It’s no secret that California is a very expensive place to live, even for physicians. It has also been pointed out that the average salary for physicians may be lower in California compared to our midwest counterparts. I don’t disagree with either of these points.
Though it turns out there are over 100,000 physicians who choose to practice in the sunshine state. Either they didn’t get the memo about the high cost of living(HCOL) or there are other forces at play beyond money. To some (or most?), the premium we pay to live here (aka Sunshine Tax) is offset by job security, ability to enjoy the Californian lifestyle and opportunity to live close to family. I couldn’t agree more.
Now, before we turn this into an HCOL vs LCOL battle of words to the likes of the East Coast-West Coast tension of the 90’s, let’s discuss this further to see if we can de-escalate the situation. No need to be sending our own to the hospitals, unless it’s for work of course.
H-COL in Californ-I-A
To the ostriches of the world, California is a super pricey place to live:
- The median home price in California is $506,000 compared to about $200,000 nationwide. Now there are some homes that inflate this number (ahem, $250 million Bel-air home), but no doubt, housing is expensive here.
- The top income bracket will pay 13.3% in state income taxes! Though most physicians will fall into the 9.3% tax bracket. By comparison, some states like Florida have 0% income tax.
- California sales tax is 7.25%. Again, some states like Oregon have 0% sales tax
- We do have a slightly lower property tax compared to the national average (0.81 vs 1.1%), one of our few wins in the money category.
- Keeping up with the Joneses- the temptation to “fit in” is real. Everywhere you look, someone has a nicer home, fancier car, a yacht, a golf cart, home movie theater, etc, etc. I’d argue that you don’t need to keep up with the Joneses, because you never will. But definitely befriend them, they probably throw great parties.
Money isn’t everything
If my goal is to optimize my salary to cost of living ratio, there’s no doubt I’d choose somewhere else to live. But there are some things I have here that money cannot buy:
- Family- I grew up here, my wife grew up here and not surprisingly our families still live here. Proximity to family is a huge plus, especially with young children. The babysitters…I mean grandparents are close by (but not too close by) so we’re able to get together as much as we’d like (not as much as they’d like, but as much as we’d like). Plus if my wife and I want to get away for a couple days sans kids, it’s a phone call away.
- Job- I’m doing just fine here when it comes to salary, but again, money isn’t everything. I love what I do, and maybe as important, I love where I work. I’m surrounded by great physicians, state-of-the-art technology and a great variety of cases-to keep my skills up and keep things interesting. I have my dream job, luckily it’s also in my dream location.
- Weather- Now it’s not always 70 degrees and sunny–because at night time it’s like 55 degrees and very not sunny. But it’s true, we don’t sway much from that range, at least where I live. Don’t you wish you could live in the snow? Nope, I did it in medical school, I’m good. But I can drive 2 hours to be in the snow if I wanted and I think that’s pretty cool.
- Activities- There is a bunch of fun stuff here and I don’t want to come off as, “my state is better than yours” because it’s not. I do think my state is better for me than your state and you could probably say the same thing. But we love the beach and are blessed to live nearby.
My strategy to achieve financial independence
No, I didn’t forget. You’re holding my beer, the San Diego based Ballast Point Sculpin IPA so I can tell you about how I’m going to fight the uphill battle and achieve financial independence here. So this is how I do it…this is how we do it (hopefully that song will be in your head for the rest of the day, courtesy of the west coast):
- Keeping it nice, but keeping it modest- We have a beautiful home, in fact it’s our dream home. But I still have one of the cheapest homes of all of our partners. Some of the Dr Joneses in my group have beachfront homes, horse stables, wine cellars, large pools, live in gated communities. One of my partners even has an elevator in his house/borderline mansion. We have chosen to keep things simple and put more money toward our future than a large mortgage.
- My car gets me to work just as fast as that Ferrari I park next to in the doctor’s parking lot- sure I won’t win any street races, but that’s not my thing anyway. My commute to work is very short, I don’t put many miles on my car each year. To me there’s no need to get a new car if I’m not really driving it that much anyway, so I should be able to get 10+ years out of this car since the wear and tear is minimal.
- Tax saving strategies- Once I started making an attending salary, I started maxing out my tax deferred accounts. I also started going to an accountant that specializes in high wealth individuals. As much as I think I know about how to avoid taxes, she knows much more, and also makes sure everything is allowed by IRS regulations. With the high federal and state taxes we pay here, tax saving maneuvers are huge!
- Pay myself first- I have said it in other posts and will say it again in future posts, paying yourself first is a key step to building wealth. The lessons I learned from The Richest Man in Babylon have served me well. Every time I get paid, I immediately invest into 529 plans & taxable accounts while at the same time putting more toward student loans. We discovered that we can live very comfortably on what is left over, no need to find money at the end of the month to achieve those same goals.
- Look for deals and maximize rewards- When we make a purchase we usually go through the same steps. First we’ll price compare amongst different websites and try to find the lowest price. Then we’ll scan the internet for a promo code, seeing if we can get an even better price. We’ll then check out Ebates and see how much cash-back we’ll get at each online store. Finally we’ll make sure we’re using the right credit card to further maximize cash back. This ensures that we are getting the best price and getting more money back to invest at the same time.
- We live where we vacation- It is indeed all good from Diego to the Bay…when it’s time for vacation, we don’t need to go far. So rather than buying 5 plane tickets to go vacation by the beach, we just drive down to the beach and sleep in our own beds at night. Sure, we take vacations to other states as well, but most of the time our vacations are reachable by car.
- I grow my own guacamole- I know, I know, you can’t grow guacamole…well maybe someday, I’m looking at you science…quit slacking! But I can grow avocados, limes and peppers in my backyard which turns out to be the same ingredients I use for guacamole. Sometimes I add cilantro and onions, but that comes from the store. The cheaper store down the street as compared to the more expensive store just up the street with the same stuff.
- Public school- I really don’t want to start a discussion on public vs private education. My wife and I are both products of the public education system and we seem to be doing just fine. She also taught in the private school sector so we’ve had plenty of these discussions ourselves. As for now, we’ve decided to send our children to public schools. We live in a great area with great schools so this choice was easy for us.
Again, if my goal was to achieve financial independence and retire at the earliest age possible, then I wouldn’t live in California (or New York/Hawaii). But I have accepted delayed gratification in those areas so I can have immediate gratification in others. And I am immediately enjoying the golden coast!