How can I survive in the Bay Area with $400k family income? Even with this kind of salary we are unable to buy a single family home in Cupertino. We want Cupertino’s good schools and shorter commute. Any suggestions for investments or business?
The brutal, complete answer: don't procreate. Sure, you may be the smart, thoughtful sort of person that humanity absolutely needs in its gene pool, but Silicon Valley doesn't want you in its gene pool: you don't make enough to own a house in a top school district. It's sending you a clear economic signal. So, you have two options.The first is to leave Silicon Valley. It's expensive, exclusive, obsessed with power and success with no concern for how they are achieved, and an utterly terrible place to raise children-- unless you want your kids to be the sort who bawl when you give them, as a 16th birthday present, a car that's "only" $35,000, because the doors "open like this instead of this". Unless you have no hope of getting a comparable income (say, $250,000 or up, considering cost of living) in Boulder, Chicago, Austin, Seattle, Boston, or New York... (ok, New York probably requires more than $300k to raise a family) I don't know why you would stay there. The Bay Area's fine when you're 22 and need to establish yourself, because the benefits of being in Corporate HQ if you work at, say, Google or Apple, are pretty massive. If you haven't made fuck-you money (so you can say "fuck you" to all the insufferable people in Silicon Valley, and even if they have more power and wealth than you, it doesn't matter because you have enough) by child-raising age, I don't know why you're still there. It's not a mark of failure to leave Silicon Valley. (Hey, I know plenty of really smart people and, statistically, most of them will never get anywhere close to $400,000.) It's a mark of good judgment. San Francisco is just OK, and the rest of the Valley is an overrated, unattractive suburban tract. Sure, the Bay Area has an incredible 3-hour-drive radius... Napa Valley, Big Sur, Yosemite... but, let's be honest, it takes a vacation to really enjoy a place like that and, if you lived elsewhere, the money saved on not paying Bay Area housing costs would easily cover airfare and hotels, anywhere you want to go. The second option, which is underrated, is not to have children. Suddenly, you don't have to own a house: renting's just fine. You want to own once you have kids, because it's good for their self-esteem to see their parents as owners rather than renters, but adults know that the difference between renting a place, and renting money to eventually buy it, comes down to mortgage rates and taxes at the time and isn't a mark of personal value. You don't actually become a different person when you're paying a mortgage instead of a rent check. If you're childless, school districts and private schools aren't on your radar, and you couldn't give a square root of a fuck about Stanford or Harvard's opaque and fluctuating admissions standards. Even in the Bay Area or New York, a childless couple can live pretty well on $400k per year. You can even (imagine this) save up money, go somewhere else, and retire. You can get a beautiful house in the woods of Pennsylvania for under $200,000. Or, if you don't like winter, you can go to Costa Rica or Mexico. You seem not to be having trouble "surviving" but with corralling the means to ensure a decent life for your children. The economic signal that our society sends is that it doesn't need or want more children. If it did, it wouldn't cost so much to set them up for a half-decent place in society. And, paradoxically, smart kids are far more costly than average kids. (An average, 100 IQ, person will be happy with an average-plus job and a middle-income standard of living. If you pop out a 150+, you need a fucking fist on the scale to get her an ability-appropriate job/position in society because she has to compete with all the smiling, drooling dumbasses who think they're what she actually is, and who have better connections and more family wealth.) The message is painful to read but clear. Society doesn't desire more children, and it certainly doesn't perceive a need for more smart children. There are too many people running around who think they are what someone like me actually is, and who have the connections to get the positions, and too few who can tell the difference.Let's say that you already have children or decide to have kids for subjective or spiritual reasons. That's fine. Nothing wrong with that. I haven't had any children, so I can't possibly evaluate the subjective benefits of having one. (I do love cats and dogs, though.) Then you have to step back and realize this: that house in the top school district is just a means to an end. There are other options: private schools, home-schooling, or high-quality public schools in less expensive places (possibly outside of the Bay Area). Your kid doesn't need to go to a pre-school with billionaires. She doesn't need Harvard, again, that's a nice-to-have but it's only a means to an end, and there are a couple hundred quality undergraduate colleges in the U.S. that, while they do less in terms of connections, do as much (and, in a few cases, arguably more) in terms of education. She needs, when she's in her 20s, to get a position in society and a level of respect that matches her abilities. In her first 10 years of work, she needs to be seen as a protégée rather than a subordinate, so that in the next 30, she can get things done instead of implementing others' shitty ideas. How you make this happen is up to you. The Cupertino pre-school won't hurt, but is it really going to make a difference when she's 25? Probably not. The typical Manhattan parent probably plows $40,000 per year for 19 years (pre-school through MBA school) into the child's education, plus 50 percent for social keep-up expenses (e.g., being able to travel with classmates). If, instead, the kid were sent to public schools and that money were invested in an index fund earning 4%, you'd have $1.66 million by that point. Personally, if I were choosing between $1.6 million than a Harvard MBA, I'd take the first. That might just be me, though. Now, obviously you can't just drop a million and a half on a teenager and say, "Go wild", because for every one who starts the next Facebook, there'll be nine who waste the money or end up dead. If you're giving up the structured wealth transfer of elite schools, you need some other structure that ensures that the money isn't wasted. Prestigious schools (as opposed to their public counterparts that are cheaper and often equivalent in quality, but don't deliver prestige and connections) provide a service of controlled inheritance, because most parents understand that dropping a 6- or 7-figure sum on a teenager and expecting him to turn that into the connections, freedom, and prestige that are achieved through prestigious education... has "unpredictable" results. So, I'm not saying that you should give your kids a huge chunk of cash at age 18, and obviously you want your kids to attend good schools (which don't have to be expensive ones). My point is that there's a spectrum of possibilities. What you could do is: move out of the Bay Area, get a decent house in a top public school district for $500,000 instead of $2 million, and use the money saved by not having a monster mortgage to bankroll your kid's first business (while requiring her to actually have a business plan that makes sense, because you don't want her to get things without working for them and learn the wrong lesson). To be honest, the only case where it makes sense to pay top dollar for schools, from a middle-class perspective, is college and professional school. And with starting capital of $50,000-- which is less than what it costs to send a kid to boarding school for 4 years-- you can have your kid "start a business" at 17 (it doesn't have to be a successful or big business, because little is expected from 17-year-olds) and make a case that does as much for elite-college admissions as any but the top 5 boarding schools.I understand the desire to give your kids every advantage in college admissions, starting at the pre-school level, but it's very hard to predict the "feeder" dynamic, because the preferences and advantages change all the time. In one year, colleges want "well-rounded" students, in the next, they want "spiky" (pre-specialized) kids. Sometimes, it's easier to get into Harvard from an average public school in Montana than from Stuyvesant (where, due to the bad luck of it being in Manhattan, you're competing with NYC day schools that have pre-negotiated, earmarked slots in all the Ivies) and well-to-do parents send their kids out into the mountain states in 11th grade to cop a regional advantage. (Yes, this actually happens. It doesn't always work, though. These parents assume that their kids will do better in college admissions as 99th-percentile students from a Montana school than 85th-percentile from Trinity... but the kids in Montana are smarter than these carpet-bagger parents realize and their kids end up only 90th-percentile from a Montana public, which is not Harvard-bound.) Other times, those preferences reverse and it's impossible to get into an Ivy from Montana. With all the opacity and the shifting preferences, you end up with is a system where, based on fear rather than data, people (if they have the means) pay huge amounts of money to put their kids into feeder pre-schools that lead to feeder grade schools that lead into feeder high schools that lead to prestigious colleges in order to get them good jobs. But maybe there are (or will be) other, less expensive, ways to get on the track at a later point, because the schools don't matter (as anything other than a means to an end) whereas the long-term effects of first professional entry do. Some kids go from Harvard to failure, and some go from state schools into great jobs (although the odds are obviously better at the elite college, and at the college level, spending the money is probably worth it). To give a concrete example of the general shiftiness of prestige and "feeder" advantages, I graduated from high school in 2001 and, on the East Coast, Stanford wasn't considered very prestigious. (College prestige was more regional than it is now.) Harvard, Yale, Amherst, MIT, Columbia, U. Chicago, Princeton, Brown... we'd heard of those. Stanford was somewhere in the same region as Michigan or Berkeley: a good school, for sure, but not eye-popping. In 2015, I don't know where Stanford stacks up in "prestige" (I don't have kids, I don't care) but a kid pretty much has to go to Stanford to have a chance at Silicon Valley. (Google admits people from other schools, but the good projects go to Stanford kids.) Ten or fifteen years ago, no one on the East Coast would have predicted that. Stanford beating Yale anywhere? No way. And yet, despite Yale's higher selectivity (yes, I know that Yale accepts a larger percentage than Stanford does, but that means jack shit) and stronger educational fundamentals, Yale kids apply to law school and Stanford kids get seed funding on the name of the school alone. My point is: 20 years out, it's pretty much impossible to predict this garbage, but you probably don't need to live in Cupertino in order for your kids to be eligible for decent jobs. At least, one fucking hopes that that is true. I'm guessing that there are multiple ways to get your kids what they really need. They need good jobs in their 20s, and elite schools two decades before that are just a means to that end. Okay, I'm done with this topic. I feel dirty and I need a shower. Good luck, OP.