.
It’s easier to go from HCOL to LCOL.
Those who are living in low cost of living areas are less likely to be able to make the switch to a higher cost of living area without a lot of planning.
Jess and I have discussed whether we would be willing to relocate to reach financial independence earlier. We’re not ready to do that right now. We have a number of reasons to stay in the area, including our friends and my job.
While we don’t want to move now, we do have that option in the future. We have a lot of equity in our house and are confident that we could relocate in the future to get rid of the mortgage payment, cutting over a quarter of our annual expenses, just like that.
How to Achieve Financial Independence in a HCOL Area
Many people buy into the narrative that relocating to a LCOL area is a necessity to achieve financial independence. I beg to differ.
As outlined above, there are many benefits to living in a HCOL area. Beyond that, you can also choose how you spend your money. We’re working toward FI and we’ve made several intentional decisions to expedite our journey to FI without depriving ourselves of what we truly enjoy.
Here are the top decisions that have helped us hack our HCOL area:
1- Boost our Income. Achieving FI in a high cost of living area starts with earning more. We are a dual-income household. I currently work a traditional W2 job for a nonprofit organization, and Jess quit her job a year and a half ago to run her own business. Earning more is essential to achieve FI in a HCOL area.
2- Not Eating Out Regularly. Many of my coworkers would eat out for lunch or order take-out every single day. I eat a PB&J at home almost every day. And, we rarely go out to dinner or order in, and as a result, our food budget was nearly cut in half.
3- Take advantage of free entertainment. With COVID, a lot of the free activities in the city were put on hold. We are looking forward to outdoor festivals and other events returning. We also spend plenty of time outdoors in the many beautiful green spaces. Most of these activities are free or very low cost.
4- Do It Yourself. Three years ago we built our own back patio. It was quite the project because we had to dig out our backyard. It took 5 full weekends of work with the other condo owners in our building. The total cost for supplies was around $3,000 (split between the two of us). While no small number, it was significantly less than the $17,000 quote that we received from a landscaper. By learning how to do things yourself, you can avoid the high rates charged by contractors.
5- Buy a reasonably sized home and stay there. Many people say that it’s better to rent than buy in a HCOL area. Our experience has been that buying our home and staying here has made a huge impact on our net worth.
Many of our friends’ rents have increased in recent years. We have a fixed housing expense that has stayed the same for the past 6.5 years. Our home has also appreciated at least 50% in the time that we have owned it. This may not happen every 6 years, but it is a great start.
Living in a high cost of living area or urban environment can be very expensive. But it doesn’t have to be as expensive as you might expect. It also may not hinder your FI goals at all. If you are intentional, you can enjoy all of the perks of the great location without sacrificing your long-term aspirations.
Nice post. I would make an even stronger statement by saying that living in a HCOL area might be the fastest way to get to Financial Independence (assuming you can 1-find a job in such area, 2-live as close to your work as possible, 3-remain strong to avoid the too many temptations of lifestyle inflation). Personal case in point: I moved from a high COL area in France to a high-ER COL area in the United States (San Francisco). I have a sibling who stayed in France so I have data to compare both situation. By looking at how much both of us have saved during the 2008-2018 period where I lived in San Francisco, I can confidentially say that I already have saved order of magnitude more money (thanks in part to much bigger raises & work opportunities) that he will be able to save during his entire working life when he will work until reaching his regular retirement age. While this doesn’t mean anything if I would have stay in San Francisco, this give Mrs. Nomad Number and I great option. One of them would be to purchase a property “clear & cash” in France (for much less than what you are paying in Boston) and still have plenty of money working for us to enjoy a good life in a country that is way cheaper than San Francisco. And of course we can do all of that without having to work for the man again. It is without saying that we feel extremely grateful for this.
That being said, I am not a pro about purchasing a property in a HCOL area like San Francisco, unless you plan to live in your home for most of your life. The reason is simple: you can’t find investment properties in San Francisco that are meeting the 1% rule (the rule says that a good investment property should generate at least 1% of it’s value as its monthly rent). Another case in point: Mrs. Nomad Numbers lived in a small condo she purchased for ~650K in 2015. After we moved together to the place I was renting, she looked at transforming her property as an investment asset. Let me tell you that the numbers did not worked at all for us. Long term rental would generate at best 3K / month (which was below the 6.5K from the 1% rule guideline). And while short term would have been better, there are big restrictions in SF that would have prevented her to do it for more than 3 months / year. We instead decided to sold it and invested the money to purchase investment properties in other states that were meeting the 1% rule. We have no regrets, are happy with the diversification this provides us and she can sleep much better now that she don’t have this Have you guys considering transforming your Boston’s home into an investment asset later on? If so are you expecting to meet the 1% rule?
Hi Mr. NN,
Thanks for the comment. The math really does add up (most of the time) for HCOL areas, I would say. At this point, I don’t think we’d transform our Boston home into a rental later on. It doesn’t meet the 1% rule, so I don’t think it would make a good investment asset unless we wanted to come back and live here later. However, we felt like it was a good investment for us (as our primary residence) because our mortgage for a 2 bedroom is less than we paid in rent for a 1 bedroom apartment and it’s appreciated quite a bit. As a rental property purely, I don’t think it would be a great investment though. We have thought a little bit about doing what Uncommon Dream has done and rented their house out on Airbnb while they live abroad for several months, especially if we were planning to come back home.
We’re actually looking to invest in real estate in a nearby city that has much better real estate investment market. We will see!
Once again, thank you for your comment!
Jessica (and Corey)
I currently live in Hawaii with my fiancé and I’m very interested in becoming financially independent while living on the island. I’m in a niche field out in Hawaii (Government Tech Writing) and I’ve never been unemployed for longer than two months. My fiancé is an elementary school teacher that is about to be awarded tenure in the public school system. I truly believe that we can start our FI/RE journey in Hawaii but after reading all the individual content in the Debt Free Community and the FI/RE Community it has felt like everyone is discouraging me from staying in Hawaii, buying property in Hawaii, and raising children in Hawaii.
Is there anyone you know that is currently working on becoming FI/RE in Hawaii and writes a blog? I would love to know so I could get some tips from them. Honestly, I would just love more guidance on reaching FI/RE while living in a HCOL environment. Are there any blogs like focus on that specific topic that you would recommend?
Hi Katie,
Regarding someone who lives in Hawaii, you could check out Doug Nordeman, who writes at The Military Guide – https://the-military-guide.com/about/about-doug-nordman/. I’m not sure if his story would resonate with you though.
Even if the Hawaii content doesn’t resonate with you, you could check out content focused toward educators – FI Principal, who writes about educators pursuing FI – https://principalfi.com/. You could also check out City Frugal (http://cityfrugal.com/) who writes about pursuing FI in high cost of living areas. Or you could try Government Worker FI, who is focused on financial independence for government workers – https://governmentworkerfi.com/.
I wish you the best of luck! If you can make it work financially where you are, I would say it’s worth it to live where you want!
Best,
Jessica
Ultimately, I think you should live where you want. If you are motivated enough, you’ll make FI work in Hawaii. Even if it takes a bit longer, if you want to be living there, you’ll already be living in paradise.
If I hear of anyone
I think it is great that you two are able to pursue FIRE in a HCOL area. There are so many variables that can make any location cheaper or more expensive based on industry, where you live in relation to where you work, how large of a family you have, etc.
We had the opportunity to live anywhere in the US, and it was a very hard decision. Andrea probably would make more in a larger city, but my income would be the same wherever we lived (since I work remote). We decided to stay in MT, and it has worked out well. It seems like every place we considered has pros and cons. At the end of the day just find a place where you can set up roots for a while, enjoy life, and save as much as you can.
Great job hitting a 57% savings rate! That’s about where we are at as well.
Hi Chris,
That’s great! I think if we had a choice of where to live, we’d live here in Boston. That’s a great way to think about it. I agree, I think it’s much more about where you want to live, where you’ll be able to enjoy life and save enough to meet your goals.
Thanks for the comment!
Jessica
I’d say that moving to a LCOL area (from Seattle to Phoenix) has helped my finances tremendously. But yes, there are definitely times that HCOL areas can be good motivation for FI. If nothing else, everything being so expensive makes you more aware of money, I think. And being aware of it tends to make people more cautious about it. Hopefully, anyway.
Hi Abigail,
Thanks for sharing. Yes, I can definitely imagine that all areas have their pros/cons, and moving to a LCOL area could make sense for a lot of people. Living in an expensive area definitely made us more aware of our spending, so you are certainly right about that!
Best,
Jessica
You all almost sound like my wife and I! We live in DC metro area- the VA side. I’ve been here 10 years now, originally from Tennessee.
From 2010-2018, my income and savings rate was the highest it has ever been.
We also live in a perfect little neighborhood with 3 competing grocery stores within walking distance. We haven’t bought a home here though, still renting.
That being said, I wouldn’t mind returning to a LCOL area. We’ll see what time will tell.
We’re FIRE now, so perhaps might try living abroad eventually.
She is from Japan, and I love it there. And my Japanese is now getting to 1/8 fluency level. ?
Thank you for the post, as we discuss this topic quite a bit.
Hi Matt,
Thank you for your comment. It is pretty incredible how much higher jobs pay in HCOL areas, in general at least. If you can keep your fixed costs fairly low and be smart about the rest, living in a HCOL area can really pay off.
We’d also love to spend significant time internationally as well. It sounds like you still have a little work to do on the Japanese, but you are well on your way!
Best,
Jessica
LCOL area (from Seattle to Phoenix) has helped my finances tremendously. But yes, there are definitely times that HCOL areas can be good motivation for FI. If nothing else, everything being so expensive makes you more aware of money, I think. And being aware of it tends to make people more cautious about it. Hopefully, anyway.
Hi Lisa,
I can definitely see arguments for both ways, and I think each person need to choose their own path. I definitely agree that for us, living in a HCOL area made us much more aware of money, and we became much more cautious about it. It also allowed us to increase our income more quickly than if we were to live in another area.
Thanks again for the comment!
Jessica
Totally agree! I’ve lived in Philly, DC, Hawaii, and now SoCal, and I’ve been able to save a ton in all of them by doing the same things you describe. And this might just be me (or a function of who I make friends with?), but I’ve felt a little less pressure to be flashy with things like house, car, and clothes compared to the LCOL place where I grew up. It’s almost like we all fully appreciate how expensive life can be here and that living in a modest house or driving a modest car doesn’t mean that you’re poor. There are plenty of big spenders for sure, but it’s also just not that unusual to be pretty frugal.
HCOL certainly isn’t for everyone, and it’s a matter of personal preference. But I would just appreciate it if people would stop poo-pooing it as “sooooo expensive.” It doesn’t have to be.
Hi Kate,
That’s a really interesting perspective. I definitely think that it’s easier to live modestly without pressure living in a HCOL area.
Thanks for sharing that insight,
Jessica
Love this article! We’re a family of 4 in Los Angeles who is comfortably saving over 50% of our income. Conscious spending on our housing is definitely key for us to make this work. Basically, we don’t pay for the guest bedroom. Besides housing, I don’t see a big difference in the cost of living here compared to smaller towns (we both grew up in small towns).
I agree with what I perceive is the overall message of this post (and of your site!), which is to enjoy the journey. We love L.A. and would happily tack on an extra 5 years of saving to be in a place where we can be ourselves and where we love raising our kids.
Luckily, we won’t have to tack on those years! With the large numbers of jobs in our industries, there are strong unions, plenty of competition, and healthy opportunities to negotiate raises. Our income has more than doubled in the past 5 years.
The downside is definitely the housing prices. My frugal mind just can’t get behind paying a six-figure down payment PLUS $1000+ more/month than our rent—just to own our residence. Luckily, we owned a home in another state and we understand just how much work and stress it is for us to own. We don’t miss it at all. This helps minimize the FOMO!
Thanks again for your post! I enjoyed your interview on Journey to Launch 🙂
Hi! I have recently moved to Boston with my fiancé and we are considering purchasing a condo in Brookline! Although condo prices are high right now, we’d be able to lock in a killer interest rate that would make the monthly payment (including HOA, taxes, insurance) close to or a little bit more than our monthly rent in Fenway.
I’m afraid that when interest rates rise in 2022, we will be priced out of the market because it doesn’t appear that Boston condo prices ever really decrease.
Do you think it’s wise to buy a condo that costs a little more than rent since we plan to be in the city for at least the next 5 years?
Hi AJ! We ended up discussing this over Twitter DM, but for other folks who might find this helpful. Here’s what I said:
“Honestly, I don’t think the question is: is it a good idea?
I think the questions are:
1. Can you afford it without being house poor?
2. Is that where you definitely want to live? (There are a lot of areas on the city less expensive than Brookline)
We did a similar thing when we bought in 2014. Our mortgage/taxes/HOA are slightly higher than our previous rent.
Ultimately, I don’t think it’s a bad decision, but only you can decide if it’s a good decision.”
I love this article! After living in HCOL areas for almost the last ten years (2 yrs in NYC, and 7 yrs in DC), I bought into the geoarbitrage argument and moved to a LCOL area last year. While I have been able to save a lot of money, mostly due to working remotely for HCOL area companies, I feel the overall quality of my life has significantly declined. I’ve started to realize that location really does matter, and I’m now willing to pay more in taxes, housing, etc. to be in a location that brings me happiness and joy. I have more options to make more money in HCOL areas, and I can always choose to spend less. It’s worth slowing down my FIRE journey to be happy during the process.
Hi Rebekah,
What a great insight! Thank you for sharing.
Best,
Jess
I live in a HCOL area currently (Manhattan). Rent is inevitably extremely expensive but it is somewhat offset by not having to maintain a car and having to pay gym membership (the apartment I’m in has a decent gym in the basement that almost no one goes to).
Everything being so expensive here for eating out basically forced us into cooking and buying bulk groceries and eating at home. Using Amazon Visa card for groceries + mostly only eating groceries = our non-rent expenses are like $600-$700/mo between two adults. And we splurge on weekends as well going out to eat.
I don’t know if it can be cheaper than living in a LCOL, but I think the quality of life tradeoff is worth it for me (I hate driving). I also personally would prefer to rent than buy in HCOL because the market is volatile. An increase in 50% of paper gains can only be captured to real gains if either 1) one takes out a HELOC and increase their risk by trying to make a spread on the interest, or 2) downsize to a LCOL place, defeating the purpose of moving to a HCOL in the first place (presumably for a better quality of life).