The Cupertino $90,000 Challenge (San Francisco, Santa Clara, Santa Cruz: apartment, for rent, health insurance)

[NoMoreSnowForMe]

Okay, my latest pet peeve is hearing constantly on these forums about how people need to make a million dollars to be able to afford to live here.

Recently someone posted that they will be moving to Cupertino with a salary of $90,000 for a family of 3. Only the one salary, so mom can stay home. People responded that that isn't enough money. I don't understand that. I'm hoping you all can explain to me what people are spending so much money on.

Here's what I see:

If they were to rent a 2 bedroom apartment at 30% of their gross income, that's $2500/month. I see lots of 2 bedroom apts in Cupertino in that price range:

SF bay area apts/housing for rent classifieds - craigslist

And of course, they could always choose to commute from somewhere cheaper, but let's stick with Cupertino.

Let's say they're in the 28% tax bracket = $64,800 net after federal withholding. CA tax 9.3% = $8370 (not sure if I'm calculating this correctly, but will go with it, as worst case scenario) $64,800 - $8370 = $56,430 net.

$56,430 divided by 12 = $4702.50 take home pay each month. Less $2500 rent = $2202.50.

Then what?

Car payment $500
Car insurance $200
Gas (2 tanks since living where work) $100
PG&E $100
Renters Insurance $30
Groceries $400
Phones $200
Cable/Internet $200

This leaves $470.00 at this point.

Obviously, you can save $500/month if you get rid of the car payment. Cut out HBO and go with Netflix, will save you even more. A stay at home mom should be able to feed the family for less, too, since she can be home to prepare meals. There are 2 bedroom apts in Cupertino for much less than $2500, too.

But, okay, if I've figured the tax right, you can't live high on the hog on $90,000 in Cupertino. You won't be buying Gucci apparel or be going out for expensive meals regularly.

I still say it can be done, though.

Discuss, please.

[thetrb]

Not sure if you included that anywhere but what about the following 2 items:
- Health insurance
- Retirement savings (401k)

[NoMoreSnowForMe]

Originally Posted by thetrb

Not sure if you included that anywhere but what about the following 2 items:
- Health insurance
- Retirement savings (401k)

No I didn't, although I mentioned $500 could be saved without a car payment.

I don't pay for my health insurance, so I'm not up on what it costs these days. Could you give a budget amount? Hubby will be working for Apple, so am wondering if insurance would be paid by employer?

[thetrb]

Usually there's a per paycheck deduction for health insurance at tech companies. Health insurance alone will probably be somewhere around $150 per paycheck, but there are other insurances (vision, dental, life), so I would budget that at $200 per paycheck, or $400 per month.

[roadwarrior101]

How about the kid's 529 college plan? They're estimating that if you want to save up enough for college, be prepared to stash away $500/month for a public school or $1,000/month for a private school. Perhaps its not important that your kids are straddled in student loan debt, but it is for me.

What about an occasional night out? Going out for dinner isn't cheap and while it shouldn't be done all the time, its a way to keep your sanity. What about the occasional vacation, or are you content being house poor?

What about clothes shopping? Do you expect your clothes to last forever?

Are we also to assume that you have no credit card debt, student loan debt and an adequate emergency fund?

You probably don't need to make $1M/year for a middle class lifestyle, but I also think others do not fully take into account all of their expenses.

[capoeira]

Originally Posted by NoMoreSnowForMe

If they were to rent a 2 bedroom apartment at 30% of their gross income, that's $2500/month. I see lots of 2 bedroom apts in Cupertino in that price range:

SF bay area apts/housing for rent classifieds - craigslist

And of course, they could always choose to commute from somewhere cheaper, but let's stick with Cupertino.

It is possible to "survive" living in a crummy apartment in Cupertino on only 90k a year but in most places in the country that income would buy a fabulous house in a great area. 90k a year in Cupertino will buy a what is a 40k per year lifestyle in most parts of the country.

[Zeya]

$400 for groceries is unrealistic, even for one person let alone a family of 5. Also, there are more paycheck deductions than just taxes.

[karwosts]

Your tax estimation is way too pessimistic. 28% tax bracket doesn't mean that you chop 28% off of your salary.

Considering your standard deductions, marginal tax brackets, child tax credit, your fed tax will probably be $8000-$10000, not $25000. California tax would also be reduced by a similar proportion (probably around $4000-$5000).

[eureka1]

Car repairs? Unexpected expenses? Travel/recreation? Sounds pretty tight to me.

[NoMoreSnowForMe]

Okay, based on what has been suggested, here's a revised budget:

$90,000 - $9,000 fed taxes - $4500 CA taxes = $76,500 net. = $6375 monthly take-home pay.

Let's say they want to save up to buy a house, so they're willing to compromise a little bit on the apt. Here's one for $2300 nicely renovated, and the kid can even have a cat and a swimming pool:

Great Location Cupertino-RENOVATED- Be the first to use NEW appliances

$6375 - $2300 = $4075.

Car payment $500
Car insurance $200
Gas (2 tanks since living where work) $100
PG&E $100
Renters Insurance $30
Groceries $800
Phones $200
Cable/Internet $200
Kid's college fund $500
Other payroll deductions including health care $400
Student loans $500

Total of above = $3530

This leaves $545.00

I'm not including credit card debt because that shouldn't be part of a budget - as in living within your means.

I still say get rid of the car payment. Get a nice used Toyota that will run forever - or at least until they buy their house.

Then you've got $1045. We'll keep HBO because they're going to be staying home more to save money. I also say you can feed a family of 3 with mom staying home for much less than $800/month, but we'll leave that.

Let's say they save $500/month. Now there's $545 left for clothes, going out to eat, etc.

I also question the college fund, as the kid could live at home and go to CA public schools close by. 2 years of community college, then transfer to CA university. This was the choice I gave my daughter. She could live at home for free, or get a job if she wanted to move out. She got a job and roommates.

I did look at house prices in Cupertino, and buying a house there with a salary of $90,000 would be about impossible, unless they've already got a hefty savings account, sold a house before they came here for instance.

So, you could rent in Cupertino and live fine, but buying is doubtful. There's also not a lot left over for going out or on vacation. To me this is no big deal. Drive 30 minutes to Santa Cruz and you're at a vacation destination. Take public transportation to San Francisco and walk around the wharf. We live in paradise. Why fly to Hawaii?

So, they rent in Cupertino, save up, budget on groceries, get an older Toyota, enjoy HBO at home, and eventually buy a condo in Santa Clara. Still sounds pretty good to me.

But, as far as the $90,000 challenge goes - it won't buy you a house in Cupertino. I see that now.

Thanks for indulging me everyone. Feel free to continue commenting, please.