Don’t think I Can Achieve Financial Independence in California? Hold my IPA

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 90s, 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 currently $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 of 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.    

California Beach

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. 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 stability 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!  

Another Second Opinion
  1. I notice where I work that a lot of the younger doctors here drive the fancy cars and many of the senior doctors are driving eco friendly cars. then you have your mix of hondas, suburus, and bmws. and a few teslas.

    But you are right that Californ-I-A has a lot to offer in living with a good quality of life. For me I have the choice of heading to the beach or the mountains on any given day.

    • Thanks for your comment! Interestingly I’ve noticed here that the young doctors who have physician parents tend to drive the fancier cars. Perhaps they had less student loan debt coming out of residency??? I’d hate to stereotype, but then again, any discussion on Californians includes stereotypes!

      I couldn’t agree with you more about having options when it comes to the beach or mountains (or wine tasting or professional sports or amusement parks, etc). It’s so nice here!

  2. That’s the thing, where ever you live, whatever the cost of living, there’s always a way to spend it all! The secret is to spend less than you earn, period.

  3. We’re not doctors and we live in NJ, not California. But we deal with many of the same issues you do in terms of the high cost of living. Jobs do generally pay well but property tax and insurance rates are a real kick in the butt. And winters are no joke either. No income tax and year-round summer is a great selling point for Florida!

    • I was hoping this post with resonate with others in HCOL areas(not just doctors in CA), thanks for your comment! I feel that salary and cost of living can’t be too discordant in general, but there are definitely some hurdles to those of us living in the pricier parts of the world.

  4. California is a beautiful place. I have been to both LA and San Francisco. We have looked at it as a retirement option, but the cost of real estate and the taxes put it out of our price range. Something is not right if a MD is having issues affording living in an area. I guess it comes down to supply and demand. Good luck and enjoy the sunshine.

    • Hi Dave, thanks for your comment! I’d guess that LA & SF are two of the most expensive cities in CA, so perhaps there are some retirement options for you here in some other areas?

      I’m definitely not having issues affording to live here as we make a decent salary, but there are some serious choices we have to make if we want to build assets rather living from paycheck to paycheck.

  5. While it’s an uphill battle to be a financially successful doc in California, it’s not an impossible one to win, especially if you’re not starting in a terrible position like many I run into ($450K in student loans, pediatrician, non-working spouse, trying to live in Bay Area etc).

    For that person, moving somewhere else, even temporarily, is likely the key to their financial success. But for a GI doc married to an ophthalmologist who combined only owe $250K in loans and are in Fresno? They’ll be fine staying in California.

  6. Way to welcome everybody to the Wild Wild West.. A state that’s untouchable like Elliott Ness.

    You do have some challenges there, as you’ve outlined nicely, but you’re also surrounded by natural beauty with ocean, desert, and mountains all nearby. As long as you have the fortitude to resist the Ferrari or private schools that cost as much or more as that Ferrari, you can still find a way to save plenty of money as a physician. Plenty of people with normal people salaries manage to live and die in L.A.


    p.s.. Is it true that Inglewood is always up to no good?

    • yes! Yes!! YES!!!

      PoF: It’s as if you just hopped off a plane at L.A.X. with your dream and a cardigan. Welcome to the land of fame and excess, I think you’re gonna fit in…

      Well, you probably don’t want to live here, but it’s definitely nice to visit at least. I am definitely biased when it comes to the West Coast. Although I can say I’ve lived on the East Coast for 4 years during medical school, I was definitely ready to come back once I finished.

      And yes, Inglewood is definitely up to no good. I’d also recommend not hitting the east side of the L.B.C. When you get to 2-1 & Lewis, hooks a right and you’ll be fine!

  7. I have family in California and other HCOL areas, where housing and taxes are higher and salary is generally lower. Living in MCOL now, the urge to move to these HCOL areas is certainly strong (as you pointed out that family is a big reason to move), there is certainly a sacrifice associated with such a move. Doing the math, living the same lifestyle, I may have to delay FI 10 years by moving to a HCOL area, I’m not sure it’s worth it. If I knew I’d have a great work-life balance and a steady income for that entire period, maybe it would look more favorable, but we just never know what the future may bring and there is something to be said about making hay while the sun still shines. Likely, I’d consider something in between, taking advantage of geographic arbitrage for a few years, pad the savings, then move to the HCOL area and create a nice work-life balance and not worry about savings as much.

    • JSA, thanks for your comment! Some of my colleagues have done exactly what you’ve suggested; take advantage of higher pay, lower cost of living coming out of training until their finances are in good shape, before moving to a HCOL area. It’s akin to “living like a resident” as long as you can after you finish–the faster to pay off your debt and the earlier you start investing, the better off you’ll be down the road. It’s definitely much tougher to do in an HCOL area, though I am finding a way to make it work.

  8. Nice post. To me, FI is not about getting there as quickly as possible. It’s about maximizing your long-term happiness. Yes. Cali is expensive. But guess what? Many of the best things in life are. I’m sure you will become financially independent in due time. If it takes an extra year and you want to enjoy the California sunshine along the way, good for you!

    • I fully agree. I’m not in the “I want to retire by age 40 crowd,” so I’m okay working a few extra years to enjoy some of the other intangible benefits I have here. I definitely don’t plan on working passed age 55 though, so that is why I am focusing on making good decisions now to set that up down the road.

  9. We also live in a VHCOL city in the East coast and the reasons you listed are the same reasons we choose to stay here except for the weather of course 🙂

    And you can def still achieve FIRE even in a VHCOL if you are smart about your money.

    99to1percent recently posted…Joining the Million Dollar Club/Challenge and So Can You

  10. Good outline. The beauty of the land also unfortunately comes with forest fires and drought! I’ll make it back out someday!

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Another Second Opinion