After writing my initial post about finances, a friend of mine commented to me that she was surprised because she thought we were “loaded,” because, as she said, we buy good foods and have a nice flat. I find this absolutely fascinating. I wonder what constitutes being “loaded,” because I certainly don’t feel that way. I think if we were loaded, I wouldn’t feel guilty about wanting to go get a hair cut when my kids need new clothes (I haven’t had my hair cut at all since last June).
I got to thinking about it, and wondered about how much money Joshua makes vs. how much our bills are, the cost of living in San Francisco vs. the cost of living in Dallas (or other places much, much cheaper than here), and what our family’s net worth is vs. the net worth of other people.
Our Income
Payscale.com shows California has an average salary of $65,834, while Texas has an average salary of $54,301. From all the stats I can find, Joshua makes more than the median for California and for San Francisco, but in his position, and in his field, he makes the upper end of the average salary.
A couple of factors helped us here. Joshua worked for a well-known and well-respected design firm here in the city as a contractor for over a year. His team leader left to start his own company, and the team dissolved. The firm’s boss then offered Joshua a position to create a new team, which enabled Joshua to ask for a higher salary than what he was making. He had this job for several months.
When his former team leader offered Joshua a job at his new firm, Joshua was able to use his new position’s salary to lobby for his salary at the new firm. He still took a pay cut when he joined the new firm, but I think he is glad he made the decision he did.
The Cost of Living
That said, the cost of living here is astronomical compared to Dallas, between 47% and 88% higher, depending on which chart you’re looking at. Our rent is 32% of Joshua’s gross income, but it is 41% of his take-home pay. Once the new insurance premium and the HSA contributions are taken out of his paycheck, our rent will be an even higher percentage. We live in a rent-controlled apartment, and our rent may be raised once a year by an amount set by the city. Our rent is due to go up in July by 2.7%.
Our rent, bills, auto and life insurance, and car payment (for a Scion xB) all take up 54% of our take-home pay. Groceries take up 16% of our budget (after rent, groceries are our biggest single category) and we cook most of our meals at home. That leaves 30% of our budget for everything from household items, clothing, and gas, to doctors visits (including all my chiropractic care), donations and saving.
If we were to follow conventional wisdom to save 20% and tithe/donate 10%, we would have nothing left to pay for anything after rent, bills, the car and groceries. And that’s where we stand today, not factoring in the insurance premium, HSA contribution, and upcoming rent increase. So it’s a pretty tight and well-oiled budget and I really have to watch what we spend where.
Net Worth
I think average net worth is interesting (and highly complicated), since if you own a home, it usually considers the value of your home as an asset, but if most of that is really debt you owe on the home, wouldn’t that be a liability? If so, then our net worth is probably better than most Americans, since the only debt we have is the balance we owe on the car. Especially considering so many people now owe more on their homes than they are worth. That said, we still have a negative net worth, since we owe more on the car than we have, including savings (unless our life insurance policies are counted - in that case, we’re worth more dead than alive!).
So.
Are we loaded?
Note: The fact of Americans’ general wealth in relation to the rest of the world has not escaped me while writing this post, so yes I understand that, in that sense we are loaded, as is anyone who lives in this country.
I was really surprised by the average salary in CA–I thought it would be much more than that in comparison to Dallas. Your cost of living is about 50% higher (or more) than ours, but your paychecks are only about 21% higher. That just further convinces me that anyone who lives in CA is crazy.
(Just kidding–we love CA and honeymooned there.)
You might be spending too much on rent, but that may be all that’s available that’s big enough for all of you and safe, since I have no idea what the market is like there. IMO rent/mortgage plus insurance should be about 35% or less of take-home pay, but I know that most Americans spend more than that.
I need to do a better job in keeping tabs on where all of our money is going. I’ve gotten lazy at that. I may give Quicken another try. In the past I got frustrated with it because it was too much work to allocate expenses that were placed on a credit card (does it go on the expenses for the month the charge was made? or the month that it’s actually paid??). We pay off our credit card in full at the end of the month, but I like to use it to get the rewards (it’s an Amazon card).
Amazingly enough, most calculators I found say your mortgage/rent should not be more than one/third of your GROSS income - and ours falls at a smidge over 32%. I’m assuming our rent will be raised to the full 2.7% this year, which should then put us right under 33% - so we still are OK as far as our rent/income ratio.
That said, this is San Francisco! I’m not sure if it’s gross or net income, but people figure to spend between 40% and 60% on housing. As of today, the median price for a house in SF is $862,804, according to this.
We got a really good deal on this place. We’re also out near the ocean - further out than we wanted to be, which factors into the price. We looked at places much more than this that weren’t near as nice (and didn’t have parking or W/D hookups or a yard!), and when I saw this place, I made Joshua leave work early that same day to see it, so we could sign the lease papers and snag it.
Perhaps we ARE crazy (I have never claimed otherwise)!
As far as Quicken, we have our credit card set up in an credit card account in Quicken. When you make transactions on the credit card, it considers them in the month you made them. So if you make charges in February, and pay it in full in March, it shows those transactions as occurring in February.
I love all the subcategories you can create and the memos you can put. I put all our medical-related stuff under “Doctor” and then subcategorize out, “Chiropractor,” “Prescriptions,” “Pediatric,” “Dental,” and so on.
I’d like to put our car loan in there, but I’m not quite sure how. Maybe I’ll figure that out.
Thanks for tips on Quicken–I haven’t used it in a few years, so I’ll have to check into it again.
Maybe you’re locked, but not loaded. Is that possible?
I always thought housing should be about 1/4- but we do about 1/3 too.
So I looked around a little more, and it looks like lenders figure your total mortgage affordability as 28% of gross income, not one-third. Then they use a total debt ratio of 36%. So we’d actually be over for housing, but just within the total debt ratio, with the car payment.
Locked? You mean as in trapped? : )
Kristen,
When you set up a new account in Quicken, depending on which year of the software you have, it should have a wizard to amortize that account for you. That might be a good way to see what your remaining principle is on the car.
If you don’t have a new enough version, let me know. I think I have some CD’s laying around.