SF vs. KC: Cost of living comparison

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Check it out at this link! You can view it live here!

Originally created for the post: ‘Why San Francisco real estate is actually pretty affordable’

What it is

This is a comparison of the cost of living in San Francisco (one of the most expensive cities in the country) against Kansas City (a reasonably priced midwest city). After understanding the cost of living by city, I took it a step further and compared what the financial situation would look like for someone in the 5th percentile of earnings in each city.

Why I created it

I wanted to understand whether San Francisco housing is actually affordable for those living here. This requires understanding both the cost of living, and the earning potential. Looking across the various household costs, we see that beyond the cost of housing, most other line items are pretty comparable to the rest of the country. When you consider that San Francisco earning potential is much higher, then the overall cost of living in the city is actually lower than other parts of the country as a percent of earnings. The 5th percentile San Francisco resident saves more money on an absolute and relative basis compared with the 5th percentile Kansas City resident!

Of course, the 5th percentile San Francisco resident is earning more than $350K per year. I realize that’s out of reach for anything other than jobs in tech, finance, entrepreneurship, and some professions. This is cold comfort for folks in more traditional lines of work.

How you can use it

Personal planning: Take a read and internalize some of the takeaways. Consider whether moving to a lower cost city will actually get you ahead of the game. Even after accounting for California’s higher taxes, and cost of living, the higher earning potential in the Bay Area can have a big impact. Certainly, if you have a company willing to pay you the same amount in SF or KC, then you might do better in KC, but that sort of situation is harder to come by.

Investment planning: Realize that, while expensive, real estate in the Bay Area isn’t unsustainable, assuming the technology trends continue. If you live here, perhaps consider buying your home to lock in those housing costs. If you’re an investor, keep an eye on Bay Area real estate. Even though cap rates are low, it could offer compelling returns if growth continues.

Good luck!

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