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I currently work as a data scientist and earn $80k per year. With a little under three years of full-time experience, most companies would classify me as either a junior data scientist or a data scientist.
According to the job site indeed, the average salary in the U.S. for a junior data scientist is $90,923:
And for data scientists, the average salary in the U.S. is $126,613:
If I narrow down my search results to just my home state of Ohio, I see that the average salary for a data scientist is $106,178:
And within Ohio, the average salary fluctuates quite a bit from city to city:
Average salaries for data scientists range from $80,345 in Mentor up to $116,364 in Cleveland:
Yet, none of these cities come close to the national average salary of $126,613 for data scientists.
Does this mean I should move to a bigger city like San Francisco where the average salary for data scientists is over $152k?
To answer this, let’s run some numbers.
Cost of Living: The One Factor That Can Cancel Out a High Salary
The financial site Nerdwallet has a neat Cost of Living Calculator that lets you compare the cost of living between two different cities. If I type in my current city of Cincinnati, OH and compare it with San Francisco, CA based on my salary of $80,000, I find that I would need to earn $160,840 to maintain my same standard of living:
This is because the cost of living is twice as high in San Francisco as it is in Cincinnati. In particular, the housing costs are 326% higher according to Nerdwallet:
The median two-bedroom rent in Cincinnati is $978 while the median two-bedroom rent in San Francisco is $3,917. Likewise, the median home price in Cincy is $290k compared to over $1.2 million for San Francisco:
Along with higher housing costs, it turns out that gas, food, entertainment, and healthcare are all considerably more expensive in San Francisco too:
Comparing Savings Rates
I currently bring home around $60,000 per year after taxes from my day job. I also spend around $24,000 per year. This means I’m able to save around $36,000 per year and my savings rate is about 60%.
Let’s assume that I could move to San Francisco and land a job as a data scientist earning the median salary of $152k. According to the SmartAsset Income Tax Calculator, I would bring home roughly $100,000 after taxes.
Let’s also assume that my annual expenses would double to $48,000 since the cost of living is about twice as high in San Francisco as Cincinnati. This means I would be able to save about $52k per year and my savings rate would be about 52%.
In summary, I can save about $36,000 per year from my current salary in Cincinnati and maintain a savings rate of 60%. If I moved to San Francisco and earned the median salary for a data scientist, I could potentially save $52,000 per year but my savings rate would drop to 52%.
Location Makes a Difference
One potential strategy I could use is move to San Francisco (or a similar tech hub) and increase the amount I’m able to save each year, then simply leave the city and move somewhere cheaper (like Cincinnati) once I decide to quit my 9-5 job. I have met several people in the personal finance community who are currently living in expensive cities simply to earn a high income for a few years before they decide to quit and relocate to a cheaper location.
This idea is appealing to me and I would potentially consider it. It’s important to keep in mind, though, that I’m using a ton of assumptions when I run these numbers. It’s possible that I wouldn’t earn such a high salary in San Francisco.
For example, if I was only able to land a salary of $120k, I would only bring in about $82k after taxes. With annual expenses of $48k, I would only be able to save $34k per year in San Francisco, which is actually less than I’m able to currently save in Cincinnati.
In theory, it sounds like a great idea to move to a tech hub like San Francisco and double my salary, but it’s important to keep in mind that I would only benefit financially if I was able to save as much of that salary as I’m able to save currently in Cincy.
If you’re someone who is considering moving to a different city to earn a more lucrative income, I encourage you to run the numbers first.
It’s certainly possible that you could boost your savings and turbo-charge your path to financial independence with a higher salary in a new city, but keep in mind that the amount you save matters more than the amount you earn. You might actually be able to save more on a lower income in a cheaper city compared to a higher income in an expensive city.
As Dave from Accidental FIRE recently wrote, there doesn’t exist one “correct” path to financial independence. Perhaps moving to a new city and boosting your salary could be the right financial move for you. Perhaps not. No matter what you decide to do, always run the numbers first.
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