Moving to California - Two Years Later

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.

When Do you Stop Chasing the Dream?

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?

I Know I Have Not Made 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.

Has the California Dream Vanished?

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 - Bad For All

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.

Houses All Around With Nothing To Buy

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.

The Haves vs. The Have Nots

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?

California's Budget Problem

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 To California With No Money

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 not 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.

Has California Housing Hit Bottom Yet?

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.

California Tax Hike

Tonight, at midnight, California will hike its tax rate 1%.  I have already written about how California is too expensive for most and this is only going to exacerbate the situation.

This now puts tax in the county of Los Angeles at 9.25%.  In many places in California, you are now flirting with 10%.  This is on top of one of the worst recessions we have seen in our lifetimes.  This will no doubt have an effect on consumer spending.  While it may seem small to some keep in mind you just eliminated 1% of spending power for all of California.  That is going to have a multiplier effect and ripple through all parts of the country.  It is not like people have money saved and can dip into their savings or savings rate and just absorb the 1% hike.

Further, this is getting into the territory where people are going to start to simply avoid the tax.  I expect more Californians to start buying online at places like Amazon where they can avoid paying California sales tax.  I have no plans to move out of the sunshine anytime soon, but they are making it very hard for me to justify living in California.  All I hear on the radio is how L.A. County is about to layoff thousands of teachers.  At the same time we have one of the worse education systems in the country.  But we are about to dramatically raise taxes.  I wrote it before, but I really want to know, where the heck is California spending all of its money?

Should You Splurge?

This past weekend was my birthday. I turned 31. Being who I am, we did not do too much. I prefer to stay at home which makes it pretty easy to not spend too much money.  We got up in the morning and had homemade waffles.  Shortly after that I got to open up my birthday gift.  My fiancee got me a new tripod, the Manfrotto 190XDB, to go along with my camera.

We decided to go to the local arboretum to spend the day.  It was a beautiful California day.  It was actually to the point where I was sweating part way through.  It must have been in the 80's.  I got several good shots with my camera (no shots with the tripod unfortunately) and was ready to call it a day by 2:00 p.m.  I was dead tired, the sun will do that to you, so i was ready to go home and just plop on the couch.  I watched the NCAA tournament and waited to go to dinner at some mysterious location.

Well the location ended up being the Arroyo Chop House.  It is a high-end steak house, similar to Ruth Chris but probably better.  We had been there once before several years ago but I honestly did not remember too much about it.  This time what stood out was the excellent service they provided.  They knew ahead of time that it was my birthday. So they reserved a spot right next to the fireplace.  They even left a card on the table wishing me a happy birthday.  I thought that was a very nice touch.

I ordered what else, a steak.  She ordered a lobster tail.  The food was excellent, better than you can get at other places like Ruth Chris.  All told, the meal, with two glasses of wine, cost us $150.   Was it worth it?  It is hard to say.  Is it ever OK to spend $150 on one meal?  It is not something we do very often but it is sometimes nice to splurge.  We can afford it easily, so it is not like we have to stretch to make this work.   We probably only eat out like this two or three times a year, my birthday, her birthday, and on our anniversary.

So should we do this? I tend to think it can actually be important to splurge every once in awhile.  You cannot be frugal all the time and it is important to once in awhile enjoy the fruits of your labor.

What do you think? Are extravagances like this justified?

What is the Right Amount of Sympathy

What is the right amount of sympathy to give to people who are down and out because of this economy?  Over the last several weeks, there have been numerous stories in the various outlets about people losing their job and now having to scrape by to make things work.  Most of the stories go a little bit something like this.

John Doe used to live the good life.  He used to make $150,000 a year selling mortgages to people.  He would take trips to Hawaii every few months, bought a big house, drove a BMW, and never worried about what something cost or if he should be saving money.  He was honest but he got caught up in corporate greed and was forced to make loans to people who could not afford it.  When all of those loans dried up, so did his job.  That was 8 months ago and he has not been able to find work since.   His house is now in foreclosure and his wife has left him along with their 5 year old son. 

How sorry should I feel for these people?  The capitalist in me of course says I should not care at all.  People should always be thinking about the future and be prudent with their money.  In almost all cases, you could point to these people living extravagant lifestyles and not saving enough money for the eventual rainy day.  A day which came sooner than they expected.  Then again, it always does.  I look at my own situation and I can only say to myself, "What are these people thinking.".  I too make a good salary.  I have better reason to believe it will continue to go on than most others do since my success is not sudden and is not nearly as tied to a booming irrational sector like so many other people's careers have been over the last few years.  But I save, and I save like crazy.  People who follow this blog know that I tightly control both my discretionary and my non-discretionary spending.  In a worse case scenario, I could probably survive several years of unemployment.  I would have to make sacrifices of course, but I do not believe I would experience quite the same life crisis these people have.

But of course there is the part of me that does not want to take the "I told you so" and "Holier than thou" attitude that so many others have.  While I think many of these people caused many of their own issues, I do not wish to dance around and make light of their situation.  These are of course real people with real suffering.  They are not blameless in their plight but that also does not mean they are not worthy of a little sympathy.  I emphasize "little" because some of these people just really do not seem to get it.  My favorite (although I cannot seem to find the article now) was one man who was living large in the Los Angeles area on $70,000 a year.  Seriously folks, that is not a lot of money.  The article talked about how he spent all of his money on trips and a nice house, all of which is gone now.  But if you think you have the right to live a lavish lifestyle when you only make $70,000 in Southern California, how is anyone supposed to feel bad about that?

Where Does California Spend the Money?

I don't have the time today to write a full post so this one is going to be short.  I just have a quick question, what the hell is California doing with all the money?  California is in the midst of a budget crisis.  It has gotten to the point where they are going to delay tax returns.  Think about that.  That is money that rightfully belongs to the people.  The government should have never had it in the first place.  But they are going to withhold that money from its citizens.  Crazy.

But I seriously have to wonder what happens to all that tax money.  I took a quick look at the California budget, and like almost all government documents it is hard to fully understand.  If you look at the high level graphs you find that California spends the majority of its budget on three things, education, health care and human services, and law enforcement.  California has a high incidence of tax.  The income tax is high, the sales tax is high, and there is tax on alcohol, cigarettes , and corporations.  Given all the people in the state, you figure the total revenue would be quite high.  Yet somehow, California has poor schools, high crime, and a purported lack of hospital facilities.  What the heck is going on?

An Historic Event - Where Were You?

Today, Barack Obama was sworn in as the 44th President of the United States.  It was an historic event.  The type of event where you just know where you were when it happened.  It is like 9/11, I know exactly where I was when I first heard (I woke up to the news of the first plane on the radio, and thought nothing of it.  I turned on the TV later, only to wonder why there was a plane headed for the Twin Towers).

So for me, on this historic event, my answer will be in the dungeons of a parking garage.

It was not the plan to be there.  It just happened.  In fact, my carpool mate and I had planned on getting to work a little early just so that we could watch the event an the TVs at work.  We normally get in about 9:10, and so we were aiming to be about 20 minutes earlier than that.  Much to our dismay, Los Angeles' Traffic decided to intervene.  Now you have to understand that my carpool buddy is a huge Barack Fan.  It is often all she ever talks about it.  During the election, it almost drove me a little crazy.  So as we got near the building, it was pretty clear that we were not going to be able to park and make it into the building before he was sworn in.

So I did the gentlemanly thing.  I offered to drop her off in front of the building and park her car for her.   So she hopped out and rode up the stairs to go watch the innaugaration.  I got to go park the car. Just as I made my way around the block (there are lots of one way streets in Los Angeles) and got into the parking structure, they began to swear Obama in.  Just as it got to about 15 seconds into the ceremony, my radio reception cut out, and I missed the whole thing.

So that's how I will remember this historic event, I missed most of it.  How about you?  What were you doing?

2008, a Look Back

I've had this blog a little bit over a year.  In that year, I will admit I haven't done a heck of a lot to try and grow this site.  I would like to make the excuse that my new job has been much more demanding then I would have realized.  I could argue that I have done really well in my financial goals by putting my focus there rather than to focus on this site.  But in the end, it would just be excuses.  It would all be true and valid but I for one do not like it when people make excuses, so I will not be making them here today.

However, despite this lack of focus in building this site, I am somewhat impressed I have blogged as much as I have.  I have a little over 200 post for the year.  That's no small feat and means I'm averaging about a post every week day.  I hope to do even better next year.  More on that to come.  I decided I would look back at what I wanted to accomplish with this website and see how far off I veered.

1. Double my $20,000 - I gave up on this one just a few month into the year.  I just didn't have the time to do it and in reality, I'm sure I would have failed at it given how poorly the market performed.  I would have done better then the market, I probably would have even made money in the money I was trading, but I would not have gotten anywhere close to doubling the money, that is for sure.


2. Develop another source of Income - I did not get to this one either.  Sad really.  It was something I really really wanted to do.  I make a nominal amount through this site, but just barely enough to cover my yearly cost so nothing much to speak of here.


3. Watch my basket more carefully - This one I have actually done thanks in no small part to this website and the discipline it has made me have.  Still, I lost track of a stock or two and held on to a few I probably should not have.  But everyone had losers this year and I'm chalking this one up to the bad market.


4. Spend more money - This one was the crazy one.  Easy for some, hard for me.  I did loosen up the purse strings ever so slightly.  I bought myself a 50" Plasma TV , a new Digital SLR camera, and a host of things for the apartment (including upgrading the apartment itself).  I even bought an engagement ring.    Admittedly the last one should not count as I would have done it regardless of my decision to spend more money or not but the first few are definitely a departure from me and my frugal ways.  All said, it was a lot of money for me.  Does it prevent my fiance from calling me frugal?  Nope.  She is probably right.  I still skimp and save probably more than I should given our income level.  But in the end, it always comes down to the fact that I rather save now and retire early later.  Then again, with the way our economy is going and the reaction of our government, they may make that impossible.

So all in all, not a very successful year from the blog perspective. It was a very successful year for so many other reasons.  I got the job under control now, where before I was miserable at times.  I got back to California and could not be happier with that move.  And of course, I got engaged!  I honestly could not ask for much more of a successful year.  Well, that is until we turn the calendar to 2009 ...

Worst Housing Markets for 2009

Fortune published their predictions for the worst housing markets in 2009.  Not surprising to me eight of the ten cities are based in California.  Number one on the list of course is my hometown of Los Angeles.

What may be surprising to some is the extent that the forecast is so negative.  The article is predicting that the market will correct to the downside about 25% in 2009 and 5% in 2010.  I'm assuming these are year over year numbers so if you take their calculation it means the median price in Los Angeles will be about $282,000 in 2009 and 265,000 in 2010.  How do these numbers compared to what I think is reasonable?

Even given this horrific prediction, I still think the numbers are a little high.  What is my reasoning?  Well the average home price in Los Angeles was about $162,000 in 2000, the beginning of the real estate boom.  The high was reached at about $573,000 representing a 350% increase.  Even at $265,000 it represents a 164% increase in about 10 years.  Is that really justified?  Not really.  If you believe, like I do, that housing should track inflation, then it would mean that there was an average of 5.5% inflation over those ten years.  Considering we had very little inflation over the last several years, and we are likely to have deflation for at least 2009, I think the 5% number is still pretty high.

In addition, housing needs to track income.  The traditional measure of housing is that housing prices should be 3x gross income.  That means the expectation is that the average income in Los Angeles will be  $88,000.  There is NO chance of that happening in the next two years (average now is just a little over $40,ooo), so the number is still a little high.  Now of course, I expect housing to retreat slowly, not in one big bang, so the prediction may be valid only if we continue to see price declines moving forward.  But they are predicting a significant slowing of the price decline in 2010, and I just do not see how that is possible considering I actually think we will OVERSHOOT to the downside like we overshot on the upside.  It happens in every market.

So in short, I think we will see even worse numbers then predicted.  The employment outlook in Los Angeles looks bleak and is getting worse.  You combine that with the overbought nature of this market, and you have the recipe for some pretty significant decreases over the next two years.

The Problem With Any Plan

We are getting closer and closer to finalizing this huge bailout.  I'll be happy to talk about it as it gets closer to becoming reality which it unfortunately will by very soon.  However, every form of the plan misses a very fundamental problem.

People cannot afford the houses they lived in.  They never could.  That's the key point.  I keep reading things where people are expecting the bottom in the housing market bottom soon and then start its rise up again.  That thinking is crazy.  We aren't anywhere close to the bottom.  Prices have dropped "significantly" but it still is not enough.  There was a meteoric rise in prices.  Prices more than doubled in most areas in a 5 year period.  Even if you are down 25% from the top, you still have quite a bit more downside before housing becomes anywhere near affordable.

A house should cost you no more than 3 times your annual income.  Even that is on the high side.   If a family earns $100k, which would put them in one of the higher brackets, that is still only a $300k house.  In California, that buys you nothing.  You still have to go out about 40 or 50 miles to find a house anywhere near that price range.  Given the price of gas now, that is unrealistic for most people.

So until the prices come down, there will be pain in the market and the economy.  People have an asset that is overvalued and they must continue to make payments on.  Those out of the market, will be unable to buy until the prices come down.  Alternatively, they could continue this terrible cycle and buy an overpriced asset that will eventually worsen the current situation. This is the fundamental problem and something that wont' be solved by throwing even more money at it.

Traffic Getting Worse

What is going on with Traffic lately?  It has gotten noticeably worse for me no matter what route I take or what time I leave.  Is it just the post-summer bounce and people are all coming back from vacation at the same time?  Is it that oil continues to get cheaper and gas is now under $4 per gallon in California?  Did people just get used to the high price of gas and decide that the alternative means of transportation just doesn't work?

California, Too Expensive?

I was chatting with a friend today that I hadn't talked to in a while.  We were just discussing how things were with each other and the conversation eventually turned into how she was doing at her job.  She has been in the job for a while, and I know she has been thinking about leaving for a long time.  But as we talked it came up that she was thinking of looking for a job out of state.  I couldn't believe what I was hearing until she explained that California has just gotten to expensive to live in.

And to a large degree she is right.  She is, like me, part of Generation Screwed.   She does OK by most standards, but she is, like me, a renter.  She wants to get married, raise a family, and eventually own a home.  Of course those in the generation face the daunting problem of saving a small fortune to buy a house.  Coupled with the high taxes and high gas prices in California, no wonder she is thinking of leaving.

It really makes me wonder how bad it is for those in California less fortunate than me.  I have started thinking about how I can save money when faced with these economic uncertainties.  Now for me, most of this is psychological in nature (more on that later), but for many many people it is a stark reality.    California is a very expensive place to live.  For many people, all the benefits of living in California don't outweigh the lower standard of living. How does the average person achieve the American Dream in California?  How is it possible to start out, pay off loans, stay out of debt, save enough to buy a house, save enough to send your kids to college, and then save enough for retirement?  I find it difficult enough as is with a high salary, no kids, and no debt, I just can't imagine how it must be for those faced with multiple challenges.

So what happens when more and more people start feeling this way?  Is it possible that we see a migration out of California?