My 1st Million At 33 – yes, you can do it too

I am not sure how many people pay attention to the physical location of your workplace, but in the long run, the geographic location often exerts an effect on your money.  As a general rule, salaries are lower at places where living expenses are lower.  There seems to be zero advantages to live in a bigger cities with all the traffic jams and polluted air when all of your additional earnings simply go to taxes and higher expenses.  However, zero advantage is only true if you rent, and also if you cannot save any money.  In other circumstances however, higher earnings with higher expenses is advantageous for the following reasons:

1. If you are able to make life quality sacrifices, you will be able to save more money simply because the total amount of your expenses is bigger in cities rather than in countryside.  Cutting 10% out of a $2000 budget is $200 while cutting 10% out of a $1000 budget is only $100.
2. If you are able to buy a home (in a normal housing market, where mortgage payment is closer to the prevailing rent), all of your higher rent money now goes into paying off your home.  Now at the end of the 30 year mortgage term, instead of paying off a $250K home, you pay off a $500K home instead.  Your networth in housing assets over a 30 year period is now twice as what it would be.
3. In a big city, there are other side financial benefits in terms of more career and networking opportunities besides your regular job.  And if your wife works, she can also have better job opportunities.

Here is a couple of circumstances that it will work against you instead of for you:

1. It is financially worse to live in a bigger city when you are already running up your debt month after month.  Why?  Same reason.  Instead of running up $100 debt in smaller cities, you will run up $200 debt instead.
2. Buying homes at the height of bubble will hurt you more because the absolute number is bigger.  Especially when you cannot make the mortgage payment, you will lose a bigger amount of down payment (if there is any) that you put into the house purchase.

At last, one of the biggest advantage of living in a big city is that usually you can move to a cheaper city while maintaining the same living standard, but not vice versa.  Knowing this, you can work in a big city when you are young, and retire at countryside when you are old.  The money that you saved will go much further in countryside for your retirement.  Your wealth actually increases after the move, even though the amount of your money doesn’t change.  The wealth effect is much bigger if you are willing to consider international moves.

Of course, money is not always the first priority.  But if you are able to tolerate city life, and is willing to make some sacrifices to save more money for later, taking a job in a bigger-pay-bigger-expense city is probably good for your money in the long run.