Get Rich in “Expensive Cities”

Food, Transportation and Housing. Those are the three big expenses you will have each month. If you can manage to keep these low, you can save a lot of money and retire early.


Food is pretty easy to control. Outside of Manhattan or downtown San Francisco, groceries aren’t all that expensive. I live in San Jose, part of expensive Silicon Valley. But my groceries are cheaper than in my small hometown 100-miles east.

If you’re American it’s hard to complain about your grocery bill too much. Sure, beef shot up in price but outside of rib-eye steaks, it’s not that bad. Even compared to our Canadian neighbors, groceries are very cheap.

We buy 90% of our groceries at Costco and most items are a great deal. My wife and I eat like royalty for $250-400 depending on the month. This wouldn’t change if we lived in cheaper large cities such as Houston, Tampa or Charlotte. Living in an expensive city has almost zero impact of our food budget. Going out to eat is a bit more expensive, but you shouldn’t be doing this more than once a week if you’re serious about early financial independence.


Next we have transportation. Guess what? A new car in the Bay Area costs the same price as one in Scottsdale. But why are you buying a new car anyways? This is a personal finance blog! Telling me you’re buying a new car is like telling a liberal professor you’re voting for Trump.

So we’ll buy a used car. Again used car prices are about the same in expensive cities as they are in cheaper cities. There are deals everywhere. I found my car in San Jose for $1,500. I’ve been driving it for almost four years at little expense. And if you live in San Francisco or NYC, you shouldn’t even have a car. What’s the point of living in these expensive cities if you cannot walk or ride a bike to work and entertainment? 


Housing on the other hand, is definitely more expensive in big cities. But your increased salary should more than make up for this! You should be making much more in San Jose than in Smalltown, USA. A friend of mine moved from Sacramento to San Jose for a job offer. He had a big apartment for $1,000 and now he has a room in a townhouse for $1,200. But he’s also making $30,000 more! I would say that’s worth it.

Another friend of mine lives in a nice part of Ann Arbor, MI. Rent is around $1,300 for a one bedroom apartment. That same apartment would be about $2,000 in San Jose. OMG, $700 more?! But is $8,400 extra per year really that much? The average Silicon Valley salary is tens of thousands more.

Renting in a high cost of living area, while making higher wages, is the most straightforward way to reach early financial independence. My wife and I looked at moving to Texas or Florida to save money. We quickly realized that rents there weren’t that much cheaper. And we would make less money! 

People who buy houses in expensive cities are allowed to complain. My neighborhood has some 1200 sq ft houses starter houses for the low price of $600,000. The average house in my county goes for over $1,000,000 which is sure to get you a decent townhome in Mountain View or a tear-down in Palo Alto.

People are buying these houses for different reasons than the rest of the country. They enjoy some of the best weather in America but are mostly just praying for appreciation. Unless they plan to stay decades, I think it’s much better to rent here.

Let’s use my neighbor’s house as an example. The former owner bought the house decades ago for next to nothing. They were renting this 1100 sq ft two-bedroom, one-bathroom for $1,800 per month. This is cheap or expensive depending on where you grew up. At first I thought this was a lot of money but now I think it was a steal. The owners were getting older so they decided to sell it. It fetched almost $500,000.

My neighborhood is decent but nothing special. The most this house could rent for is about $2,500. However when factoring in the mortgage, property taxes and maintenance: you would lose money renting it out!

The only people who are making money renting houses in San Jose are the ones who bought decades ago. All the new owners are buying in hopes of appreciation. Or because renting is throwing money away. FOMO is real.

It shouldn’t surprise you that I have a better idea.

Why don’t you live in an expensive city because that’s where you will make more money? While in the city, you cook most of your meals. You drive a Japanese beater or ride a bike. You rent a room if you’re single or a small house/apartment if you’re married. Then you save all you can.

The difference in price to live in an expensive city versus a smaller town isn’t as much as you think. Once you’re in the big city you can complain like all of the other locals about how expensive it is to live here. You can talk about wanting to upgrade to a $1.5 million dollar house because the school district is really great. But instead of saving for that down payment, you’re secretly saving and investing twenty five times your yearly spending to get out of here.

Retire and travel the world or buy a house? Pretty easy decision.

This article has 7 comments

  1. Stephen Reply

    You can get rich in those cities but it’s the entry level jobs that really suffer in those locations. I’ve seen the same in the oil boom towns in northern Alberta. You can definitely leverage a successful career in a boom but minimum wage rarely changes unfortunately for some.

  2. getrichquickish Reply

    Totally agree with this. I live in Seattle, a city most would consider expensive. I had an opportunity to move to Salt Lake City for work recently. At first glance I thought this would be an amazing chance to get ahead financially, by moving to a lower cost of living city. But upon closer inspection the price of housing in SLC wasn’t *that* much less that Seattle (plus WA doesn’t have a state income tax). We stayed in Seattle because even though it’s more expensive, I’m still able to build my net worth faster here.

  3. Julie @ Millennial Boss Reply

    We moved to the Bay Area to lock in the gains of the higher salaries. If you can find a way to hack cost of living here while making more, you’ll probably end up further ahead than staying in a low cost of living area – or that was our strategy at least. We’re maxing out all of our accounts here and jobs have great benefits. I miss the chill Colorado vibes and having more space sometimes though.

  4. Why We Don't Own Real Estate - Steveonomics Reply

    […] I love renting because I can leave at any time. I don’t have to mow the lawn. I don’t have to paint the house. I don’t have to repave the driveway or fix the roof. I’ll happily clean the inside of the house, change light bulbs and unclog my sink or toilet but that’s about it. Renting gives me a huge degree of freedom and control. Also, I live in the Bay Area mainly because of the hot job market. […]

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