Double Journey

I recently got a message from this blog asking me if, two years later, I thought it was worth it to move back to California.

Before I get into this, I have to say it did not really occur to me that I have been back in California for two years until I got this e-mail.  I knew the two year anniversary of my job was coming up but it did not really sink in how long it has been until I got the message.  The past two years have been such a blur and it seems hard to believe I have been at this job longer than I was at Microsoft.  Maybe that says more about the job I have now compared to the one I had before.

Now on to the question.  Was it worth it to move back to California from Washington?  Ironically I answer this question the same day that it was pouring rain in Los Angeles.  But this makes my answer to this all the more certain.  Yes, it was absolutely to move back to California from Washington.

I was thinking about this as I rode the elevator to work.  I am in a very high skyscraper and the elevator has a television in it that I find myself catching news clips as I enter and leave the building.  On the ride down today, the news had “Storm Watch” flashing on the screen.  Now, after living in Washington for two years, I can tell you.  The rain wasn’t all that severe.  It came down hard, but it would be a pretty normal day in Seattle.  The reason this made me think of how good I have it is because weather like this is so unusual we make a big deal about it here.  This is the first time it has rained in the last several months.  Think about that for a second.  It is December and it probably hasn’t rained of any significance in several months.   I actually can’t even remember the last time it rained. You can’t buy weather like that.

Of course, that is not the only reason I am glad to move back to California (but it is a big part).  I’m happier with my job and I am glad to be around family and friends.  My wife is happier (weather affects her more than it does me) so that makes my life better.  So if I had to do it all over again, I would do it in a heartbeat.

But I caution anybody from taking my experience and translating it to your own.  My situation is unique in many ways.  First off, I grew up here.  The culture and lifestyle just really work for me since I grew up here.  Moreover, I have a base of friends and family here.  Moving out here, not knowing anyone, can be really difficult. I find it easy to make and meet new friends but this is not true for everyone and California can be a lonely place if you don’t have any friends or family.  But perhaps the biggest deterrent to moving out here has to be the money.  Can you make it work?  Moving to California with no money is not an easy tasks.  It is not easy even if you have money.  Housing is expensive and taxes will take whatever you have left.

My situation is likely not the same as yours.  I make very good money and I live very frugally.  While I certainly “miss” the money that California extracts from me, I probably will not miss it as much as those who live paycheck to paycheck.   The cost of living does not affect me nearly as much as it would other people.  And make no mistake about it, California has a high cost of living.  You combine that with our high unemployment rate and (still) high housing prices, and it can be a daunting financial burden.  This has gotten so bad, I have written how I think the California Dream is vanishing for many, even myself.

So while I have no regrets about moving back here this is not to say I won’t once again leave.  High taxes and high housing is driving me away, I’m sure it will drive others as well.  In fact, I had such a conversation with someone about this on Saturday.  But I’ll write about that in my next blog.

Living in California, and specifically Los Angeles, I know many people chasing their dreams of being in the entertainment business.  These dreams range from writing, acting, and of course becoming a famous musician.  The odds of becoming successful in any of these endeavors is minuscule but I think many of these people think if someone like Britney Spears can do it, why can’t they?

I had my own dreams growing up.  I wanted to be a professional basketball player.  For me, this dream ended long ago when it was clear I wouldn’t grow past six feet tall.  Needless to say, it has not been something that I have held on to. But for many people they continue to cling to their dreams despite severe financial hardship.  Most of these people cannot make a living chasing their dreams and this puts strains on themselves and their loved ones.

So what advice would you give someone chasing a nearly unobtainable dream?  I am not the type of person who would tell someone to stop chasing their dream.  I believe having dreams and refusing to give up on them are what make some of the greatest people great.  But I am also an extremely rational and practical person who believes at some point you have to take responsibility and get a real job.  In the specific case of my friend who made me think to write this post, he is currently out of work and she does not make enough to support the two of them.

I contrast this to my own current situation.  I have told my wife to go ahead and pursue her dreams.  She is going back to school with the hope of becoming an interior designer.  She will for sure make less money when she finishes school and there is the expense of actually putting her through school. But in the end I want her to do whatever makes her happy even if it doesn’t make any financial sense.  But of course our situation is different than our friend’s.  I make a very good living.  It is more than enough to cover our living expenses.  So her pursuing her dream has no deep financial impact on our family.

In general, I think the rules should be pretty simple.

• When you are single and only responsible for yourself, you can do whatever you want
• When you are in a serious relationship, pursue your dreams so long as it does not cause any financial strain (or resentment) on your relationship
• If children are involved, really time to put away impossible goals and buckle down.  Your children’s dreams are now your responsibility

At the end of the day, it really just boils down to your level of responsibility.  Like most things in life, the less responsibility you have, the more freedom you have to do what you want.  Family always comes first.

What do you think?  When do you stop chasing your dreams?  Have you ever known somebody who chased it too long and what did you do about it?

It has been hot in California the last few weeks.  It has been in the 100’s in some areas.  High 90’s in the others.

If you are like me, you are not able to sleep at night if it is too hot.  Lucky for me, I have central air-conditioning.  My problem?  The air works much better in the living room than it does anywhere else.  Further, the temperature sensor is also in the living room.  So to get my bedroom cold at night would require that I put the temperature insanely low in the living room.  For someone like me who hates waste, this is not an acceptable solution.

Those who follow my blog know how I feel about the lower standard of living my generation now has compared to the previous generation.   It just does not make sense to me that someone with my combined household income has to make some of the trade offs that I have to make.  I am not really complaining about it, it is just the way life is.  But it is something I find particularly interesting.

Anyway, the reason I bring all of this up is that this “heated” situation just makes it all that more clear that I have not yet “made it”.  To solve my hot night dilemma I have had to move my bed, or more accurate my mattress, into the living room.  I no longer have a living space, I have bed.  And to quote my fiancee, it just looks kind of “ghetto”.  We are making the most of it.  In many respects we like it even better this way (we can now watch the big TV in bed).  But it just puts me in my place of how much farther I have to go to have a truly comfortable and un-comprising living situation.   A household that makes in the top 5% of the US has resorted to sleeping on a mattress, in the living room, on the floor.  But hey, at least I have the mattress.

I have been writing often about California lately.  I have done this mostly because there have been many things on my mind, not the least of which has been if it is really worth it to live in California.  For the most part I think it is.  I love most of the things that California has to offer and I have many ties to the area.  My family is here, I went to high school here, and I have a lot of friends in the area.  But I have lived in three of the four corners of the United States and can honestly say that I think I can make it work anywhere I go (with the possible exception of Alaska).

So if I love it here so much why would I consider leaving?  Well, California has been in the news a lot lately, most of it not too good.  There have been several articles wondering if the allure of California is fading.   With the budget crisis the way it is there is little doubt in my mind that a tax hike is around the corner.  Considering how high the tax burden already is, I am in no mood to see even more of my paycheck go out the window.  Unemployment is high and the opportunities for me in the area are somewhat limited.  While I like my current job, I don’t know if I will be there five years from now so I am just planning ahead for what I will do down the road.

Of course one of my biggest problems with California will come to no surprise to my loyal readers.  The cost of housing.  It is still way to high.  Most of the homes in my area are still asking for $500,000.  They are nowhere near worth that.  But even if prices come down another 20%, the housing would still be overpriced.  On the eve of my marriage, I have to look at the situation and ask myself, “Is living in California worth reducing my standard of living?”

I know that I can make just as much salary wise in other parts of the country as I can here.  In fact, in many areas I might even have a distinct advantage given less competition for jobs.  So what is someone like me, a young successful mid-career professional supposed to do?  Do I continue to pay high taxes and live in a small rented apartment?  Or should I consider moving to a state like Texas which has a very low tax burden (no income tax at all) and very affordable housing?  I did a quick search in some of the bigger metropolitan areas like Houston and Austin and there are many houses that I could pay cash for.  For houses in the price range I want to spend, I could easily find a four or five bedroom house for what I could get a condo for here.

Yes, I know what the argument against is.  I would have to live in Texas.  But seriously, I’m sure it is not all that bad.  Most of the people I know from the area speak highly of it and would go back if the right opportunity came along.  I’m not saying I’m going to move there or anywhere in the next year, but it is something I would have to consider.  it is something I would have to consider even sooner if California did something stupid like raise taxes yet again.

California’s budget was finally passed last night.  The thing is nobody is happy about it, and that is probably a good thing.

Budgets are hard.  It is not something that most people understand.  I have to deal with this at work all the time.  I have a budget for the department.  I cannot simply spend more than my budget.  No matter how much work there may be I cannot just go hire a new person to do the work.  I have to to be very sure that the benefit of hiring someone, buying a new computer, or sending someone to training outweighs the problems that breaking the budget brings.  If it is not everyone ends up paying for it as the company will miss profit numbers and that results in budget cuts, i.e. layoffs.

This is a classic economics problem.  Economics deals with how to allocate limited resources against unlimited wants.  Nobody in California thinks they should give up their budget.  But California spends money on three major things.  Education,  health care, and law enforcement.  Of course nobody wants to take money away from teachers, nobody wants to turn sick people away, and nobody wants to free prisoners.  So given that, where do you expect California to cut?  When you have a budget gap like California, you cannot make a dent in it if you do not cut from the biggest ticket items.  And this is what California has done.  What else could they do?

As much as I love living here, I have to admit that things are not so great for some.  Unemployment is over 10% in the state.  Housing is still way too expensive.   Taxes are going to have to rise more than they already have (Sales tax is 9.75% in many areas).  So many great reasons to be here.  But for some, especially those in my age group, the negatives are starting to outweigh the positives.

I looked at some housing prices this weekend.  I’m not really in the market but I like to keep tabs on where things are.  I have noticed that there are a lot of new “For Sale” signs going up in and around the Pasadena area.  I think most of this is people getting ready for the summer selling season.  I think a lot of people held off trying to sell in the weak market that we have had in the last year but people can’t wait anymore so here comes the inventory.

But when I look at housing, I think about the saying with regard to the dehydrated man stuck in the middle of the Ocean.  “Water, Water everywhere without a drop to drink.”  While I am interested in housing and there seems to be a lot of inventory, there really is nothing to buy.  How did I come to this conclusion?

I just did the math.  I pay $1700 for my two bedroom apartment.  I admit that it is a pretty good deal when you factor in where I live but I don’t want to be spending way more than that right now.   Doing the math backward, I looked at houses with mortgage if I paid $2000 per month.  That comes out to a $300K mortgage.  Factor in a down payment, and you get a house of around $350K.

My search criteria was simple.  Find me a single family starter home in the $350K range located in Pasadena that has at least 3 bedrooms.  I think there was something like 3 listings.  All the close neighborhoods east are worse as they are even more expensive so there were no listings there.  West in the Burbank area?  Only a handful there too.

No way housing should still be this high.  All I want is a decent starter home and there is nothing within a halfway decent range.  So I’m staying out of the market looking for something to do with all this cash.

One thing that I have thought about over the past few weeks seems to be this bifurcation that seems to be taking place between those who are struggling in this economy and those that seem to be doing just fine.

In the news, I continuously here about how ordinary Americans are struggling.  Unemployment is nearing double digits in most parts of the country.  It is even worse around here as California is above 11%.  The U.S. is printing money to cover up the problems and big companies like GM and Chrysler are going under.  It seems all is doom and gloom depending on where you are looking at things.  Of course there are the “green shoots” that we all want to see.  This is the reason that the market rallied over the last ten or so weeks.  We are up over 30% from the lows because the market has decided that we are not going to reach armageddon.   But if you really read the news it does not look good for most of your average Americans.

But I get the feeling that we are really coming down to a society of the haves and the have nots.  Throughout all this bad news the one thing that has really struck me is how little some things have not been affected.  I went to the mall this weekend and it was pretty crowded.  Of course I have no idea if people are actually buying things.  Maybe they are just looking and needing to get to the malls to get away from their problems.  But I’m definitely not seeing the scracity of people I would expect to see.  It was the same thing this past holiday season where the malls and outlets were much more crowded than I would expect given the dire situation much of the nation faces.

For more proof just look at the movies.  Hollywood is having a fantastic year at the box office.  People are going to see the big blockbuster movies like Star Trek  and Terminator.  By many accounts, this might be a record year for Hollywood.  Now much of it is due to higher ticket prices but that in itself is a good sign.  It is not easy to raise prices if there is no demand for your product.  And clearly there is demand.   With ticket prices over $10 in most places, I would expect this to be a luxury most people skip as times get rougher, but that doesn’t seem to be the case.

Now everything I’ve written is mostly anecdotal.  Maybe people are really cutting back and I’m just seeing it from a different perspective.  But it has me thinking.  Maybe this recession is hitting the population in very disproportionate ways.  Most people would immediately jump to a rich vs. poor conclusion but I’m not so sure.  If that were really the case, I wouldn’t be noticing the activity I am seeing simply because the “poor” should greatly outnumber the “rich”.

So what is it?  Are things really either that good or that bad? Who do you think is most being affected by this recession?

Yesterday, my fellow Californians defeated a series of ballot measures aimed at “fixing” the budget crisis that California now faces.  Sadly, this is the second budget crisis California has faced in the last several months.  Just a few months ago, our government proclaimed we had a $40 billion budget deficit and enacted a bunch of new measures to close the gap.  This included a 1% increase in the sales tax.  Something I wasn’t too happy with.

But now California supposedly has another crisis on its hands and the only solution this time is going to be to make spending cuts.  What a novel idea.  Gee, we don’t take in as much money as we used to, what should we do?  Seems pretty logical to me but I guess logic is not one of our goverment’s defining characteristics.

I’m not saying budget cuts are easy.  I’m not saying that I want to see large class sizes and less police on the street.  But at the end of the day, you have to face reality.  I’m sure it was pretty painful for your average Joe to have to give their dream home they “worked” so hard for (notice the quotes since I don’t think many American’s worked all that hard for their house) but when the pink slip came and the money was no longer coming in, Joe had to give up the house.  Joe probably had to give up many other things to and I’m sure it hurt.

I’ve never found living within my means to be a hard thing, but that’s probably because I never lived above my means.  I only wish our federal government had to be more like our state government.  I only wish they had to find a way to trim the fat rather than just print money.  I know some people may think that printing money sounds like a nice painless solution but believe me its not.  It just delays the problem until later.  It not only delays it, it actually grows it.   Money only has value if there is real value behind it.  Unfortunately for all of us savers, our dollars are starting to lose their vlaue.

Moving anywhere with no money can be a pretty daunting tasks.  Moving to a state like California can seem downright impossible if you do not have any money.

One of the more popular ways people come to this site is looking for information on how to move to California if you have no money.  I have actually never blogged about this, I blogged about the advantages California has as a place to live, but I think it is a pretty interesting idea so I decided to actually write a blog post about it.

First let me say I think it is impossible to move anywhere with absolutely zero money.  There are just cost associated with any move so you are going to need some amount of money, even if it is just to pay for the bus ride here. So rather than talk about moving to California with absolutely no money, I am going to talk about what would be the absolute cheapest way to get and live here.

I also want to address one other issue.  Are you sure you want to move here?  I have left and come back to California three different times so I am well aware of the advantages of living here.  If you are planning on moving here with no money, it seems you are pretty desperate to move here and are probably running away from something than running to California.  While I love living here, I have lived in many other places and would say that most places are livable.   It is a much better idea to continue to live in your current area, save some money, and move to California when you have some means than to try and move here with nothing.  Moving to California will not be some sort of magical cure that fixes all of life’s problems.  In fact, moving here with no money will cause you a lot of problems that will probably be worse than almost anything you are now facing.  It may not seem like it, but being broke in an expensive place to live is no fun either.

If you are still set on moving to California, keep reading. Be prepared to leave everything behind. I do mean everything.  If you really have no money to move to California, you do not have the money to haul your stuff over here either.  Not having stuff means you can save on moving cost and you can have a smaller place.  It also means you can sell all your stuff and raise some money to actually get here.  Put all your stuff on sale on Craigslist.  If you own the computer you are reading this on, you should put it up for sale.  If you own an iPod, you should put it up for sale.  You might not get a great deal for your stuff but it will put money in your pocket and that is the most important thing right now.

So now you have nothing to burden you down and you (hopefully) have at least a few bucks in your pocket.  The very first thing you have to worry about is not getting here but where you are going to live when you get here.  This is your biggest problem.  You have to have somewhere to live.  It is not OK to come here and go live on the street.  If at all possible, you want to find a temporary place to live that will not cost you anything.  Why?  Because to get a place to live you have to have a job.  But to get a job, you often have to have a place to live.  It is a vicious catch-22.  Find or make a friend here that you can crash on their couch for a while.  Find a long lost relative who might be willing to put you up for at least a month.  Whatever it takes, you need to find a place where you can live for very very little money.  This likely has to be with someone you know because no landlord is going to take you in with no job.  Your only other alternative is to find a place where you can live week to week.  There are many motels that you can do this at, but it is not going to be a pleasant, or even cheap option.  If you can find somewhere you can live rent free, your life is going to be MUCH MUCH easier.  Rent is by far the biggest expense that you cannot avoid.  Eliminating this as an expense means you can go much longer on a lot less money.

An alternative is to scour the classifieds for work that will provide housing.  This is often the case with nanny type positions.  While looking after kids might not be your ideal job, it is better than living in the street.  If you are desperate enough to move here without money than even the thought of looking after someone else’s kids should not scare you.

The next order of business is to get a job.  If you have no money and no job options, it does not matter what type of job you get.  Even if you are going to have to take minimum wage, do it.  You need to have cash flow.  You are in no position to hold out for just the right job.  You have no money and are probably bumming off of people so swallow your pride and take what you can get.  If the job pays minimum wage than it will not be a big deal to leave the job once you line up something else.  But under no circumstances should you continue without a job.  Even a minimum wage job at 30 hours a week will put about $200 in your pocket.  That’s nothing to sneeze at when you have nothing.

Spend on nothing but the necessities.  There are only so many things you actually need.  You need to have a roof over your head but you should have taken care of that by now.  You need to have food.  That is pretty much it.  Anything else, you need to cut out from your life.  Contrary to popular belief, you do not need a car.  I know people in California who get by just fine, albeit inconveniently, on public transportation.  Cars are expensive to maintain.  You need to do repairs, pay for gas, pay for registration, and pay for insurance.  This is not an option if you have no money.  If you have a car, you should have already sold it by now to raise money.  You do not need to have cable TV.  You do not need to have a cell phone (you do need somewhere that you can be reached if you are looking for a job).  You do not need internet access.  Almost anything you think you need can either be cut or obtained some other way (use the internet at the local library). If something is not actually helping you to survive you do not need it.

After you have secured a job, you need to find a better job.  You need to spend every waking hour doing something toward this goal.  You should be searching job sites, fixing your resume, or obtaining skills or knowledge that will help you find a job.  Searching for a job is a full time job.  If you are not spending 40 hours a week doing it, you are not trying hard enough.  This plus your day job means you are just working 80 hours a week.  That is no big deal.  Just do it.

While this plan may sound unpleasant or even frightening it can be done.   My strong advice is to still not do it.  If you can hold out, not move, and save money you should be doing that.

A friend of mine pointed me to this article suggesting that California real estate may have reached a bottom and is in the middle of a recovery.  The article sites busy real estate agent, dwindling housing supplies and the return of the investor.  So do I think we are close to a housing bottom?

In a word, no.   The article does not argue that housing prices are not still falling.  In fact, it clearly says that housing prices are still declining.  So what is going on here?  There is a simple explanation of this.  No asset goes straight down.  When prices decline, rational buyers who were sitting on the sideline will move in.  There are lots of people in the world that have no patience.  We are a society full of people who need to have what they want immediately. Just like we had a stock rally in December, and then a precipitous drop in February and March, housing will in all likelihood have a rebound before it goes lower.  Nothing ever rises or falls in a straight line.

But this rebound, if you can call it a rebound, does not mean we are near a bottom.  We will spend years, and I’m not exaggerating, at a very low level for housing.  Keep in mind, if you threw out the 70’s and the early part of this decade, housing prices have barely beat inflation in the last 100 years.  So even if there is a “rebound” around the corner, we are, at best, going to be at a very low price level for a very long time.  I make much more than the average person.  When you combine my fiancée’s income, which is also above average, I get pretty close to being in the top few percent of wage earning families in America.  However, 3x or 4x of that would still only by me an average house in my neighborhood.  How absurd is that?  A household that makes about three or four times what an average household makes can only afford the average house?  We still have a ways to go.

I want to buy a house.  I am the perfect buyer that everyone is waiting to come into this market, and I am staying out.  I have a friend in San Francisco who is exactly like me.  Wants to buy, has the money, but has the patience to wait it out.   These are the people who need to come into the market.  That will require at least another 20% down from here, and more likely another 30%.  So no, California has not reached a bottom.