Is Cost of Living overstated?
New York City is high cost-of-living, and I have absolutely no clue why people live there.  It's a tough place, and the taxes are oppressive.  People buy a studio apartment for $150,000 that has 175 square feet (that's not a typo) plus a $700/month maintenance fee that continues after the mortgage is paid off.  And that's just what the fee is now. Our rental house (which used to be our primary residence) at 1,300 square feet has a (15-year) mortgage payment of about $800, and $1,000 per year in property taxes.  And my area isn't particularly low cost-of-living. High cost-of-living is just that.  More money flies out the door just for the privilege of living there.  You make good investments with real estate by buying property at a good price in a good location.  Those deals are everywhere, but in high CoL locations you're probably more susceptible to price fluctuations which will trap you in your property if your mortgage goes underwater. Anyway, that's a long way of saying that I don't buy your recommendation to get property in high CoL areas.  There are desirable low CoL places to live, too. "I do not believe there is a strong correlation between CPI (Consumer Price Index) and housing value appreciation. Take, for example, New York City which has the highest CPI in the US.  A great deal of the CPI number is skewed by Manhattan.  One can live in Brooklyn or Queens and avoid some of NYC's high CPI.  I would say that housing appreciation occurs because of the human activity in the area.  That same human activity is what drives the CPI.  There are other contributing factors, like limits on economies of scale.  You simply cannot set down a Super Walmart in much of NYC, so goods are distributed over a larger number of stores.  (Sure, NYC is a port city, but the goods are distributed within the city by trucks.) The San Francisco Bay Area is another high CPI area in the US.  Here, as well, it is the location that draws people.  While NYC is mostly about economic activity, the SF Bay Area is a mix of the draw of a great location and the economic activity that occurs due to the large number of people living there.  I know of a house in Oakland that sold for approximately $350k, in 2004/05.  It was located not too far from the ""Killing Fields,"" as they were known locally.  It was not the worst neighborhood in Oakland, but it was not very far from it.  This was for a shabby, single-story unit which I believe had 5 (maybe 6) rooms.  That is a lot of money for a house that required a lot of attention and was in a bad neighborhood.  I have no idea how the housing market is after the housing bubble, but the higher value areas had the most room to fall and many of them fell hard. Ultimately, it is supply and demand that determines the CPI and housing values.  This supply and demand is determined by the human activity in the area and some practical considerations regarding the area. A final note: If we are talking about a primary residence, it should not necessarily be looked at as an investment.  First and foremost, it is a necessity.  Second, if you need to hire people for the maintenance and/or upgrades, that will eat into your gains.  Contractors are not cheap, especially where they are in high demand.  Finally, the tax incentive is actually not that great.  Sure, you take what you can get, but its impact is relatively marginal." I live in Upstate NY. It's a great, reasonable cost place to live -- provided that you have a job.  In NYC, there are probably a few hundred jobs with duties similar to mine in a 45-minute radius. Upstate, there may be 5-6. "after 30 years, you'd have a million dollar house vs a quarter million dollar house. You've captured three quarters of a million dollars in rent, given my napkin math hypothetical. As I figure the math, a 250,000 house appreciating to a million dollar house in 30 years requires a sustained ~4.9% appreciation every year--seems unrealistic. The historical rate of inflation, on average, has been closer to 3-3.5%; a 3% appreciation would give a final value of $589k.  This also doesn't taken into account the idea that you may have bought a property during a housing bubble, and so then you wouldn't get 3% year-over-year returns. But also, in terms of ""capturing rent"", you are not factoring in necessary or possible costs that renting doesn't have:  mortgage interest and insurance, maintenance, property tax, insurance, buying and selling associated fees, and, importantly, opportunity costs (in that the money not tied up in the house could be invested elsewhere).   So it is not such a slam dunk as you make it out.  Many use the NY Times buy/rent calculator to compare renting vs. buying." I'm not convinced that cost of living is related to ensuring greater appreciation of assets over time, especially over a 30 year window. The importance of regional differences in cost of living to anyone's decision-making should be weighted by the percentage of their income spent on indexed items.  That is, for people who spend 35%, or even 50% of their salary on indexed items, regional variances in cost of living are far more important than for people who spend 10% of their salaries on these items.  Essentially, as income goes up, the significance of cost of living goes down. See http://macromon.wordpress.com/2011/02/02/how-u-s-income-groups-get-squeezed-by-food-prices/ for a pretty picture of the relevance of cost of living across income groups (for food & gas, which are often not included in indexes due to volatility).  So, if you are wondering whether cost of living is overstated, perhaps it's because you are in an income group that doesn't need to worry about it as much.  Whether it's overstated or not will depend on how much one makes and spends. "You mention: High rent places are usually also high   property value places. Given the tax   incentives, it seems like a good long   term idea to grab a house, so if we   assume you have the option of working   and buying a house in a high CoL or a   low CoL city, I think you'd prefer the   high cost. Because essentially, after   30 years, you'd have a million dollar   house vs a quarter million dollar   house. You've captured three quarters   of a million dollars in rent, given my   napkin math hypothetical. I think you're forgetting about some of the associated costs with ""owning"" a home, including:"
So my Question is this, in reality is investment in equities like the   stock market even remotely resemble the type of growth one would   expect if investing the same money in an account with compounding   interest? Generally no as there is a great deal of volatility when it comes to investing in stocks that isn't well represented by simply taking the compounded annual growth rate and assuming things always went up and never went down. This is adding in the swings that the market will take that at times may be a bit of a rude surprise to some people. Are all these prognosticators vastly underestimating how much savers   need to be socking away by overstating what is realistic in terms of   growth in investment markets? Possibly but not probably. Until we know definitively what the returns are from various asset classes, I'm not sure I'd want to claim that people need to save a ton more. I'll agree that the model misses how wide the swings are, not necessarily that the averages are too low or overstated. After driving through Texas last year, I really can't overstate just how many wind turbines there are, and how windy it is. I stopped at a little rest stop right in the middle of the state - in the middle of the day - and I was nearly blown over getting out of the car. And the number of turbines... Just amazing. Miles and miles and miles. It really looked like an endless landscape of turbines. If you think there is no complication in your application and you can easily satisfy all criteria you can do the process yourself without using any agent and save few thousand dollars. I have done myself. Another cost Chris forgot to mention is the medical examination cost which is mandatory. If your certificates and docs are non-English translation fees are quite high as well.  The immigration process is very bureaucratic and requires lot of supporting documents. As for living in Australia, Rent, Car and living expenses are high compared to US. But in Sydney and Melbourne you can rent near public transport, which isn't too bad (well not like Europe ). So having a car is not essential. Rent for a decent flat in these cities will be $300 - $350 p/w and you may have to pay 4-6 weeks as advance. You can get a lot of information from the dept. of immingration website. Yo, pede, are you triggered??!!   It's obvious you're profoundly based but you greatly overstate my case ... historically/traditionally/economically, **ANY** president's economy over the first 6-9 mos is driven by the president before him. This has nothing to do with the god-emperor &lt;laugh&amp;facepalm&gt; just historical economics. Certainly there are psychological factors in play, but it's not like flipping a light switch. There's an *enormous* financial mass operating here and it takes a good deal of time to move and turn.  So, we good bro?  (BTW, re: god-emperor, wasn't that the guy in the *Dune* book who took drugs so he could turn into a worm? Just sayin.) "I'll second what littleadv says about the ""entertainment"" expenses; they do seem high relative to your income.  The numbers for electricity and vehicle insurance seem high to me as well, but that depends on where you live and how you heat your house, etc., so they may be normal for your situation. You've got almost $500/month going to debt payments (vehicle, window replacement, and student loan).  You didn't list the credit card payments on there, so that will add to the debt payment amount.  Finding a way to get those debts paid off as quickly as possible would free up a lot of cash flow.  You could consider trying to find extra income (second job, your wife getting a job or finding a way to make some money from home, sell some things, etc.) I'm wondering about the things I don't see here: food (including restaurants), clothing, fuel, maintenance and repairs (both car and house), etc, etc.  With the numbers you list above, you have money left over every month, but when you add in the things I just mentioned, that may not be the case. I suggest that you keep track of all of your expenses for the next month to see what you're really spending (including the things not listed here).  Then, using that information, make a plan for the following month (and every month thereafter) about how you're going to live on what you bring home.  Just tracking your expenses will likely show you some areas where you could easily cut back on spending.   Also, I recommend that you start working on a plan to increase your income, both temporarily as I suggest above, and longer term by focusing on your career direction.  You are above the poverty level (assuming you live in the US), but below average in income." In places like the midwest city where I live, this is false, the cost of living is low.  I pay 340 a month, have a yard, kitchen, own bathroom, jam room, bedroom, own shower, great neighborhood downtown etc.  When I started out, I made minimum wage and lived with roommates in the same nice neighborhood.   This is just false. "&gt; I've done the math  Look, your random assertions are meaningless.  Show your work.   Edit: Oh, and by the way, compare the bay area (which has a federal [""low income"" limit of about 105k](http://www.mercurynews.com/2017/04/22/in-costly-bay-area-even-six-figure-salaries-are-considered-low-income/) with [the rest of of the country](https://www.huduser.gov/portal/datasets/il/il2017/select_Geography.odn) where the low-income limit is closer to 40-50k for most states.   200k is also much more than 120k." So ... hotdogs shouldnt count either? What about cars? gasoline? Why shouldn't one off costs count?  Virtually everything I buy is a one off cost.   New and resold houses are being sold/bought every day.  The case and shillers housing index takes attributes from common housing and amalgamates the costs. So theres your perpetual gauge if you need one.   Its striking to me that perhaps the hugest cost in most people's lives, isn't considered when calculating inflation.   No wonder the housing bubble got out of control.